<PAGE> 1
As filed with the Securities and Exchange Commission on December 23, 1998
Registration No. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------------------------
CONVERGYS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Ohio 31-1598292
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
201 East Fourth Street
Cincinnati, Ohio 45202
(513) 397-5364
(Address, including zip code, of registrant's principal executive office)
-------------------------------------------------------------------------
CONVERGYS CORPORATION 1998 LONG TERM INCENTIVE PLAN (30,000,000 Common Shares)
CONVERGYS CORPORATION RETIREMENT AND SAVINGS PLAN (5,000,000 Common Shares)
CONVERGYS CMG RETIREMENT SAVINGS PLAN (100,000 Common Shares)
CONVERGYS CORPORATION EMPLOYEE STOCK PURCHASE PLAN (1,100,000 Common Shares)
CONVERGYS CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN
(Full title of the plan)
-------------------------------------------------------------------------
William D. Baskett III
Secretary & General Counsel
201 East Fourth Street
Cincinnati, Ohio 45202
(513) 723-2444
(Name, address including zip code, and telephone number
including area code, of agent for service)
-------------------------------------------------------------------------
Please send copies of all communications to:
Neil Ganulin, Esq.
Frost & Jacobs LLP
2500 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
(513) 651-6800
-------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Title of Amount Proposed Maximum Proposed Maximum Amount of
Securities to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Share(1) Price Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, 36,200,000 $19.219 $695,727,800 $193,412.33
without par value(2)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated in accordance with Rule 457(c) pursuant to Rule 457(h)(1), based
upon the average of the high and low prices per share on the New York Stock
Exchange on December 17, 1998, solely for the purpose of calculation of
the registration fee.
(2) Includes attached rights
Pursuant to Rule 416(a), this registration statement also covers additional
common shares to be offered or issued to prevent dilution resulting from stock
splits, stock dividends or similar transactions.
Pursuant to Rule 416(c), this registration statement also covers an
indeterminate amount of interests to be offered or sold pursuant to the employee
benefit plans described herein.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The following documents have been filed by Convergys Corporation (the
"Company") with the Commission (File No. 1-14379) and are incorporated herein
by reference:
1. The Company's Prospectus dated August 12, 1998.
2. The Company's Quarterly Reports on Form 10-Q for the periods
ended June 30, 1998 and September 30, 1998.
3. The Company's Current Reports on Form 8-K filed September 2,
1998, November 24, 1998 and December 4, 1998.
4. Cincinnati Bell Inc.'s Annual Report on Form 11-K for the CBIS
Retirement and Savings Plan (predecessor to the Convergys
Corporation Retirement and Savings Plan).
5. Cincinnati Bell Inc.'s Annual Report on Form 11-K for the
MATRIXX Marketing Inc. Profit Sharing/401(k) Plan (predecessor
to the Convergys CMG Retirement Savings Plan).
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the
"Subsequently Filed Documents"), prior to the filing of a post-effective
amendment which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in this Registration Statement and to be a part of
this Registration Statement from the date of filing of such documents.
Any statement contained in this Registration Statement or in a document
incorporated by reference in this Registration Statement shall be deemed to be
modified or superseded for purposes of this Registration Statement to the extent
that a statement contained herein or in any Subsequently Filed Document modifies
or supersedes such statement. Any such modified or superseded statement shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
The Company will provide without charge, upon written or oral request,
to each person to whom a copy of this Registration Statement is delivered, a
copy of any or all of the documents incorporated by reference herein, not
including exhibits to such documents. Requests for such copies should be
directed to the Secretary, Convergys Corporation, 201 East Fourth Street,
Cincinnati, Ohio 45202, telephone number (513) 723-7000.
II-1
<PAGE> 3
ITEM 4. DESCRIPTION OF CAPITAL STOCK.
The following is a summary description of the capital stock of the
Company, does not purport to be complete and is subject to, and is qualified in
its entirety by, the Company's Amended Articles of Incorporation (the
"Articles") as filed with the Securities and Exchange Commission on July 17,
1998 as Exhibit 3.1 to Pre-Effective Amendment No. 2 to the Company's
Registration Statement on Form S-1 (File No. 333-53619).
The Company's authorized capital stock consists of 500,000,000 common
shares, without par value (the "Common Shares"), and 5,000,000 preferred shares,
without par value (the "Preferred Shares"), of which 4,000,000 are voting
preferred shares.
All Common Shares of the Company are entitled to participate equally in
such dividends as may be declared by the Board of Directors of the Company and
upon liquidation of the Company, 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, covenants, 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 the Company's assets upon
liquidation until satisfaction of any liquidation preference granted to the
Preferred Shares.
No holders of shares of any class of the Company's capital stock have
pre-emptive rights nor the right to exercise cumulative voting in the election
of directors.
LIMITATIONS ON CHANGE IN CONTROL
The following provisions of the Articles and Ohio law might have the
effect of delaying, deferring or preventing a change in control of the Company
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 the Company and certain persons described below.
II-2
<PAGE> 4
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), the 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 the Company would be sufficient to prevent
implementation of any of the corporate actions mentioned above. In addition,
Article Fifth classifies the Board of Directors into three classes of directors
with staggered terms of office and the Regulations of the Company (the
"Regulations") provide certain limitations on the removal from and filling of
vacancies in the office of director.
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 the Company
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 the Company (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 the Company'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 the Company 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 331/3%; (ii) 331/3% but not more than 50%; and
(iii) more than 50%.
II-3
<PAGE> 5
The merger moratorium statute provides that, unless a corporation's
articles of incorporation or regulations otherwise provide, an "issuing public
corporation" (which definition the Company 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, recapitalizations 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.
The following is a summary description of the terms of the rights
described below, does not purport to be complete and is subject to, and is
qualified in its entirety by, the Company's Rights Agreement, filed with the
Securities and Exchange Commission as Exhibit 4.1 to this Registration
Statement.
On November 19, 1998, the Board of Directors of the Company declared a
dividend distribution of one right ("Right") on each of the Company's
outstanding Common Shares to holders of record of the Common Shares at the close
of business on December 1, 1998 (the "Record Date"). One Right also will be
distributed for each Common Share issued after December 1, 1998, until the
Distribution Date (which is described in the next paragraph). Each Right
entitles the registered holder to purchase from the Company a unit ("Unit")
consisting of one one-hundredth of a Series A Preferred Share of the Company
(the "Preferred Shares") at a purchase price of $70.00 per Unit, subject to
adjustment (the "Purchase Price").
Initially, the Rights will be attached to all Common Share certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Shares and the
"Distribution Date" will occur upon the earlier of (a) 10 business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding Common Shares
or (b) 10 business days following the commencement of a tender offer or exchange
offer that would if consummated result in a person or group beneficially owning
15% or more of the outstanding Common Shares.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on December 1, 2008, unless earlier redeemed by
the Company as described below.
II-4
<PAGE> 6
After the Distribution Date, the separate Rights Certificates alone
will represent the Rights. Except for certain issuances in connection with
outstanding options and convertible securities and as otherwise determined by
the Board of Directors, only Common Shares issued prior to the Distribution Date
will be issued with Rights.
If a person becomes the beneficial owner of 15% or more of the Common
Shares ("Flip-In Event"), each holder of a Right will have the right to receive,
upon exercise, Common Shares having a value equal to two times the Purchase
Price of the Right. Moreover, the Rights will not be exercisable until the
Rights are no longer redeemable as described below. The Acquiring Person would
not be permitted to exercise any Rights and any Rights held by such person (or
certain transferees of such person) will be null and void and non-transferable.
If, following the Distribution Date, the Company is acquired in certain
specified mergers or other business combinations (i.e., the Company does not
survive or its Common Shares are changed or exchanged), or 50% or more of its
assets or earning power (on a consolidated basis) is sold or transferred in one
transaction or a series of related transactions ("Flip-Over Events"), each Right
becomes a Right to acquire common stock of the other party to the transaction
(or its ultimate parent in certain circumstances) having a value equal to two
times the Purchase Price. As an enforcement mechanism, the Rights Agreement
prohibits the Company from entering into any such transaction unless the other
party agrees to comply with the provisions of the Rights.
In general, the Company may redeem the Rights in whole, but not in
part, at a price of $0.001 per Right, at any time prior to a Flip-In Event.
Immediately upon the action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $0.001 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The issuance of the Rights may have certain anti-takeover effects and
possible disadvantages. The Rights will cause substantial dilution to a person
or group who attempts to acquire the Company or a significant Common Share
ownership interest without conditioning the offer on the Rights being redeemed
or a substantial number of Rights being acquired. Accordingly, an Acquiring
Person might decide not to acquire the Company or such an interest, although
individual shareholders may view such an acquisition favorably. In addition, to
the extent that issuance of the Rights discourages takeovers that would result
in a change in the Company's management or Board of Directors, such a change
will be less likely to occur. The Board of Directors believes, however, that the
advantages of discouraging potentially discriminatory and abusive takeover
practices outweigh any potential disadvantages of the Rights. The Rights should
not interfere with any merger or other Business Combination approved by the
Board of Directors. The Rights are designed to protect shareholders against
unsolicited attempts to acquire control of the Company, whether through
accumulation of Common Shares in the open market or partial or two-tier tender
offers, that do not offer a fair price to all shareholders.
II-5
<PAGE> 7
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
There are no provisions in the Articles by which an officer or director
may be indemnified against any liability which he or she may incur in his or her
capacity as such. However, the Company has indemnification provisions in its
Regulations which provide the Company will, to the full extent permitted by Ohio
law, indemnify all persons whom it may indemnify under such law.
Reference is made to Section 1701.13(E) of the Ohio Revised Code, which
provides for indemnification of directors and officers in certain circumstances.
The Company 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 of 1933, which may be made against such persons
while acting in their capacities as directors and officers of the Company.
The above discussion of the Articles, Regulations and Section
1701.13(E) of the Ohio Revised Code is not intended to be exhaustive and is
respectively qualified in its entirety by the Articles, Regulations and such
statute.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The Exhibits filed as part of this Registration Statement are described
in the Exhibit Index included in this filing.
ITEM 9. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales
of the securities registered hereunder are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
this registration statement (or the most
recent
II-6
<PAGE> 8
post-effective amendment thereof) which,
individually or in the aggregate, represent
a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in this registration
statement or any material change to such
information in the registration statement;
provided; however, that the undertakings in clauses
(i) - (ii) hereof will not apply if the information
required to be included in a post-effective amendment
by those clauses is contained in periodic reports
filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are
incorporated by reference in this registration
statement.
(b) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment 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.
(c) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(2) 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 Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
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 therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) 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 provisions of Rule 512(h) of
Regulation S-K, 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 of 1933 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
II-7
<PAGE> 9
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Securities Act
of 1933 and will be governed by the final adjudication of such issues.
II-8
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati and State of Ohio, on the 23rd day of
December, 1998.
CONVERGYS CORPORATION
By: /s/ Steven G. Rolls
-------------------------------
Steven G. Rolls
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 23rd day of December, 1998 by the
following persons in the capacities indicated.
Signature
/s/ James F. Orr* Principal Executive Officer;
- -------------------------------- President, Chief Executive Officer
James F. Orr and Director
/s/ Steven G. Rolls Principal Financial Officer
- -------------------------------- and Principal Accounting Officer;
Steven G. Rolls Chief Financial Officer
/s/ Charles S. Mechem, Jr.* Chairman of the Board
- -------------------------------- and Director
Charles S. Mechem, Jr
/s/ John F. Barrett* Director
- --------------------------------
John F. Barrett
/s/ Judith G. Boynton* Director
- --------------------------------
Judith G. Boynton
/s/ Roger L. Howe* Director
- --------------------------------
Roger L. Howe
/s/ Steven C. Mason* Director
- --------------------------------
Steven C. Mason
/s/ Brian H. Rowe* Director
- --------------------------------
Brian H. Rowe
* /s/ William D. Baskett III
---------------------------------
William D. Baskett III,
as attorney-in-fact
II-9
<PAGE> 11
Pursuant to the requirements of the Securities Act of 1933, the
trustees of the plan (or other persons who administer the employee benefit plan)
have duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cincinnati, State of
Ohio, on the 23rd day of December, 1998.
CONVERGYS CORPORATION
RETIREMENT AND SAVINGS PLAN
By: CONVERGYS CORPORATION
By: /s/ Thomas P. Mehnert
-----------------------------
Thomas P. Mehnert
II-10
<PAGE> 12
Pursuant to the requirements of the Securities Act of 1933, the
trustees of the plan (or other persons who administer the employee benefit plan)
have duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cincinnati, State of
Ohio, on the 23rd day of December, 1998.
CONVERGYS CMG RETIREMENT
SAVINGS PLAN
By: CONVERGYS CORPORATION
By: /s/ Thomas P. Mehnert
-----------------------------
Thomas P. Mehnert
II-11
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
<S> <C> <C>
3.1 Amended Articles of Incorporation of the Company are hereby
incorporated by reference to Exhibit 3.1 to Pre-Effective
Amendment No. 2 to the Company's Registration Statement on
Form S-1 (File No. 333-53619) filed on July 17, 1998.
3.2 Regulations of the Company are hereby incorporated by
reference to Exhibit 3.2 to Pre-Effective Amendment No. 2 to
the Company's Registration Statement on Form S-1 (File No.
333-53619) filed on July 17, 1998.
4.1 Convergys Corporation Rights Agreement
4.2 Convergys Corporation 1998 Long Term Incentive Plan is hereby
incorporated by reference to Exhibit 10.5 to Pre-Effective
Amendment No. 2 to the Company's Registration Statement on
Form S-1 (File No. 333-53619) filed on July 17, 1998.
4.3 Convergys Corporation Retirement and Savings Plan
4.4 Convergys CMG Retirement Savings Plan
4.5 Convergys Corporation Employee Stock Purchase Plan
4.6 Convergys Corporation Executive Deferred Compensation Plan
5 Opinions of Frost & Jacobs LLP
23.1 Consents of Frost & Jacobs LLP (contained in Exhibit 5)
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of PricewaterhouseCoopers LLP
24 Powers of Attorney
</TABLE>
II-12
<PAGE> 1
Exhibit 4.1
- --------------------------------------------------------------------------------
CONVERGYS CORPORATION
and
THE FIFTH THIRD BANK
Rights Agent
RIGHTS AGREEMENT
Dated as of November 30, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
RIGHTS AGREEMENT______________________________________________________________1
SECTION 1. CERTAIN DEFINITIONS.___________________________________________1
SECTION 2. APPOINTMENT OF RIGHTS AGENT.___________________________________8
SECTION 3. ISSUE OF RIGHT CERTIFICATES.___________________________________8
SECTION 4. FORM OF RIGHT CERTIFICATES.___________________________________11
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.____________________________12
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF
RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR
STOLEN RIGHT CERTIFICATES.____________________________________13
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE;
EXPIRATION DATE OF RIGHTS.____________________________________15
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES.___________19
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES._____________19
SECTION 10. PREFERRED SHARES RECORD DATE._________________________________21
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF
SHARES OR NUMBER OF RIGHTS.___________________________________22
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.___36
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER.______________________________________37
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.______________________42
SECTION 15. RIGHTS OF ACTION._____________________________________________45
SECTION 16. AGREEMENT OF RIGHTS HOLDERS.__________________________________46
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER.____________47
SECTION 18. CONCERNING THE RIGHTS AGENT.__________________________________47
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.____48
SECTION 20. DUTIES OF RIGHTS AGENT._______________________________________49
SECTION 21. CHANGE OF RIGHTS AGENT._______________________________________53
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES.___________________________54
SECTION 23. REDEMPTION AND TERMINATION.___________________________________55
SECTION 24. EXCHANGE._____________________________________________________56
SECTION 25. NOTICE OF CERTAIN EVENTS._____________________________________57
SECTION 26. NOTICES.______________________________________________________59
SECTION 27. SUPPLEMENTS AND AMENDMENTS.___________________________________59
SECTION 28. SUCCESSORS.___________________________________________________60
i
<PAGE> 3
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.____60
SECTION 30. BENEFIT OF THIS AGREEMENT.____________________________________61
SECTION 31. SEVERABILITY._________________________________________________62
SECTION 32. GOVERNING LAW.________________________________________________62
SECTION 33. COUNTERPARTS._________________________________________________62
SECTION 34. DESCRIPTIVE HEADINGS._________________________________________62
EXHIBIT A FORM OF CERTIFICATE OF AMENDMENT TO AMENDED ARTICLES
OF INCORPORATION OF CONVERGYS CORPORATION_____________________64
EXHIBIT B FORM OF RIGHT CERTIFICATE_____________________________________67
EXHIBIT C SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES________________74
ii
<PAGE> 4
RIGHTS AGREEMENT
----------------
Agreement, dated as of November 30, 1998, between Convergys
Corporation, an Ohio corporation (the "Corporation"), and The Fifth Third Bank,
an Ohio corporation (the "Rights Agent").
The Board of Directors of the Corporation has authorized and declared a
dividend of one Right on each Common Share (as hereinafter defined) of the
Corporation outstanding at the close of business on December 1, 1998 (the
"Record Date"), each right representing the right to purchase one one-hundredth
(1/100) of a Series A Preferred Share, without par value, of the Corporation
having the rights and preferences set forth in the Form of Certificate of
Amendment to Amended Articles of Incorporation of Convergys Corporation attached
hereto as Exhibit A, upon the terms and subject to the conditions herein set
forth (the "Rights"), and has further authorized the issuance of one Right with
respect to each Common Share of the Corporation that shall become outstanding
between the Record Date and the earliest of the Distribution Date, the
Expiration Date and the Final Expiration Date (as such terms are hereinafter
defined), except as otherwise shall be provided herein.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as hereinafter defined)
who or which, together with all Affiliates and Associates (as such terms are
hereinafter defined) of such Person, shall be the Beneficial Owner (as
hereinafter defined) of 15% or more of the Common Shares of the Corporation then
outstanding, but shall not include an Exempt Person (as such term is
<PAGE> 5
hereinafter defined); provided, however, that if the Board of Directors of the
Corporation determines in good faith that a Person who would otherwise be an
"Acquiring Person" has become such inadvertently (including, without limitation,
because (i) such Person was unaware that it beneficially owned a percentage of
Common Shares that would otherwise cause such Person to be an "Acquiring Person"
or (ii) such Person was aware of the extent of its Beneficial Ownership of
Common Shares but had no actual knowledge of the consequences of such Beneficial
Ownership under this Rights Agreement) and without any intention of changing or
influencing control of the Corporation, and such Person, as promptly as
practicable after being advised of such determination divested or divests
himself, herself or itself of Beneficial Ownership of a sufficient number of
Common Shares so that such Person would no longer be an Acquiring Person, then
such Person shall not be deemed to be or to have become an "Acquiring Person"
for any purposes of this Agreement. Notwithstanding the foregoing, (i) if a
Person would be deemed an Acquiring Person upon the adoption of this Agreement
because of ownership of 15% or more but less than 20% of the Common Shares on
such date, such Person will not be deemed an Acquiring Person for any purposes
of this Agreement unless and until such Person acquires Beneficial Ownership of
any additional Common Shares (other than pursuant to a dividend or distribution
paid or made by the Corporation on the outstanding Common Shares in Common
Shares or pursuant to a split or subdivision of the outstanding Common Shares),
after the adoption of this Agreement unless upon the consummation of the
acquisition of such additional Common Shares such Person does not own 15% or
more of the Common Shares then outstanding, and (ii) no Person shall become an
"Acquiring Person" as the result of an acquisition of Common Shares by the
Corporation which, by reducing the number of shares outstanding,
2
<PAGE> 6
increases the proportionate number of shares beneficially owned by such Person
to 15% or more of the Common Shares then outstanding, provided, however, that if
a Person shall become the Beneficial Owner of 15% or more of the Common Shares
then outstanding by reason of such share acquisitions by the Corporation and
thereafter become the Beneficial Owner of any additional Common Shares (other
than pursuant to a dividend or distribution paid or made by the Corporation on
the outstanding Common Shares in Common Shares or pursuant to a split or
subdivision of the outstanding Common Shares), then such Person shall be deemed
to be an "Acquiring Person" unless upon the consummation of the acquisition of
such additional Common Shares such Person does not own 15% or more of the Common
Shares then outstanding. For all purposes of this Agreement, any calculation of
the number of Common Shares outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding Common
Shares of which any Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date hereof.
(b) "Act" shall mean the Securities Act of 1933.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations (the
"General Rules") promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date of this Agreement.
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own", any securities:
3
<PAGE> 7
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (whether or not in writing), (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights (other than these Rights
at any time prior to the occurrence of a Triggering Event (as hereinafter
defined) but thereafter including Rights acquired from and after the
Distribution Date (as hereinafter defined) other than Rights acquired pursuant
to Section 3(a), Section 11(i) and Section 22 hereof), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote or dispose of "beneficial
ownership" (as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Agreement)
(including pursuant to any agreement, arrangement or understanding, whether or
not in writing); provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security under this clause (B)
as a result of an agreement, arrangement or understanding to vote such security
if such agreement, arrangement or understanding (1) arises solely from a
revocable proxy given in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the
4
<PAGE> 8
applicable rules and regulations of the Exchange Act, and (2) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person's Affiliates or Associates has any agreement, arrangement
or understanding (whether or not in writing) for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described in the
proviso to clause (B) of subparagraph (ii) of this paragraph (c)) or disposing
of any securities of the Corporation.
(e) "Business Day" shall mean any day other than a Saturday, Sunday, or
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding
Business Day.
(g) "Common Shares" when used with reference to the Corporation shall
mean the Common Shares, without par value, of the Corporation. "Common Shares"
when used with reference to any Person other than the Corporation shall mean the
capital stock of such Person with the greatest voting power (or, if such Person
is a subsidiary of another Person, of the Person which ultimately controls such
first-mentioned Person), or the equity securities or other equity interest
having power to control or direct the management of such Person.
(h) "Common Share Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
5
<PAGE> 9
(i) "Current Per Share Market Price" shall have the meaning set forth
in Section 11(d)(i) hereof.
(j) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(k) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
(l) "equivalent preferred shares" shall have the meaning set forth in
Section 11(b) hereof.
(m) "Exchange Act" shall have the meaning set forth in Section 1(d)
hereof.
(n) "Exempt Person" shall mean the Corporation, any Subsidiary (as such
term is hereinafter defined) of the Corporation, in each case including, without
limitation, in its fiduciary capacity, or, any employee benefit plan of the
Corporation or of any Subsidiary of the Corporation, or any entity or trustee
holding Common Shares for or pursuant to the terms of any such plan or for the
purpose of funding any such plan or funding other employee benefits for
employees of the Corporation or of any Subsidiary of the Corporation, or
Cincinnati Bell Inc. on or before December 31, 1998.
(o) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(p) "Final Expiration Date" shall mean the close of business on
December 1, 2008.
(q) "Person" shall mean any individual, firm, corporation, partnership
or other entity and shall include any successor (by merger or otherwise) of such
entity.
(r) "Preferred Shares" shall mean Series A Preferred Shares, without
par value, of the Corporation.
(s) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(t) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
6
<PAGE> 10
(u) "Record Date" shall have the meaning set forth in the second
paragraph of this Agreement.
(v) "Redemption Price" shall have the meaning set forth in section
23(a) hereof.
(w) "Rights" shall have the meaning set forth in the second paragraph
of this Agreement.
(x) "Rights Certificates" shall have the meaning set forth in Section 3
hereof.
(y) "Section 11(a)(ii) Event" shall mean the event described in Section
11(a)(ii) hereof.
(z) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in section 11(a)(iii) hereof.
(aa) "Section 13 Event" shall mean any event described in Clause (i),
(ii) or (iii) of Section 13(a) hereof.
(bb) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition shall include, without
limitation, a report filed pursuant to Section 13(d) promulgated under the
Exchange Act) by the Corporation or by an Acquiring Person that an Acquiring
Person has become such or such earlier date as a majority of the Board of
Directors shall become aware of the existence of an Acquiring Person.
(cc) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(dd) "Subsidiary" shall mean, with reference to any Person, any
corporation of which securities or other ownership interests having ordinary
voting power sufficient to elect a majority of the board of directors or other
persons performing similar functions are beneficially owned,
7
<PAGE> 11
directly or indirectly, by such Person, and any corporation or other entity that
is otherwise controlled by such Person.
(ee) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ff) "Trading Day" shall have the meaning set forth in Section 11(d)(i)
hereof.
(gg) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Any determination required by the definitions contained in this Section
shall be made by the Board of Directors of the Corporation in their good faith
judgment, which determination shall be final and binding on the Rights Agent.
Section 2. Appointment of Rights Agent. The Corporation hereby appoints
the Rights Agent to act as agent for the Corporation in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint such Co-Rights Agents
as it may deem necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i)
the close of business on the tenth Business Day after the Shares Acquisition
Date, or (ii) the close of business on the tenth Business Day after the date of
the commencement of, or first public announcement of the intent to commence, a
tender or exchange offer by any Person (other than an Exempt Person) if upon
consummation thereof, any such Person other than an Exempt Person would be the
Beneficial Owner of 15% or more of the Common Shares then outstanding (the
earlier of such dates, including any such date which is after the date of this
Agreement and prior to the issuance of the Rights, being herein referred to as
the "Distribution Date"): (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for
8
<PAGE> 12
Common Shares registered in the names of the holders thereof (which certificates
for Common Shares shall be deemed also to be Right Certificates) and not by
separate Right Certificates, and (y) the Rights will be transferable only in
connection with the transfer of the underlying Common Shares (including a
transfer to the Corporation). As soon as practicable after the Distribution
Date, the Corporation will prepare and execute and the Rights Agent will
countersign, and the Rights Agent, if requested by the Corporation, will send,
by first-class, insured, postage prepaid mail, or, if requested by or on behalf
of a holder, shall otherwise deliver, to each record holder of Common Shares as
of the close of business on the Distribution Date, at the address of such holder
shown on the records of the Corporation, one or more Right Certificates, in
substantially the form of Exhibit B hereto (the "Right Certificates"),
evidencing one Right for each Common Share so held, subject to adjustment. In
the event that an adjustment in the number of Rights per Common Share has been
made pursuant to Section 11(p) hereof, at the time of distribution the
Corporation shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Right Certificates evidencing only
whole numbers of Rights are distributed and cash is paid in lieu of fractional
Rights. As of and after the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(b) As promptly as practicable following the Record Date, the
Corporation will send a copy of a Summary of Rights to Purchase Preferred
Shares, in substantially the form attached hereto as Exhibit C (the "Summary of
Rights"), by first-class, postage prepaid mail, to each record holder of Common
Shares as of the close of business on the Record Date, at the address of such
holder shown on the records of the Corporation. With respect to certificates for
Common Shares outstanding as of the Record Date until the Distribution Date, the
Rights will be evidenced by such certificates for Common Shares registered in
the names of the holders thereof, and the
9
<PAGE> 13
registered holders of the Common Shares shall also be the registered holders of
the associated Rights. Until the Distribution Date (or the earlier Expiration
Date or Final Expiration Date), the transfer of any certificate for Common
Shares in respect of which Rights have been issued shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
(c) Rights shall be issued in respect of all Common Shares that shall
become outstanding after the Record Date but prior to the earliest of the
Distribution Date or the Expiration Date or the Final Expiration Date, except as
otherwise provided in Section 11(p). Certificates representing such Common
Shares (and certificates delivered pursuant to Sections 6 and 7(d)) shall also
be deemed to be Right Certificates, and shall have impressed on, printed on,
written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Convergys
Corporation and The Fifth Third Bank, as Rights Agent, dated as of
November 30, 1998 as the same may be amended from time to time (the
"Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal executive
offices of Convergys Corporation and available for inspection by the
holder of this certificate. Under certain circumstances set forth in
the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
Convergys Corporation will mail to the holder of this certificate a
copy of the Rights Agreement without charge within five days after
receipt of a written request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to, or held by, any Person
who is, was or becomes an Acquiring Person or any Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement)
and any subsequent holder of such Rights may become null and void. In
no event may the Rights be exercised after December 1, 2008.
With respect to such certificates containing the foregoing legend,
until the Distribution Date (or the earlier Expiration or Final Expiration
Date), the Rights associated with the Common
10
<PAGE> 14
Shares represented by such certificates shall be evidenced by such certificates
alone and registered holders of Common Shares shall also be the registered
holders of the associated Rights, and the transfer of any such certificate shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby. In the event that the Corporation purchases or otherwise
acquires any Common Shares after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Shares shall be deemed cancelled
and retired so that the Corporation shall not be entitled to exercise any Rights
associated with the Common Shares which are no longer outstanding.
Notwithstanding this paragraph (c), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
Section 4. Form of Right Certificates. (a) The Right Certificates (and
the forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially in the form set forth as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Corporation may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Right
Certificates, whenever issued, shall be dated as of the Distribution Date, and
on their face shall entitle the holders thereof to purchase such number of
Preferred Shares as shall be set forth therein at the price per share set forth
therein (the "Purchase Price"), but in any event
11
<PAGE> 15
the amount and type of securities purchasable upon the exercise of each Right
and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by: (i) an Acquiring Person or
any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which is part of a plan, arrangement or understanding which has as a primary
purpose or effect avoidance of Section 7(e) hereof, and any Right Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Right Certificate referred to in this
sentence, shall contain (to the extent feasible and otherwise reasonably
identifiable as such) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Right Certificate
and the Rights represented hereby may become void in the circumstances
specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Corporation by its Chairman of the Board,
President or any Vice
12
<PAGE> 16
President, either manually or by facsimile signature, and have affixed thereto
the Corporation's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Corporation, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Corporation who shall have signed any of the Right
Certificates shall cease to be such officer of the Corporation before
countersignature by the Rights Agent and issuance and delivery by the
Corporation, such Right Certificates nevertheless may be countersigned by the
Rights Agent, and issued and delivered by the Corporation, with the same force
and effect as though the person who signed such Right Certificates had not
ceased to be such officer of the Corporation; and any Right Certificate may be
signed on behalf of the Corporation by any person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the
Corporation to sign such Right Certificate, although at the date of the
execution of this Rights Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at one of its offices in the United States, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates, the
Right Certificate number and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Sections 4(b), 7(e) and 14 hereof, at any time after the
close of business on the Distribution Date, and at or prior to the close of
business on the earlier of the Expiration Date or the Final Expiration
13
<PAGE> 17
Date, any Right Certificate or Right Certificates may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of Preferred Shares
(or, following a Triggering Event, Common Shares, other securities or property,
as the case may be) as the Right Certificate or Right Certificates surrendered
then entitled such holder (or former holder in case of a transfer) to purchase.
Any registered holder desiring to transfer, split up, combine or exchange any
Right Certificate shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Neither the Rights Agent nor the Corporation shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Right Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Right Certificate and the Corporation shall have been provided with such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Corporation shall
reasonably request. Thereupon the Rights Agent shall, subject to Sections 4(b),
Section 7(e) and Section 14 hereof, countersign and deliver to the Person
entitled thereto a Right Certificate or Right Certificates, as the case may be,
as so requested. The Corporation may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
Subject to the provisions of Section 7(e) hereof, at any time after the
Distribution Date and prior to the close of business on the earlier of the
Redemption Date or the Final Expiration Date, upon receipt by the Corporation
and the Rights Agent of evidence reasonably satisfactory
14
<PAGE> 18
to them of the loss, theft, destruction or mutilation of a Right Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and, at the Corporation's request, reimbursement to the
Corporation and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Right Certificate
if mutilated, the Corporation will make and deliver a new Right Certificate of
like tenor to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purposes, together
with payment of the Purchase Price with respect to each surrendered Right for
the total number of shares (or other securities or property, as the case may be)
as to which such surrendered Rights are exercisable, at or prior to the earlier
of (i) the Final Expiration Date; (ii) the time at which the Rights are redeemed
as provided in Section 23 (such earlier time being herein referred to as the
"Expiration Date"); or (iii) the time at which such Rights are exchanged as
provided in Section 24 hereof. At the close of business on the Final Expiration
Date, the Rights shall become null and void.
(b) The "Purchase Price" for each one one-hundredth of a Preferred
Share pursuant to the exercise of a Right shall initially be $70, shall be
subject to adjustment from time to time as
15
<PAGE> 19
provided in Sections 11 and 13 hereof and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right (in cash, or by certified
bank check or money order payable to the order of the Corporation) of the
Purchase Price for the shares (or other securities or property, as the case may
be) to be purchased and an amount equal to any applicable transfer tax, the
Rights Agent shall thereupon promptly (i) (A) requisition from the Corporation
or any transfer agent of the Preferred Shares (or make available, if the Rights
Agent is the transfer agent) certificates for the number of Preferred Shares to
be purchased and the Corporation will comply and hereby authorizes its transfer
agent to comply with all such requests, or (B) if the Corporation shall have
elected to deposit the Preferred Shares issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Corporation hereby directs the
depositary agent to comply with such request, (ii) when appropriate, requisition
from the Corporation the amount of cash to be paid in lieu of issuance of
fractional shares in accordance with Section 14, (iii) promptly after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder and (iv) when
appropriate, after receipt thereof, promptly deliver such cash to or upon the
order of the registered holder of such Right Certificate.
16
<PAGE> 20
In the event that the Corporation is obligated to issue other securities
(including Common Shares) of the Corporation, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Corporation will make all
arrangements necessary so that such other securities, cash and/or property are
available for distribution by (or on behalf of) the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the occurrence of a Triggering Event, any Rights beneficially owned by
(a) an Acquiring Person, or an Associate or Affiliate of an Acquiring Person,
(b) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (c) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (i) a transfer (whether or not
for consideration) from the Acquiring Person (or from any such Associate or
Affiliate) to holders of equity interests in such Acquiring Person (or in any
such Associate or Affiliate) or to any Person with whom the Acquiring Person (or
any such Associate or Affiliate) has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (ii) a transfer which the
Board of Directors otherwise concludes in good faith (whether before or after
such transfer) is part of a plan,
17
<PAGE> 21
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), and subsequent transferees of such Persons,
shall become null and void without any further action, and any holder of such
Rights shall thereupon have no rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise, from and after the
occurrence of a Triggering Event. The Corporation shall use all reasonable
efforts to insure that the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but shall have no liability to any holder of Rights or
other Person for the inability to make any determinations with respect to an
Acquiring Person or their Affiliates, Associates or transferees hereunder. No
Right Certificate shall be issued pursuant to Section 3 or Section 6 hereof that
represents Rights that are or have become void pursuant to the provisions of
this paragraph, and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the provisions of
this paragraph shall be cancelled. The Corporation will inform the Rights Agent
of any rights that are of have become void pursuant to the provisions of this
paragraph.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Corporation shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported
transfer or exercise as set forth in Section 6 or in this Section 7 unless the
certificate contained in the form of assignment or election to purchase set
forth on the reverse side of the Right Certificate surrendered for such transfer
or exercise shall have been completed and signed by the registered holder
thereof and the Corporation shall have been provided with such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Corporation shall reasonably request.
18
<PAGE> 22
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Corporation or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Rights Agreement. The Corporation shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Right Certificate purchased or acquired by the
Corporation otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Corporation, or shall, at the
written request of the Corporation, destroy such cancelled Right Certificates
and deliver a certificate of destruction thereof to the Corporation.
Section 9. Reservation and Availability of Preferred Shares. The
Corporation covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares (and, following
the occurrence of a Triggering Event, Common Shares and/or other securities) or
any authorized and issued Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares and/or other securities) held in its treasury,
the number of Preferred Shares (and, following the occurrence of a Triggering
Event, Common Shares and/or other securities) that will be sufficient (in
accordance with the terms of this Agreement, including Section 11(a)(iii)
hereof) to permit the exercise in full of all outstanding Rights.
So long as the Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares and/or other securities) issuable upon the
exercise of Rights may be listed on
19
<PAGE> 23
any national securities exchange or quotation system, the Corporation shall use
its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such exchange
or quotation system upon official notice of issuance in connection with such
exercise.
The Corporation shall use its best efforts to (i) file, as soon as
practicable following the first occurrence of a Triggering Event, a registration
statement under the Securities Act of 1933 (the "Act"), with respect to the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the date of the expiration of the Rights. The Corporation will also take
such action as may be appropriate under the blue sky laws of the various states.
The Corporation may temporarily suspend, for a period of time not to exceed
ninety (90) days, the exercisability of the Rights in order to prepare and file
such registration statement or in order to comply with such blue sky laws. Upon
any such suspension, the Corporation shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as well as
a public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction, unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
has been declared effective.
The Corporation covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares and/or other securities)
delivered upon exercise of Rights shall, at the time of
20
<PAGE> 24
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
The Corporation further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares (and, following the occurrence of a Triggering Event,
Common Shares and/or other securities) upon the exercise of Rights. The
Corporation shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Right Certificates to a person
other than, or the issuance or delivery of certificates for the Preferred Shares
(and, following the occurrence of a Triggering Event, Common Shares and/or other
securities) in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise, or to issue or deliver
any certificates for Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares and/or other securities) upon the exercise of
any Rights until any such tax shall have been paid (any such tax being payable
by the holder of such Right Certificate at the time of surrender) or until it
has been established to the Corporation's satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name any
certificate for Preferred Shares (or Common Shares and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and
21
<PAGE> 25
any applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Preferred Shares (or Common
Shares and/or other securities, as the case may be) transfer books of the
Corporation are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares (or Common Shares and/or
other securities, as the case may be) transfer books of the Corporation are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate shall not be entitled to any rights of a shareholder of the
Corporation with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Corporation, except as provided
herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number and kind of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Corporation shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of shares or (D) issue
any shares of its capital stock in a reclassification of the Preferred Shares
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and
22
<PAGE> 26
the number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books of the Corporation
were open, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination or reclassification;
provided however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Corporation issuable upon exercise of one Right. If an
event occurs which would require an adjustment under both Section 11(a)(i) and
Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required by Section
11(a)(ii).
(ii) Subject to Section 24 of this Agreement, in the event any
Person becomes an Acquiring Person then, promptly following the first occurrence
of such Section 11(a)(ii) Event, proper provision shall be made so that each
holder of a Right (except as provided below and in Section 7(e) hereof) shall
hereafter have the right to receive, upon exercise thereof at the then-current
Purchase Price in accordance with the terms of this Agreement, in lieu of a
number of one one-hundredths of a Preferred Share, such number of Common Shares
of the Corporation as shall equal the result obtained by (x) multiplying the
then-current Purchase Price by the then-number of one one-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (which,
following such first occurrence shall thereafter be referred to as the "Purchase
Price" for each Right and for all purposes of this Agreement) by 50% of the
current per share
23
<PAGE> 27
market price (determined pursuant to Section 11(d) hereof) of the Common Shares
on the date of such first occurrence (such number of shares, the "Adjustment
Shares"); provided, however, that the Purchase Price and the number of Common
Shares so receivable upon exercise of a Right shall thereafter be subject to
further adjustment as appropriate in accordance with Section 11(f) hereof.
(iii) The Corporation may at its option (evidenced by a
certified resolution of the Corporation's Board of Directors delivered to the
Rights Agent) substitute for a Common Share issuable upon the exercise of Rights
in accordance with the foregoing subparagraph (ii) such number of fractions of
Preferred Shares having an aggregate current market value equal to the current
per share market price of a Common Share. In the event that the number of Common
Shares which are authorized by the Corporation's Articles of Incorporation but
not outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Corporation shall to the extent permitted by applicable law and any material
agreement then in effect to which the Corporation is a party: (A) determine the
excess of (1) the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value") over (2) the Purchase Price (such excess, the
"Spread"), and (B) with respect to each Right, (other than Rights which have
become void pursuant to Section 7(e)) make adequate provision to substitute for
the Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash,
(2) a reduction in the Purchase Price, (3) Common Shares or other equity
securities of the Corporation (including, without limitation, preferred shares
which the Board of Directors of the Corporation has deemed to have the same
value as Common Shares (such preferred shares,
24
<PAGE> 28
"common share equivalents")), (4) debt securities of the Corporation, (5) other
assets, or (6) any combination of the foregoing, having an aggregate value equal
to the Current Value (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board of Directors of the
Corporation based upon the advice of one or more investment or financial
advisors selected by the Board of Directors of the Corporation; provided,
however, if the Corporation shall not have made adequate provisions to deliver
value pursuant to clause (B) above within thirty (30) days following the first
occurrence of a Section 11(a)(ii) Event (the "Section 11(a)(ii) Trigger Date"),
then the Corporation shall be obligated to deliver, to the extent permitted by
applicable law and any material agreement then in effect to which the
Corporation is a party, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares (to the extent available)
and then, if necessary, such number of Preferred Shares or fractions of
Preferred Shares (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. If the Board of
Directors of the Corporation shall determine in good faith that it is likely
that sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights, the thirty (30) day period set forth above may
be extended to the extent necessary, but not more than ninety (90) days after
the Section 11(a)(ii) Trigger Date, in order that the Corporation may seek
shareholder approval for the authorization of such additional shares (such
period, as it may be extended, the "Substitution Period"). To the extent that
the Corporation determines that some action need be taken pursuant to the second
and/or third sentences of this Section 11(a)(iii), the Corporation (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights, and (y) may suspend the exercisability of the Rights
until the expiration of the
25
<PAGE> 29
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such second sentence and to determine the value thereof. In the event of any
such suspension, the Corporation shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iii), the value of the Common Shares shall be the
current per share market price (as determined pursuant to Section 11(d) hereof)
of the Common Shares on the Section 11(a)(ii) Trigger Date and the value of any
"common share equivalents" shall be deemed to have the same value as the Common
Shares on such date.
(iv) In lieu of issuing Common Shares in accordance with
subparagraph (ii) of this Section 11(a), the Corporation may with respect to
each Right, if a majority of members of the Board of Directors determines that
such action is in the best interests of the Corporation and not contrary to the
interests of the holders of Rights, make adequate provision to substitute for
the Adjustment Shares, (x) upon the surrender for exercise of a Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction in Purchase
Price, (3) Common Shares, or other equity securities of the Corporation
(including without limitation common share equivalents), (4) debt securities of
the Corporation, (5) other assets or (6) any combination of the foregoing having
an aggregate value equal to the Current Value where such aggregate value has
been determined by the Board of Directors of the Corporation based upon the
advice of one or more investment or financial advisers selected by the Board of
Directors of the Corporation or (y) upon the surrender for exercise of a Right
and without requiring payment of the Purchase Price, (1) cash, (2) Common Shares
or other equity securities of the Corporation (including,
26
<PAGE> 30
without limitation, common share equivalents), (3) debt securities of the
Corporation, (4) other assets or (5) any combination of the foregoing, having an
aggregate value equal to the Spread where such aggregate value has been
determined by the Board of Directors of the Corporation based upon the advice of
one or more investment or financial advisors selected by the Board of Directors
of the Corporation.
(b) In the event the Corporation shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than the
current per share market price of the Preferred Shares (as defined in Section
11(d)) on such record date, the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the denominator of
which shall be the number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or equivalent preferred
shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are
27
<PAGE> 31
initially convertible) provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Rights Agent (and shall be binding on the Rights Agent
and the holders of the Rights). Preferred Shares owned by or held for the
account of the Corporation shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights or warrants are not so
issued, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In the event the Corporation shall fix a record date for the making
of a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular periodic cash dividend out of the
earnings or the retained earnings of the Corporation or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b)), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
current per share market price of the Preferred Shares (as defined in Section
11(d)) on such record date, less the fair market value (as determined in good
faith by the Board of Directors of
28
<PAGE> 32
the Corporation, whose determination shall be described in a statement filed
with the Rights Agent) of the portion of the assets or evidences of indebtedness
so to be distributed or of such subscription rights or warrants applicable to
one Preferred Share, and the denominator of which shall be such current per
share market price of the Preferred Shares provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Corporation to be
issued upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) and Section 11(a)(iv) hereof,
the "current per share market price" of the Preferred Shares on any date shall
be deemed to be the average of the daily closing prices per share of such
Preferred Shares for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however, that in
the event that the current per share market price of the Preferred Shares is
determined during a period following the announcement by the issuer of such
Preferred Shares of (A) a dividend or distribution on such Preferred Shares
payable in such Preferred Shares or securities convertible into such Preferred
Shares (other than the Rights), or (B) any subdivision, combination or
reclassification of such Preferred Shares, and prior to the expiration of the
requisite 30 Trading Day period after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current per share market
price" shall be appropriately adjusted to take into account ex-dividend trading.
The closing price for
29
<PAGE> 33
each Trading Day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Preferred Shares are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Preferred
Shares are listed or admitted to trading or, if the Preferred Shares are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the Preferred Shares are not quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Preferred Shares
selected by the Board of Directors of the Corporation. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the Preferred Shares are listed or admitted to trading is open for the
transaction of business or, if the Preferred Shares are not listed or admitted
to trading on any national securities exchange, a Business Day. If the current
per share market price of the Preferred Shares on any date cannot be determined
in the manner provided above, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be an amount equal to one
hundred (as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the Common Shares
occurring after the date of this Agreement) multiplied by the
30
<PAGE> 34
current per share market price of the Common Shares. If neither the Common
Shares nor the Preferred Shares is publicly held or so listed or traded,
"current per share market price" shall mean the fair value per share as
determined in good faith by the Board of Directors of the Corporation, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) and Section 11(a)(iv) hereof,
the "current per share market price" of the Common Shares shall be determined in
the same manner set forth above for Preferred Shares in clause (i) of this
Section 11(d), provided, however, for the purpose of any computation in Section
11(a)(iii) and Section 11(a)(iv) hereof, the "current per share market price" of
the Common Shares on any date shall be deemed to be the average of the daily
closing prices per Common Share for ten consecutive Trading Days immediately
following such date and the reference to the "30 Trading Day period" in Section
11(d)(i)(B) shall be the "ten Trading Day period."
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in such Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a Common Share or other share or
one-ten-thousandth of a Preferred Share, as the case may be. Notwithstanding the
first sentence of this Section 11(e), any
31
<PAGE> 35
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which requires such
adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11 or
Section 13 hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Section 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m) and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Shares shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Corporation subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Preferred Shares
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Corporation shall have exercised its election as
provided in Section 11(i), below, upon each adjustment of the Purchase Price as
a result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Preferred Share (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one one-hundredths
of a share covered by a Right immediately prior to
32
<PAGE> 36
such adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) In lieu of the adjustment in the number of one
one-hundredths of a Preferred Share purchasable upon the exercise of a Right,
the Corporation instead may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights. Each of the Rights outstanding
after such adjustment of the number of Rights shall be exercisable for the
number of shares or fraction of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Corporation shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if Right Certificates have been issued, shall be at least 10 days later
than the date of such public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Corporation shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Corporation, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if
33
<PAGE> 37
required by the Corporation, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Corporation, the
adjusted Purchase Price) and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in such public
announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Preferred Shares issuable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may continue to express the
Purchase Price per share and the number of Preferred Shares which were expressed
in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the Preferred Shares
issuable upon exercise of the Rights, the Corporation shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable Preferred
Shares at such adjusted Purchase Price.
(1) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Corporation may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the Preferred Shares and other capital stock or securities of the Corporation,
if any, issuable upon such exercise over and above the Preferred Shares and
other capital stock or securities of the Corporation, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Corporation
34
<PAGE> 38
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Corporation shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any of the Preferred Shares at less than the current market
price, issuance wholly for cash of Preferred Shares or securities which by their
terms are convertible into or exchangeable for Preferred Shares, stock dividends
or issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Corporation to holders of its Preferred Shares shall not
be taxable to such shareholders.
(n) The Corporation covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with, (ii) merge with or into, or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one or
more transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Corporation and its Subsidiaries (taken as a
whole) to, any other Person if at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.
(o) The Corporation covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take)
35
<PAGE> 39
any action if at the time such action is taken it is reasonably foreseeable that
such action will diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Corporation shall at any time after the date of this Agreement
and prior to the Distribution Date (i) pay a dividend on the outstanding Common
Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares,
(iii) combine the outstanding Common Shares into a smaller number of shares, or
(iv) issue any shares of its capital stock in a reclassification of the
outstanding Common Shares, the number of Rights associated with each Common
Share then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each Common Share following any such event
(including other Common Shares issued after the date of such event, but prior to
the Distribution Date) shall equal the result obtained by multiplying the number
of Rights associated with each Common Share immediately prior to such event by a
fraction the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of Common Shares outstanding immediately
following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Corporation shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Shares and the Common Shares a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate in accordance with
Section 26 hereof.
36
<PAGE> 40
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. (a) In the event that, following the Distribution Date, directly
or indirectly, (i) the Corporation shall consolidate with, or merge with and
into, any other Person, and the Corporation shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) any Person shall
consolidate with the Corporation, or merge with and into the Corporation, and
the Corporation shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the Common Shares of the Corporation shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (iii) the Corporation shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Corporation and its Subsidiaries (taken as a whole and
calculated on the basis of the Corporation's most recent regularly prepared
financial statements) to any Person or Persons (other than the Corporation or
any Subsidiary of the Corporation), then, and in each such case, proper
provision shall be made so that (1) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then-current Purchase Price in accordance with the terms
of this Agreement, such number of validly authorized and issued, fully paid,
non-assessable and freely tradable Common Shares of the Principal Party (as
hereinafter defined), not subject to any rights of first refusal or similar
rights, as shall be equal to the result obtained by (x) multiplying the
then-current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable (or, if such Right is not currently
exercisable for a number of Preferred Shares, the number of such fractional
shares for which it
37
<PAGE> 41
was exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event and dividing that product by (y) 50% of the current per share market price
of the Common Shares of such Principal Party (determined pursuant to Section
11(d)(ii) hereof) on the date of consummation of such consolidation, merger,
sale or transfer; provided that the Purchase Price and the number of Common
Shares of such Principal Party issuable upon exercise of each Right shall be
further adjusted as provided in Section 11(f) of this Agreement to reflect any
events occurring in respect of such Principal Party after the date of such
consolidation, merger, sale or transfer; (2) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Corporation
pursuant to this Agreement; (3) the term "Corporation" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of an event set forth in Section 13(a) hereof;
(4) such Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of its Common Shares in accordance with
Section 9) in connection with such consummation as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights; provided that, upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other extraordinary
transaction in respect of such Principal Party, each holder of a Right shall
thereupon be entitled to receive, upon exercise of a Right and payment of the
Purchase Price as provided in this Section 13(a), such cash, shares, rights,
warrants and other property which such holder would have been entitled to
receive had such holder, at the time of such transaction, owned the Common Stock
of the Principal Party
38
<PAGE> 42
receivable upon the exercise of a Right pursuant to this Section 13(a), and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property; and (5) the provisions of Section
11(a)(ii) hereof shall be of no effect following the first occurrence of any
event set forth in this Section 13(a).
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (i) or (ii) of
the first sentence of Section 13(a) hereof: (A) the Person that is the issuer of
the securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer of the
shares of Common Stock which has the greatest aggregate market value of shares
outstanding, or (B) if no securities are so issued, (x) the Person that is the
other party to the merger, if such Person survives said merger, or, if there is
more than one such Person, the Person the shares of Common Stock of which have
the greatest aggregate market value of shares outstanding or (y) if the Person
that is the other party to the merger does not survive the merger, the Person
that does survive the merger (including the Corporation if it survives) or (z)
the Person resulting from the consolidation; and
(ii) in the case of any transaction described in (iii) of the
first sentence in Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if such Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred or if the Person receiving the greatest portion of the
assets or earning power cannot be
39
<PAGE> 43
determined, whichever of such Persons as is the issuer of Common Stock having
the greatest aggregate market value of shares outstanding; provided, however,
that in any case described in the foregoing clauses (b)(i) and (b)(ii), (1) if
the Common Shares of such Person are not at such time and have not been
continuously over the preceding twelve (12) month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; (2) in case such
Person is a Subsidiary, directly or indirectly, of more than one Person, the
Common Shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market value or (3) if such Person
is owned, directly or indirectly, by a joint venture formed by two or more
Persons that are not owned, directly or indirectly, by the same Person, the
rules set forth in clauses (1) and (2) above shall apply to each of the owners
having an interest in the venture as if the Person owned by the joint venture
was a Subsidiary of both or all of such joint venturers, and the Principal Party
in each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.
(c) The Corporation shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have sufficient Common
Shares authorized to permit the full exercise of the Rights and prior thereto
the Corporation and such Principal Party shall have executed and delivered to
the Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and that such consolidation, merger,
sale or transfer of assets shall not result in a default by the Principal Party
under this Agreement as the
40
<PAGE> 44
same shall have been assumed by the Principal Party pursuant to paragraphs (a)
and (b) of this Section 13 and further providing that, as soon as practicable
after the date of any consolidation, merger or sale of assets mentioned in
paragraph (a) of this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date; and
(ii) use its best efforts, if the Common Stock of the
Principal Party shall be listed or admitted to trading on the New York Stock
Exchange or on another national securities exchange to list or admit to trading
(or continue the listing of) the Rights and the securities purchasable upon
exercise of the Rights on the New York Stock Exchange or such securities
exchange, or, if the Common Stock of the Principal Party shall not be listed or
admitted to trading on the New York Stock Exchange or a national securities
exchange, to cause the Rights and the securities receivable upon exercise of the
Rights to be reported by such other system then in use;
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act; and
(iv) obtain waivers of any rights of first refusal or
preemptive rights in respect of the Common Stock of the Principal Party subject
to purchase upon exercise of outstanding Rights.
41
<PAGE> 45
(d) In case the Principal party has provision in any of its authorized
securities or in its certificate of incorporation or by-laws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue (other than to holders of Rights pursuant
to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, shares of Common
Stock of such Principal Party at less than the then current market price per
share thereof (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Stock of such Principal Party at
less than such then current market price, or (ii) providing for any special
payment, tax or similar provision in connection with the issuance of the Common
Stock of such Principal Party pursuant to the provisions of Section 13, then, in
such event, the Corporation hereby agrees with each holder of Rights that it
shall not consummate any such transaction unless prior thereto the Corporation
and such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been cancelled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
42
<PAGE> 46
Section 14. Fractional Rights and Fractional Shares.
(a) The Corporation shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price for any Trading Day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
similar system then in use or, if on any such date the Rights are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights selected
by the Board of Directors of the Corporation. If on any such date no such market
maker is making a market in the Rights, the
43
<PAGE> 47
fair value of the Rights on such date as determined in good faith by the Board
of Directors of the Corporation shall be used.
(b) The Corporation shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-hundredth of a
share may, at the election of the Corporation, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Corporation and a
depositary selected by it, provided that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares. In lieu of fractional Preferred Shares that are not integral multiples
of one one-hundredth of a Preferred Share, the Corporation shall pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of a Preferred Share. For purposes of this Section 14(b), the
current market value of a Preferred Share shall be the closing price of a
Preferred Share (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of a Triggering Event, the Corporation
shall not be required to issue fractions of Common Shares upon exercise of the
Rights or to distribute certificates which evidence fractional Common Shares. In
lieu of fractional Common Shares, the Corporation shall pay to the registered
holders of Right Certificates at the time such Rights are
44
<PAGE> 48
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Common Share. For purposes of this Section 14(c),
the current market value of one Common Share shall be the closing price of one
Common Share (as determined pursuant to of Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of any Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Corporation to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
45
<PAGE> 49
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Corporation and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Corporation and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Corporation or the Rights Agent) for
all purposes whatsoever, and neither the Corporation nor the Rights Agent shall
be affected by any notice to the contrary.
(d) notwithstanding anything in this Agreement to the contrary,
neither the Corporation nor the Rights Agent shall have any liability to any
holder of a Right or other Person as a result of its inability to perform any of
its obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided,
46
<PAGE> 50
however, the Corporation must use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Corporation which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Corporation or
any right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. The Corporation agrees to pay
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Corporation also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. This
47
<PAGE> 51
indemnification shall survive the expiration or termination of the Rights or
this Rights Agreement.
The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Right Certificate or
certificate for Preferred or Common Shares or for other securities of the
Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust or
stock transfer business of the Rights Agent or any successor Rights Agent, or
any Affiliate of the Rights Agent that undertakes the corporate trust or stock
transfer business of the Rights Agent as a result of transfer, assignment or any
other means, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent
48
<PAGE> 52
and deliver such Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Corporation and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Corporation), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation,
49
<PAGE> 53
the identity of any Acquiring Person and the determination of "current per share
market price") be proved or established by the Corporation prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by any one of the
Chairman of the Board, the President, a Vice President, the Treasurer or the
Secretary of the Corporation and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Corporation
and any other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Corporation only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except as to its
countersignature thereof); nor shall it be responsible for any breach by the
Corporation of any covenant or condition contained in this Agreement or in any
Right Certificate; nor shall it be responsible for any adjustment required under
the provisions of Sections 11 or 13 hereof or responsible for the manner, method
or amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
50
<PAGE> 54
Rights evidenced by Right Certificates after actual notice of any such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or Common Shares to be purchased pursuant to this Agreement or
any Right Certificate or as to whether any Preferred Shares or Common Shares
will, when so issued, be validly authorized and issued, fully paid and
nonassessable; nor will it be liable for any federal or state transfer taxes or
charges that may be due upon the issuance or transfer of any Preferred Share,
Common Share or Right Certificate.
(f) The Corporation agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, a Vice President, the Secretary
or the Treasurer of the Corporation, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with the
instructions of any such officer or for any delay in acting while waiting for
such instructions. When applying to any such officer for instructions, the
Rights Agent may set forth in writing (i) any proposed action or omission of the
Rights Agent with respect to its duties or obligations under this Agreement and
(ii) the date on or after which the Rights Agent proposes such action will be
taken or omitted. Such date shall not be less than three Business Days after any
such officer receives such application for instructions from the Rights Agent,
unless an earlier date is
51
<PAGE> 55
mutually agreed to by the parties. Unless the Rights Agent has received written
instructions from the Corporation (including any such officer) with respect to
such proposed action or omission prior to such date (or, if longer, in the case
of a proposed action to be taken, prior to the Rights Agent actually taking such
action), the Rights Agent shall not be liable for the actions or omissions set
forth in such application, provided that such action or omission does not
violate any express provisions of this Rights Agreement. The Rights Agent may
execute and exercise any of the rights or powers vested in it or perform any
duty hereunder either itself or by or through its attorneys or agents.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or contract with or lend
money to the Corporation or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Corporation or for any other
legal entity.
(i) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
hereunder if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is not
reasonably assured to the Rights Agent.
(j) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response
52
<PAGE> 56
to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise of transfer without first consulting
with the Corporation.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Corporation and to each transfer
agent of the Common Shares and the Preferred Shares by registered or certified
mail, and to the holders of the Right Certificates by first-class mail. The
Corporation may remove the Rights Agent or any successor Rights Agent upon 30
days' notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of the Common Shares and the
Preferred Shares, by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Corporation shall
appoint a successor to the Rights Agent. If the Corporation shall fail to make
such appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Corporation), then the incumbent Rights Agent or the
registered holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Corporation or by such a court, shall be (a) a
corporation organized and doing business under the laws of the United States or
any state therein, in good standing, having a principal office in a state in the
United States, which is authorized under such laws to exercise corporate trust
or stock transfer powers and is subject to supervision or examination by federal
or state authority and
53
<PAGE> 57
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100 million or (b) an Affiliate of a corporation described
in clause (a) of this sentence. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Corporation shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Shares and the Preferred Shares, and as soon as practicable
thereafter mail a notice thereof in writing to the registered holders of the
Right Certificates (which notice may be included in any regularly scheduled
mailing to shareholders whether such mailing is by fist-class mail or
otherwise). Failure to give any notice provided for in this Section 21, however,
or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the
Corporation may, at its option, issue new Right Certificates evidencing Rights
in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price per share and/or the number or kind
or class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.
54
<PAGE> 58
Section 23. Redemption and Termination. (a) The Board of Directors of
the Corporation may, at its option, at any time prior to the Shares Acquisition
Date, redeem all but not less than all of the then outstanding Rights at a
redemption price of $.01 per Right, as such amount may be appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being hereinafter referred to as
the "Redemption Price").
(b) Immediately upon the action of the Board of Directors of the
Corporation ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Corporation shall give notice of such
redemption to the Rights Agent and to the holders of the then outstanding Rights
by mailing such notice to all such holders at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. The failure to give notice or any
defect in notice shall not affect the validity of the redemption. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Corporation nor any of its Affiliates
or Associates may redeem, acquire or purchase for value any Rights at any time
in any manner other than that specifically set forth in this Section 23 and
other than in connection with the repurchase of Common Shares prior to the
Distribution Date.
55
<PAGE> 59
Section 24. Exchange. (a) The Board of Directors of the Corporation
may, at its option, at any time after any Person first becomes an Acquiring
Person, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have not become effective or that have
become void pursuant to the provisions of Section 7(e) hereof) for Common Shares
at an exchange ratio of one Common Share per Right, approximately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such amount per Right being hereinafter referred to as the
"Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall
not be empowered to effect such exchange at any time (1) after any Person (other
than an Exempt Person), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of Common Shares aggregating 50% or more of
the Common Shares then outstanding. From and after the occurrence of a Section
13 Event, any Rights that theretofore have not been exchanged pursuant to this
Section 24(a) shall thereafter be exercisable only in accordance with Section 13
and may not be exchanged pursuant to this Section 24(a). The exchange of the
Rights by the Board of Directors may be made effective at such time, on such
basis and with such conditions as the Board of Directors in its sole discretion
may establish.
(b) Immediately upon the effectiveness of the action of the Board of
Directors of the Corporation ordering the exchange of any Rights pursuant to
paragraph (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of Common
Shares equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Corporation shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the
56
<PAGE> 60
validity of such exchange. The Corporation shall promptly mail a notice of any
such exchange to all of the holders of the Rights so exchanged at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) The Corporation may at its option and in the event that there shall
not be sufficient Common Shares issued but not outstanding or authorized but
unissued to permit an exchange of Rights as contemplated in accordance with this
Section 24, the Corporation shall substitute to the extent of such
insufficiency, for each Common Share that would otherwise be issuable upon
exchange of a Right, a number of Preferred Shares or fraction thereof (or
equivalent preferred shares as such term is defined in Section 11(b)) such that
the current per share market price (determined pursuant to Section 11(d) hereof)
of one Preferred Share (or equivalent preferred share) multiplied by such number
or fraction is equal to the current per share market price of one Common Share
(determined pursuant to Section 11(d) hereof) as of the date of such exchange.
Section 25. Notice of Certain Events. In case the Corporation shall
propose, at any time after the Distribution Date, (a) to pay any dividend
payable in stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of Preferred Shares (other than a regular
periodic cash dividend out of earnings or retained earnings of the
57
<PAGE> 61
Corporation) or (b) to offer to the holders of its Preferred Shares rights or
warrants to subscribe for or to purchase any additional Preferred Shares or
shares of stock of any class or any other securities, rights or options, or (c)
to effect any reclassification of its Preferred Shares (other than a
reclassification involving only the subdivision of outstanding Preferred
Shares), or (d) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of more than
50% of the assets or earning power of the Corporation and its Subsidiaries
(taken as a whole) to, any other Person, or (e) to effect the liquidation,
dissolution or winding up of the Corporation, then, in each such case, the
Corporation shall give to each holder of a Right Certificate, to the extent
feasible and in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Preferred Shares, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(a) or (b) above at least 20 days prior to the record date for determining
holders of the Preferred Shares for purposes of such action, and in the case of
any such other action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Preferred Shares, whichever shall be the earlier.
In case any SECTION 11(a)(ii) EVENT shall occur, then, in any such
case, (i) the Corporation shall as soon as practicable thereafter give to each
holder of a Right Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of the occurrence of such event,
58
<PAGE> 62
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding
paragraph to Preferred Shares shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Corporation shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Convergys Corporation
201 East Fourth Street
Cincinnati, Ohio 45202
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Corporation or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Corporation) as follows:
The Fifth Third Bank
Attention: Dana Hushak
Corporate Trust Administration
Mail Drop 1090D2
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Subject to the provisions of Sections 19 and 21, notices or demands authorized
by this Agreement to be given or made by the Corporation or the Rights Agent to
the holder of any Right Certificate shall be sufficiently given or made if sent
by first class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Corporation.
Section 27. Supplements and Amendments. Except as otherwise provided in
this Section 27, for so long as the Rights are then redeemable, the Corporation
may in its sole and
59
<PAGE> 63
absolute discretion, and the Rights Agent shall if the Corporation so directs,
supplement or amend any provision of this Agreement in any respect without the
approval of any holders of the Rights. At any time when the Rights are no longer
redeemable, except as otherwise provided in this Section 27, the Corporation
may, and the Rights Agent shall, if the Corporation so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
in order to (i) cure any ambiguity, (ii) correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) shorten or lengthen any time period hereunder, or (iv)
change or supplement the provisions hereunder in any manner which the
Corporation may deem necessary or desirable; provided that no such supplement or
amendment shall adversely affect the interests of the holders of Rights as such
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person), and no such amendment may cause the Rights again to become redeemable
or cause the Agreement again to become amendable other than in accordance with
this sentence. Notwithstanding anything contained in this Agreement to the
contrary, no supplement or amendment shall be made which decreases the
Redemption Price. Upon the delivery of a certificate from an appropriate officer
of the Corporation which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Corporation or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
(a) For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any
60
<PAGE> 64
particular time, including for purposes of determining the particular percentage
of such outstanding Common Shares of which any Person is the Beneficial Owner,
shall be made in accordance with the provisions of Rule 13d-3(d)(1)(i) of the
General Rules. The Board of Directors of the Corporation shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board, or the Corporation, or as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement. All such actions,
calculations, interpretations and determinations (including, for purpose of
clause (ii) below, all omissions with respect to the foregoing) which are done
or made by the Board in good faith, shall (i) be final, conclusive and binding
on the Corporation, the Rights Agent, the holders of the Right Certificates and
all other parties and (ii) not subject the Board to any liability to the holders
of the Right Certificates.
(b) For purposes of this Agreement, any determination to be made by the
Board of Directors of the Corporation may be by a duly constituted committee
thereof if so authorized to act by the Board of Directors pursuant to the
Corporation's Regulations, and in such circumstances any reference to the Board
of Directors herein shall be deemed to include a reference to such committee.
Section 30. Benefit of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Corporation, the Rights Agent
and the registered holders of the Right Certificates (and, prior to the
Distribution Date, registered holders of the Common
61
<PAGE> 65
Shares) any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Corporation,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, registered holders of the Common Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Ohio and for all purposes shall be governed by and
construed in accordance with the laws of Ohio applicable to contracts made and
to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each such counterpart shall for all purposes be deemed to be
an original, and all such counterparts shall together constitute but one and the
same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
62
<PAGE> 66
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: CONVERGYS CORPORATION
By
------------------------------- --------------------------------------
William D. Baskett III James F. Orr
Secretary and General Counsel President and Chief Executive Officer
Attest: THE FIFTH THIRD BANK
By
------------------------------- --------------------------------------
Name Vice President and Trust Officer
-----------------------------
Title
----------------------------
63
<PAGE> 67
EXHIBIT A
FORM OF
CERTIFICATE OF AMENDMENT TO
AMENDED ARTICLES OF INCORPORATION OF
CONVERGYS CORPORATION
James F. Orr, President and Chief Executive Officer, and William D.
Baskett III, Secretary and General Counsel, of Convergys Corporation, an Ohio
corporation for profit with its principal place of business at Cincinnati, Ohio,
do hereby certify that at a meeting of the Board of Directors held pursuant to
notice on the 19th day of November, 1998, the following resolution was adopted
pursuant to Section 1701.70(B)(1) of the Ohio General Corporation Law:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the Ohio
General Corporation Law, as amended, and by Article Fourth of the Corporation's
Amended Articles of Incorporation, such Article Fourth is amended to add a new
Paragraph 9 providing for a series of Voting Preferred Shares and that the
designation of the authorized number of shares of, and the relative rights,
preferences and limitations of, such series are as follows:
9. Of the 4,000,000 Voting Preferred Shares of the Corporation,
2,000,000 shall constitute a series of Voting Preferred Shares designated as
Series A Preferred Shares (the
64
<PAGE> 68
"Series A Preferred Shares") and have, subject and in addition to the other
provisions of this Article Fourth, the following relative rights, preferences
and limitations:
(1) Dividends and Distributions.
(A) Subject to the provisions of this Article Fourth, the
holders of the Series A Preferred Shares shall be entitled to receive, when and
as declared by the Board of Directors, out of funds legally available for that
purpose, cumulative dividends in cash on the 1st day of January, April, July and
October in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a Series A Preferred Share or fraction thereof, in
an amount per share per quarter (rounded to the nearest cent) equal to the
greater of (i) $280.00 or (ii) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount, (payable in kind) of
all non-cash dividends or other distributions (other than a dividend payable in
Common Shares or a subdivision of the outstanding Common Shares, by
reclassification or otherwise), declared on the Common Shares, since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of a Series A
Preferred Share or fraction thereof; provided that, in the event no dividend or
distribution shall have been declared on the Common Shares during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend on the Series A Preferred Shares of $20.00 per
share shall
65
<PAGE> 69
nevertheless be payable on such subsequent Quarterly Dividend Payment Date. In
the event the Corporation shall at any time declare or pay any dividend on the
Common Shares payable in Common Shares, or effect a subdivision or combination
of the outstanding Common Shares (by reclassification or otherwise) into a
greater or lesser number of Common Shares, then in each such case the amount to
which holders of the Series A Preferred Shares were entitled immediately prior
to such event under clause (ii) of the next preceding sentence shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately prior to
such event.
(B) The Board of Directors may fix a record date for the
determination of holders of the Series A Preferred Shares entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be no more than 60 days prior to the date fixed for the payment thereof.
Dividends shall begin to accrue and be cumulative on outstanding Series A
Preferred Shares from the Quarterly Dividend Payment Date next preceding the
date of issue of such Series A Preferred Shares, unless the date of the issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of the Series A Preferred Shares entitled to received a quarterly dividend and
before such Quarterly Dividend
66
<PAGE> 70
Payment Date, in either of which events such dividends shall begin to accrue and
be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the Series A Preferred
Shares in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
(2) Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, then,
subject to the provisions of this Article Fourth, the holders of the Series A
Preferred Shares shall be entitled to receive, from the assets of the
Corporation available for distribution to shareholders, an amount equal to all
dividends accumulated to the date of final distribution plus an amount equal to
the greater of (A) $7,000.00 per share or (B) an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, of 100 times the
aggregate amount to be distributed per share to holders of Common Shares. All
such preferential amounts shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the distribution of
any assets of the Corporation to, the holders of any class of shares ranking
junior as to assets to the Series A Preferred Shares, or the holders of any
series of Preferred Shares ranking junior as to assets to the Series A Preferred
Shares. In the event the Corporation shall at any time declare or pay any
dividend on Common Shares payable in Common Shares, or effect a subdivision or
combination of the outstanding Common Shares (by reclassification or otherwise)
into a greater or lesser number of Common Shares, then in each such case the
aggregate amount to which holders of the Series A Preferred Shares were entitled
immediately prior to such event under clause (B) of the next preceding sentence
shall be adjusted by
67
<PAGE> 71
multiplying such amount by a fraction, of the numerator of which is the number
of Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately prior to
such event.
(3) Redemption. The Series A Preferred Shares shall not be
redeemable.
(4) Voting Rights. Subject to the provisions of this Article
Fourth, each Series A Preferred Share shall entitle the holder thereof to one
vote on all matters submitted to a vote of the shareholders of the Corporation.
The holders of fractional Series A Preferred Shares shall not be entitled to any
vote on any matter submitted to a vote of the shareholders of the Corporation.
(5) Certain Restrictions.
(A) Subject to the provisions of this Article Fourth, whenever
quarterly dividends or other dividends or distributions payable on the Series A
Preferred Shares are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on outstanding Series a
Preferred Shares shall have been paid in full, the Corporation shall not:
68
<PAGE> 72
(i) declare or pay dividends on, or make any other
distributions on, any shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Shares;
(ii) redeem, purchase or otherwise acquire for
consideration shares ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Shares; provided that the
Corporation may at any time redeem, purchase or otherwise acquire any such
junior shares in exchange for any shares of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred Shares;
(iii) declare or pay dividends on or make any other
distributions on any shares ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with a Series A Preferred Shares, except
dividends paid ratably on the Series A Preferred Shares and all such parity
shares on which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iv) purchase or otherwise acquire for consideration
any Series A Preferred Shares, or any shares ranking on a parity with the Series
A Preferred Shares, except in accordance with a purchase offer made in writing
or by publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative rights and
69
<PAGE> 73
preferences of the respective series and classes, shall determine in good faith
will result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of the
Corporation unless the Corporation could, pursuant to paragraph (A) of this
subparagraph 5, purchase or otherwise acquire such shares at such time and in
such manner.
(6) Reacquired Shares. Any Series A Preferred Shares purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired promptly after the acquisition thereof. All such shares shall upon their
retirement become authorized but unissued Voting Preferred Shares and may be
reissued as part of a new series of Voting Preferred Shares to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.
(7) Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the Common Shares are exchanged for or changed into other shares or securities,
cash and/or any other property, then in any such case the Series A Preferred
Shares shall at the same time be similarly exchanged or changed in an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount of shares, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
Common Share is changed
70
<PAGE> 74
or exchanged. In the event the Corporation shall at any time declare or pay any
dividend on Common Shares payable in Common Shares, or effect a subdivision or
combination of the outstanding Common Shares (by reclassification or otherwise)
into a greater or lesser number of Common Shares, then in each such case the
amount set forth in the next preceding sentence with respect to the exchange or
change of Series A Preferred Shares shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the number of
Common Shares that were outstanding immediately prior to such event.
IN WITNESS WHEREOF, the above named officers acting for and on behalf
of Convergys Corporation, have hereunto subscribed their names this _____ day of
December, 1998.
By:
------------------------------------
James F. Orr, President and
Chief Executive Officer
By:
------------------------------------
William D. Baskett III, Secretary
and General Counsel
71
<PAGE> 75
EXHIBIT B
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R-___________________ ___________________Rights
NOT EXERCISABLE AFTER ________________ OR EARLIER IF REDEEMED BY THE COMPANY (AS
DEFINED HEREINAFTER). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH
TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERM IS DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]1
Rights Certificate
CONVERGYS CORPORATION
This certifies that ______________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the
Shareholder Rights Plan, the terms of which are set forth in the Rights
Agreement dated as of November 30, 1998 (the "Rights Agreement"), between
Convergys Corporation, an Ohio corporation (the "Company"), and The Fifth Third
Bank (the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M. (Cincinnati, Ohio time) on December 1, 2008 at the office or offices
of the Rights Agent designated for such purpose, or its successors as Rights
Agent, one one-hundredth of a fully paid, nonassessable Series A Preferred Share
(the "Preferred Shares") of the Company, at a purchase price of $70 per one
one-hundredth of a share (the "Purchase Price"), upon presentation and surrender
of this Rights Certificate with the Form of Election to Purchase and related
Certificate duly executed. The Purchase Price may
- ---------------
(1) The portion of the legend in brackets shall be inserted only if
applicable, shall be modified to apply to an Acquiring Person, as applicable,
and shall replace the preceding sentence.
72
<PAGE> 76
be paid in cash or by certified bank check or money order payable to the order
of the Company. The number of Rights evidenced by this Rights Certificate (and
the number of shares which may be purchased upon exercise thereof) set forth
above, and the Purchase Price per share set forth above, are the number and
Purchase Price as of _______________, based on the Preferred Shares as
constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person, or an Affiliate
or Associate of any such Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of any such Person, such Rights
shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of Preferred Shares or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions, and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are available upon written request to the
Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Preferred Shares as the Rights evidenced by
the Rights Certificate or Rights Certificates surrendered shall have entitled
such holder to purchase. If this Rights Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.01 per Right at any time prior to the Shares Acquisition Date.
73
<PAGE> 77
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting shareholders except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS, the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of _________________, ________.
ATTEST: CONVERGYS CORPORATION
_________________________ By:____________________________
Secretary
Title:_________________________
Countersigned:
THE FIFTH THIRD BANK, Rights Agent
By:_____________________________
Authorized Signature
74
<PAGE> 78
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer the Rights Certificate.)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns and
transfers unto__________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _________________, _______
_________________________________
Signature
Signature Guaranteed:_________________________________
75
<PAGE> 79
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Person (as such terms are defined pursuant to
the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated:_________________, ______ _________________________________
Signature
Signature Guaranteed:_________________________________
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise Rights
represented by Rights Certificate.)
To: CONVERGYS CORPORATION
The undersigned hereby irrevocably elects to exercise _________________
Rights represented by this Rights Certificate to purchase the Preferred Shares
issuable upon the exercise of the Rights (or such other securities or property
of the Company or of any other person which may be issuable upon the exercise of
the Rights) and requests that certificates for such shares be
76
<PAGE> 80
issued in the name of and delivered to:
Please insert social security or other identifying number:______________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number: _____________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: _____________________, _________ ______________________________
Signature
Signature Guaranteed:_____________________________
77
<PAGE> 81
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person, or an Affiliate or Associate of any such Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person, or an Affiliate or
Associate of any such Person.
Dated: __________________, ________ ______________________________
Signature
Signature Guaranteed:_____________________________
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
78
<PAGE> 82
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
On November 19, 1998 the Board of Directors of Convergys Corporation
(the "Company") declared a dividend distribution of one right ("Right") on each
of the Company's outstanding Common Shares, without par value (the "Common
Shares"), to holders of record of the Common Shares at the close of business on
December 1, 1998 (the "Record Date"). One Right also will be distributed for
each Common Share issued after December 1, 1998 until the Distribution Date
(which is described in the next paragraph). Each Right entitles the registered
holder to purchase from the Company a unit ("Unit") consisting of one
one-hundredth of a Series A Preferred Share of the Company (the "Preferred
Shares") at a purchase price of $70 per Unit, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights are set forth in a
Rights Agreement dated as of November 30, 1998 (the "Rights Agreement") between
the Company and The Fifth Third Bank, as Rights Agent.
Initially, the Rights will be attached to all Common Share certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Shares and a
Distribution Date will occur upon the earliest of (i) 10 business days following
a public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding Common Shares or (ii) 10
business days following the commencement of a tender offer or exchange offer
that would if consummated result in a person or group beneficially owning 15% or
more of the outstanding Common Shares.
Until the Distribution Date (i) the Rights will be evidenced by the
Common Share certificates and will be transferred with and only with such Common
Share certificates, (ii) new Common Share certificates issued after the Record
Date,will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Shares
outstanding will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on December 1, 2008 unless earlier redeemed by
the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Shares as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except for certain issuances in
connection with outstanding options and convertible securities and as otherwise
determined by the Board of Directors, only Common Shares issued prior to the
Distribution Date will be issued with Rights.
79
<PAGE> 83
If a person becomes the beneficial owner of 15% or more of the Common
Shares ("Flip-In Event"), each holder of a Right will have the right to receive,
upon exercise, Common Shares having a value equal to two times the exercise
price (Purchase Price) of the Right. Moreover, the Rights will not be
exercisable until the Rights are no longer redeemable as described below. If the
Company does not have enough authorized Common Shares to satisfy the exercise of
the Rights, the Company will be required to substitute value in the form of
cash, property, debt or equity securities, or a reduction of the Purchase Price,
or any combination of the foregoing, in an aggregate amount equal to the value
of the Common Shares which would otherwise be issuable. In addition, the Company
may provide that, in lieu of payment of any exercise price by holders of the
Rights, the Company will issue to such holders securities equal to the value of
the spread between the exercise price and the value of the Common Shares. The
Acquiring Person would not be permitted to exercise any Rights and any Rights
held by such person (or certain transferees of such person) will be null and
void and non-transferable.
For example, at an exercise price of $70 per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following a Flip-In
Event would entitle its holder to purchase $140 worth of Common Shares (or other
consideration, as noted above) for $70. Assuming that the Common Shares had a
per share value of $35 at such time, the holder of each valid Right would be
entitled to purchase 4 Common Shares for $70. Alternatively, at the discretion
of the Board of Directors, each Right following a Flip-In Event, without payment
of the exercise price, would entitle its holder to Common Shares (or other
consideration, as noted above) with a value of $70.
If, following the Distribution Date, the Company is acquired in certain
specified mergers or other business combinations (i.e., the Company does not
survive or its Common Shares are changed or exchanged), or 50% or more of its
assets or earning power (on a consolidated basis) is sold or transferred in one
transaction or a series of related transactions ("Flip-Over Events"), each Right
becomes a Right to acquire common stock of the other party to the transaction
(or its ultimate parent in certain circumstances) having a value equal to two
times the Purchase Price. As an enforcement mechanism, the Rights Agreement
prohibits the Company from entering into any such transaction unless the other
party agrees to comply with the provisions of the Rights.
The Purchase Price payable and the number of Units of Preferred Shares
or other securities or property issuable upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) if holders of the Preferred Shares are granted certain rights or
warrants to subscribe for Preferred Shares or convertible securities at less
than the current market price of the Preferred Shares, or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until
80
<PAGE> 84
cumulative adjustments amount to at least 1% of the Purchase Price. No
fractional Units will be issued and, in lieu thereof, an adjustment in cash will
be made based on the market price of the Preferred Shares on the last trading
date prior to the date of exercise.
In general, the Company may redeem the Rights in whole, but not in
part, at a price of $0.01 per Right, at any time prior to a Flip-In Event.
Immediately upon the action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $0.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for shares (or other consideration) of the Company or for common
stock of the acquiring company as set forth above.
As long as the Rights are redeemable, the Company may amend any
provision of the Rights Agreement in any respect without the approval of the
holders of the Rights. At any time when the Rights are no longer redeemable, the
Company may amend the Rights Agreement without the approval of the holders of
the Rights in order to cure any ambiguity, correct or supplement any provision
which may be defective or inconsistent with any other provision, shorten or
lengthen any time period, or change or supplement the provisions in any manner
in which the Company may deem necessary or desirable; provided that no such
supplement or amendment shall adversely affect the interests of the holders of
the Rights, and no such amendment may cause the Rights again to become
redeemable or cause the Rights Agreement again to become amendable other than in
accordance with the terms of the original Rights Agreement.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
81
<PAGE> 1
Exhibit 4.3
CONVERGYS CORPORATION
RETIREMENT AND SAVINGS PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999)
<PAGE> 2
TABLE OF CONTENTS
CONVERGYS CORPORATION RETIREMENT AND SAVINGS PLAN
PAGE
SECTION 1 NAME AND PURPOSE OF PLAN...........................................1
SECTION 2 GENERAL DEFINITIONS; GENDER AND NUMBER.............................1
SECTION 3 CREDITED SERVICE...................................................4
SECTION 4 ELIGIBILITY AND PARTICIPATION......................................7
SECTION 5 CONTRIBUTIONS......................................................8
SECTION 6 LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS......................10
SECTION 7 ACCOUNTS......................................................... 17
SECTION 8 DISTRIBUTIONS.....................................................20
SECTION 9 WITHDRAWALS DURING EMPLOYMENT; LOANS; TRANSFERS...................28
SECTION 10 TOP-HEAVY PROVISIONS..............................................31
SECTION 11 ADMINISTRATION OF THE PLAN........................................35
SECTION 12 MANAGEMENT OF ASSETS..............................................36
SECTION 13 AMENDMENT AND TERMINATION.........................................37
SECTION 14 MERGERS AND CONSOLIDATIONS........................................37
SECTION 15 NON-ALIENATION OF BENEFITS........................................38
SECTION 16 MISCELLANEOUS.....................................................38
i
<PAGE> 3
CONVERGYS CORPORATION RETIREMENT AND SAVINGS PLAN
SECTION 1
NAME AND PURPOSE OF PLAN
1.1 Name. The plan set forth herein shall be known as the Convergys
Corporation Retirement and Savings Plan (the "Plan").
1.2 Purpose. The Plan is designated as a plan intended to qualify as a
profit sharing plan under section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code").
1.3 Predecessor Plan. The Plan is intended to amend and supersede the
CBIS Retirement and Savings Plan effective January 1, 1999.
SECTION 2
GENERAL DEFINITIONS; GENDER AND NUMBER
2.1 General Definitions. For purposes of the Plan, the following terms
shall have the meanings hereinafter set forth unless the context otherwise
requires:
2.1.1 "Affiliated Employer" means Convergys, each corporation
which is a member of a controlled group of corporations (within the meaning of
section 414(b) of the Code as modified by section 415(h) of the Code) which
includes Convergys, each trade or business (whether or not incorporated) which
is under common control (within the meaning of section 414(c) of the Code as
modified by section 415(h) of the Code) with Convergys, each member of an
affiliated service group (within the meaning of section 414(m) of the Code)
which includes Convergys and each other entity required to be aggregated with
Convergys under section 414(o) of the Code.
2.1.2 "Approved Absence" means an absence from active service
with an Affiliated Employer by reason of a vacation or leave of absence approved
by the Affiliated Employer, any absence from active service with an Affiliated
Employer while employment rights with the Affiliated Employer are protected by
law and any other absence from active service with an Affiliated Employer which
does not constitute a termination of employment with the Affiliated Employer
under rules adopted by the Affiliated Employer and applied in a uniform and
nondiscriminatory manner.
<PAGE> 4
2.1.3 "Beneficiary" means the person or entity designated by a
Participant, on forms furnished and in the manner prescribed by the Committee,
to receive any benefit payable under the Plan after the Participant's death. If
a Participant fails to designate a beneficiary or if, for any reason, such
designation is not effective, his "Beneficiary" shall be his surviving spouse,
or, if none, his estate. Notwithstanding the foregoing, the "Beneficiary" of a
married Participant shall be deemed to be his spouse unless (a) he has
designated another person or entity as his beneficiary and his spouse has
consented to such designation in a written consent which acknowledges the effect
of such designation and is witnessed by a Plan representative or notary public
or (b) his spouse cannot be located.
2.1.4 "CMG Plan" means the Convergys CMG Retirement Savings
Plan (formerly known as the MATRIXX Marketing Inc. Profit Sharing/401(k) Plan).
2.1.5 "Cincinnati Bell Shares" means common shares of
Cincinnati Bell Inc.
2.1.6 "Committee" means the Convergys Employee Benefits
Committee.
2.1.7 "Convergys" means Convergys Corporation.
2.1.8 "Convergys Shares" means common shares of Convergys.
2.1.9 "Covered Compensation" means, with respect to any
Participant, for any computation period, the total salary, hourly wages, merit
awards, pay in lieu of vacation, holiday differential pay, disability pay,
commissions and bonuses paid to him by a Participating Company during the
computation period for services rendered as a Covered Employee, plus the
additional amount of such compensation that the Participating Company would have
paid to the Participant during the computation period for services rendered as a
Covered Employee if the Participant had not entered into a cash or deferred
arrangement described in section 401(k) of the Code or elected non-taxable
benefits under a cafeteria plan described in section 125 of the Code, but
excluding "spot" bonuses, referral bonuses, severance pay, relocation pay,
imputed income and any other special form of pay. In the case of a Participant
on international assignment, his Covered Compensation shall not be increased or
decreased by reason of any international service adjustments. For purposes of
the Plan, an Employee's "Covered Compensation" for any Plan Year compensation
for any Plan Year shall not be deemed to exceed $160,000 or such greater amount
as may be permitted for such Plan Year under section 401(a)(17) of the Code.
2.1.11 "Covered Employee" means an Employee who is employed by
a Participating Company, subject to the following:
2
<PAGE> 5
(a) The term "Covered Employee" shall not include any Employee
who is a member of a collective bargaining unit unless and until his
participation in the Plan has been approved under a collective bargaining
agreement.
(b) The term "Covered Employee" shall not include any person
who is a "leased employee" within the meaning of section 414(n) of the Code. For
purposes of the preceding sentence, the term "leased employee" means any person
(other than an employee of the recipient) who pursuant to an agreement between
the recipient and any other person (leasing organization) has performed services
for the recipient (or for the recipient and related persons determined in
accordance with section 414(n)(6) of the Code) on a substantially full-time
basis for a period of at least one year, and such services are performed under
primary direction or control by the recipient.
(c) The term "Covered Employee" shall not include any Employee
(other than a Foreign Service Employee) who is employed at a location which is
not within one of the States of the United States. For the purpose of the
preceding sentence, "Foreign Service Employee" means an Employee who is a
citizen of the United States and who has been classified by the Participating
Company which employs him as a Foreign Service Employee.
(d) The term "Covered Employee" shall not include any Employee
who is a Rotational Employee. For purposes of the preceding sentence,
"Rotational Employee" means an Employee who is a nonresident alien employed
within one of the States of the United States for a period not expected to
exceed three years.
(e) The term "Covered Employee" shall not include an Employee
of Convergys Customer Management Group Inc. who is a member of Group Levels D1,
D2, D3, C4, C5 or C6 other than a member of Group Level C4 who is employed at
one of the following locations: 01, 02, 03, 04, 08, 09, 17, 19, 46, 53, 54, 56,
62, 63, and 64.
2.1.11 "Employee" means any person who is a common law
employee of an Affiliated Employer, including any such person who is absent from
active service with an Affiliated Employer by reason of an Approved Absence.
2.1.12 "Entry Date" means January 1, 1999 and the first day of
each calendar month after January 1, 1999.
2.1.13 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
2.1.14 "Normal Retirement Date" means the date on which a
Participant attains age 59-1/2.
3
<PAGE> 6
2.1.15 "Participant" means a person who was a Participant in
the Plan on December 31, 1998, or who thereafter becomes a Participant in the
Plan in accordance with the provisions of Section 4, and who remains a
Participant.
2.1.16 "Participating Company" means Convergys, Convergys
Information Management Group Inc. and Convergys Customer Management Group Inc.
2.1.17 "Plan Accounts" means, collectively, all outstanding
bookkeeping accounts maintained for a Participant in accordance with the
provisions of the Plan.
2.1.18 "Plan Year" means the calendar year.
2.1.19 "Total Disability" means a physical or mental
disability which, in the opinion of a physician selected or first approved by
the Committee, disables the Participant from performing his duties as an
Employee and is expected to continue for one year or longer.
2.1.20 "Trust" means the trust established in conjunction with
the Plan.
2.1.21 "Trustee" means the person or corporation serving as
trustee of the Trust.
2.1.22 "Valuation Date" means the last day of each Plan Year
and such other dates as may be selected by the Committee for the valuation of
the Trust assets.
2.2 Gender and Number. For purposes of the Plan, words used in any
gender shall include all other genders, words used in the singular form shall
include the plural form and words used in the plural form shall include the
singular form, as the context may require.
SECTION 3
CREDITED SERVICE
3.1 Eligibility Service. Each Employee who has completed at least 1,000
Hours of Service during the 12-month period commencing on the day he first
performs an Hour of Service for an Affiliated Employer shall be credited with
one year of Eligibility Service as of the last day of such 12-month period. Each
Employee who fails to complete at least 1,000 Hours of Service during the
12-month period commencing on the day he first performs an Hour of Service for
an Affiliated Employer shall be credited with one year of Eligibility Service as
of the last day of the first Plan Year (commencing on or after the day he first
performs an Hour of Service for an Affiliated Employer) during which he
completes at least 1,000 Hours of Service. Notwithstanding the foregoing, if an
Employee who does not have any nonforfeitable right under the Plan to an accrued
4
<PAGE> 7
benefit derived from Affiliated Employer contributions has a Break in Service of
at least five years and if the number of Plan Years during such Break in Service
equals or exceeds the number of his years of Eligibility Service on the day
preceding such Break in Service (excluding any years of Eligibility Service
prior to such Break in Service not required to be taken into account by reason
of a prior Break in Service), his years of Eligibility Service prior to such
Break in Service shall be disregarded for purposes of determining his
eligibility to become a Participant in the Plan.
3.2 Vesting Service. Each Employee shall be credited with one year of
Vesting Service for each Plan Year during which he completes at least 1,000
Hours of Service. Notwithstanding the foregoing, if an Employee who does not
have any nonforfeitable right under the Plan to an accrued benefit derived from
Affiliated Employer contributions has a Break in Service of at least five years
and if the number of Plan Years during such Break in Service equals or exceeds
the number of his years of Vesting Service on the day preceding such Break in
Service (excluding any years of Vesting Service prior to such Break in Service
not required to be taken into account by reason of a prior Break in Service),
his years of Vesting Service prior to such Break in Service shall be disregarded
for purposes of the Plan.
3.3 Break in Service. For purposes of the Plan, the term "Break in
Service" means a period of one or more consecutive Plan Years during each of
which an Employee fails to complete more than 500 Hours of Service.
3.4 Hours of Service. Subject to the rules contained in 29 CFR Section
2530.200b-2(b) and (c) (which are incorporated herein by reference), an
Employee's "Hours of Service" shall be computed as follows:
3.4.1 One Hour of Service shall be credited for each hour for
which an Employee is paid, or entitled to payment, for the performance of duties
for an Affiliated Employer during the applicable computation period.
3.4.2 One Hour of Service shall be credited for each hour for
which an Employee is paid, or entitled to payment, by an Affiliated Employer on
account of a period of time during which no duties are performed (irrespective
of whether the employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty, military duty or
leave of absence. Notwithstanding the preceding sentence:
(a) No more than 501 Hours of Service are required to
be credited under this Section 3.4.2 to an Employee on account of any single
continuous period during which the Employee performs no duties (whether or not
such period occurs in a single computation period);
(b) An hour for which an Employee is directly or
indirectly paid, or entitled to payment, on account of a period during which no
duties are performed is not required to
5
<PAGE> 8
be credited to the Employee if such payment is made or due under a plan
maintained solely for the purpose of complying with applicable workmen's
compensation, or unemployment compensation or disability insurance laws; and
(c) Hours of Service are not required to be credited
for a payment which solely reimburses an Employee for medical or medically
related expenses incurred by the Employee.
For purposes of this Section 3.4.2, a payment shall be deemed to be made by or
due from an Affiliated Employer regardless of whether such payment is made by or
due from the Affiliated Employer directly, or indirectly through, among others,
a trust fund, or insurer, to which the Affiliated Employer contributes or pays
premiums and regardless of whether contributions made or due to the trust fund,
insurer or other entity are for the benefit of particular Employees or are on
behalf of a group of Employees in the aggregate.
3.4.3 One Hour of Service shall be credited for each hour for
which back pay, irrespective of mitigation of damages, is either awarded or
agreed to by an Affiliated Employer. The same hours of service shall not be
credited both under Section 3.4.1 or Section 3.4.2, as the case may be, and
under this Section 3.4.3. Crediting of Hours of Service for back pay awarded or
agreed to with respect to periods described in Section 3.4.2 shall be subject to
the limitations set forth in that Section.
3.4.4 For purposes only of determining whether an Employee has
incurred a Break in Service, if the Employee is absent from work for an
Affiliated Employer (a) by reason of the pregnancy of the Employee, (b) by
reason of the birth of a child of the Employee, (c) by reason of the placement
of a child with the Employee in connection with the adoption of such child by
the Employee, or (d) for purposes of caring for such a child for a period
beginning immediately following such a birth or placement, and the Employee is
not paid or entitled to be paid for such absence, the Employee will be credited
with one Hour of Service for each hour which the Employee would normally have
been scheduled for work but for such absence, or, if the Employee does not have
a regular work schedule, with eight Hours of Service for each day of such
absence. Notwithstanding the preceding sentence:
(i) No more than 501 Hours of Service will be
credited under this Section 3.4.4 to an Employee on account of any single
continuous period of such an absence;
(ii) Any Hours of Service which are to be credited to
an Employee under this Section 3.4.4 by reason of a single continuous period of
absence will be credited for the Plan Year in which such absence begins if the
Employee would be prevented from incurring a Five Year Break in Service with
respect to such Plan Year solely because of such crediting. Otherwise, such
Hours
6
<PAGE> 9
of Service will be credited for the Plan Year next following the Plan Year in
which such absence begins; and
(iii) No Hours of Service will be credited under this
Section 3.4.4 to an Employee unless the Employee furnishes to the Committee such
timely information as the Committee may reasonably require to establish that the
applicable absence from work is for reasons referred to in the first sentence of
this Section 3.4.4 and the number of days for which there was such an absence.
The same Hours of Service shall not be credited both under Section 3.4.1, 3.4.2
or 3.4.3 above and under this Section 3.4.4.
3.5 Service with Predecessor Entities. For purposes of the Plan, in the
case of an employee of a Predecessor Entity who became an Employee as of the
date on which the Predecessor Entity was acquired by an Affiliated Employer
("Acquisition Date"), from and after the Acquisition Date his service with the
Predecessor Entity shall be deemed to be service with an Affiliated Employer.
For purposes of this Section 3.5, "Predecessor Entity" means NICE Corporation,
Automated Phone Exchange Incorporated, Telephone Marketing Services, Inc.,
Ameritel Corporation, Waveland Associates, Inc., ADI Research, Inc., WATS
Marketing of American, Inc., Software Support, Inc., Maritz, Inc. and American
Transtech, Inc. (ATI"). In the case of an employee of Scherers Communications,
Inc. ("Scherers") who became an Employee on August 7, 1996, for purposes of the
Plan, his service with Scherers prior to August 7, 1996 shall be deemed to be
service with an Affiliated Employer. In the case of an employee of AT&T Corp.
("AT&T") who became an Employee on March 1, 1998, for purposes of the Plan, his
service with AT&T prior to March 1, 1998 shall be deemed to be service with an
Affiliated Employer. In the case of an employee of AccuStaff Incorporated or
People Systems Inc. (collectively, "AccuStaff") who became an Employee during
1998 and who was supporting Convergys Customer Management Group Inc. immediately
prior to becoming an Employee, for purposes of the Plan, his service with
AccuStaff prior to the date he became an Employee shall be deemed to be service
with an Affiliated Employer.
SECTION 4
ELIGIBILITY AND PARTICIPATION
4.1 Eligibility. Each Employee (a) who is a Covered Employee, (b) who
has attained age 21 and (c) who has been credited with at least one year of
Eligibility Service shall be eligible to become a Participant in the Plan.
4.2 Participation. Each Employee may elect to become a Participant in
the Plan on any Entry Date on which he satisfies all of the eligibility
requirements of Section 4.1.1 by completing a form provided by the Committee and
filing such form with the Committee within the time
7
<PAGE> 10
prescribed by the Committee. Each Participant shall remain a Participant so long
as he remains an Employee and until his Plan Accounts have been fully
distributed or forfeited.
4.3 Transfers from CMG Plan. Effective January 1, 1999, each person who
was a participant in the CMG Plan on December 31, 1998 and who is not CMG Plan
Eligible on January 1, 1999 automatically shall become a Participant in this
Plan on January 1, 1999 and the amounts credited to his accounts under the CMG
Plan automatically shall be transferred to the corresponding Plan Accounts in
this Plan. If a participant in the CMG Plan becomes a Covered Employee after
January 1, 1999, he automatically shall become a Participant in this Plan on the
date he becomes a Covered Employee and the amounts credited to his accounts
under the CMG Plan automatically shall be transferred to the corresponding Plan
Accounts in this Plan. Until changed by the Participant, in accordance with the
provisions of this Plan, any beneficiary designation, investment direction and
authorization for salary deferral contributions in effect under the CMG Plan
shall continue in effect under this Plan. For purposes of the Plan, the term
"CMG Plan Eligible" means an Employee who is eligible to make 401(k)
contributions to the CMG Plan.
SECTION 5
CONTRIBUTIONS
5.1 Salary Deferral Contributions. Each Participant may authorize
salary deferral contributions, of up to such percentage of his Covered
Compensation as may be fixed by the Committee from time to time, by completing a
form supplied by the Committee and filing such form with the Committee within
the time prescribed by the Committee. A Participant may change his authorization
for salary deferral contributions from one permissible percentage to another at
such times as the Committee may direct by completing a form supplied by the
Committee and filing such form with the Committee within the time prescribed by
the Committee. A Participant may suspend his authorization for salary deferral
contributions at such times as the Committee may direct by completing a form
provided by the Committee and filing such form with the Committee within the
time prescribed by the Committee. A Participant who has suspended his
authorization for salary deferral contributions may again authorize salary
deferral contributions by completing and signing a form provided by the
Committee and filing such form with the Committee within the time prescribed by
the Committee. Subject to the limitations contained in Section 6, (a) the amount
of Covered Compensation otherwise payable to each Participant on or after
January 1, 1999 shall be reduced by the amount of the salary deferral
contributions authorized by the Participant with respect to such Covered
Compensation and (b) the Participating Companies shall contribute to the Plan,
for each such Participant, an amount equal to the amount by which his Covered
Compensation has been reduced. Salary deferral contributions under this Section
5.1 shall be paid to the Trustee no less frequently than monthly.
Salary deferral contributions under this Section 5.1 shall be made in cash.
8
<PAGE> 11
5.2 Basic Company Contributions. The Participating Companies shall
contribute to the Plan, for each Participant who authorized salary deferral
contributions under Section 5.1, an amount equal to the lesser of (a) 4% of the
Participant's Covered Compensation with respect to which salary deferral
contributions were authorized or (b) 66-2/3% of the amount of the salary
deferral contributions made with respect to such Covered Compensation under
Section 5.1, subject to the limitations contained in Section 6. The
Participating Companies' contributions for any payroll period under this Section
5.2 shall be paid to the Trustee no less frequently than monthly. The
Participating Companies' contributions under this Section 5.2 may be made in
cash or Convergys Shares. Notwithstanding the foregoing, in the event of a
distribution of a Participant's salary deferral contributions under Section 6.2,
any Participating Company contributions (and earnings thereon) under this
Section 5.2 which are attributable to such distributed contributions also shall
be distributed to the Participant at the same time; provided, however, that if
such Participating Company contributions (and earnings thereon) would have been
subject to forfeiture if the Participant had ceased to be an Employee, such
contributions and earnings shall not be distributed but shall be forfeited.
5.3 Rollover Contributions. With the consent of the Committee, a
Covered Employee may make a rollover contribution to the Trust as described in
section 401(a)(5), 403(a)(4) or 408(d)(3) of the Code; provided that no Covered
Employee may roll over any amounts which were previously deducted by him under
section 219 of the Code. Any rollover contribution must be made in cash or
Convergys Shares. A Covered Employee who makes a rollover contribution under
this Section 5.3 prior to becoming a Participant shall thereupon become a
Participant, provided that such Participant may not authorize contributions
under Section 5.1 or share in Participating Company contributions under Section
5.2 prior to the date on which his participation otherwise could have commenced
under Section 4.2.
5.4 Mistake of Fact; Disallowance of Deduction. Any contribution made
by a Participating Company by reason of a mistake of fact or conditioned on its
deductibility under section 404 of the Code, to the extent disallowed, shall be
repaid to the Participating Company, at the Participating Company's election,
provided that such repayment is made within one year after the mistaken payment
of the contribution or within one year of the disallowance of the deduction.
Earnings attributable to such contributions may not be paid to the Participating
Company, but any losses attributable thereto shall reduce the amount which may
be repaid. All Participating Company contributions shall be conditioned on their
deductibility under section 404 of the Code.
5.5 Application of Forfeitures. Any forfeitures arising under the Plan
in any Plan Year shall be applied first, to make any restorals called for under
Section 8.6 and second, to reduce the contributions otherwise required of the
Participating Companies.
9
<PAGE> 12
SECTION 6
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
6.1 Section 404 Limitations. In no event shall the Participating
Companies' total contributions to the Plan for any Plan Year under Sections 5.1
and 5.2 exceed 15% of the Compensation of those Participants who are entitled to
share in the Companies' contributions under such Sections for such Plan Year. If
the Companies' total contributions for any Plan Year could exceed the limitation
described in the preceding sentence, the following adjustments shall be made in
the following order so that such limitations are not exceeded: first, the
amounts to be contributed under Section 5.2 shall be reduced proportionately;
and, second, the amounts to be contributed under Section 5.1 shall be reduced
proportionately.
6.2 Section 401(k) Limitations. If for any Plan Year the Participating
Companies' contributions under Section 5.1 on behalf of those Participants who
are Highly Compensated Employees exceed both the limitation contained in Section
6.2.1 and the limitation contained in Section 6.2.2, the contributions on behalf
of such Participants (together with the earnings thereon) shall, to the extent
necessary to insure that at least one of such limitations will not be exceeded,
be distributed to such Participants prior to the end of the following Plan Year.
Distributions shall be made on the basis of the dollar amount of the
contributions made under Section 5.1 by or on behalf of such Participants,
beginning with the highest dollar amount.
6.2.1 The Average Deferral Percentage for those Eligible
Employees who are Highly Compensated Employees must not be more than the Average
Deferral Percentage of all other Eligible Employees multiplied by 1.25.
6.2.2 The excess of the Average Deferral Percentage for those
Eligible Employees who are Highly Compensated Employees over the Average
Deferral Percentage of all other Eligible Employees must not be more than two
percentage points and the Average Deferral Percentage for those Eligible
Employees who are Highly Compensated Employees must not be more than the Average
Deferral Percentage of all other Eligible Employees multiplied by two.
Notwithstanding the foregoing, at the election of Convergys, in lieu of making
distributions to those Participants who are Highly Compensated Employees, (a)
the salary deferral contributions which would otherwise be distributed shall be
recharacterized as voluntary post-tax contributions (subject to the limitations
contained in Sections 6.3 and 6.4) or (b) the Participating Companies may make
special contributions on behalf of those Participants who are not Highly
Compensated Employees in an amount sufficient to satisfy the limitations of
Section 6.2.1 or 6.2.2. Such special contributions shall be allocated among the
Salary Deferral Accounts of those Participants who are entitled to share in the
Participating Companies' contributions under Section 5.1 for the Plan Year and
who are not Highly Compensated Employees in the proportion that each such
Participant's salary deferral
10
<PAGE> 13
contributions under Section 5.1 for the Plan Year bear to all such Participants'
salary deferral contributions under Section 5.1 for the Plan Year. For purposes
of the Plan, (a) the "Average Deferral Percentage" for a specified group of
Eligible Employees shall be the average of such Eligible Employees' Individual
Deferral Percentages and (b) "Individual Deferral Percentage" means, with
respect to any Eligible Employee for any Plan Year, the ratio of the salary
deferral contributions paid to the Plan for the Eligible Employee under Section
5.1 to the Eligible Employee's Compensation for such Plan Year. For purposes of
determining the Individual Deferral Percentage of an Eligible Employee who is a
Highly Compensated Employee, this Plan and all other 401(k) plans maintained by
any Affiliated Employer in which the Eligible Employee is eligible to
participate shall be treated as a single plan. In the event this Plan must be
combined with one or more plans (other than an employee stock ownership plan
described in section 4975(e)(7) of the Code) in order to satisfy the
requirements of section 401(a)(4) or 410(b) of the Code (other than the average
benefits test described in section 410(b)(2)(A)(ii) of the Code), then all cash
or deferred arrangements that are included in such plans shall be treated as a
single arrangement for purposes of section 401(k) of the Code.
6.3 Section 401(m) Limitations. If for any Plan Year the total
contributions under Section 5.2 on behalf of those Participants who are Highly
Compensated Employees exceed both the limitation contained in Section 6.3.1 and
the limitation contained in Section 6.3.2, the contributions on behalf of such
Participants under Section 5.2 (together with the earnings thereon) shall, to
the extent necessary to insure that at least one of such limitations will not be
exceeded, be distributed to such Participants prior to the end of the following
Plan Year. Distributions shall be made on the basis of the dollar amount of the
contributions made by or on behalf of such Participant under Section 5.2,
beginning with the highest dollar amount. Forfeitures under this Section 6.3 may
not be allocated to Participants whose contributions are reduced under this
Section 6.3.
6.3.1 The Average Contribution Percentage for those Eligible
Employees who are Highly Compensated Employees must be not more than the Average
Contribution Percentage of all other Eligible Employees multiplied by 1.25.
6.3.2 The excess of the Average Deferral Percentage for those
Eligible Employees who are Highly Compensated Employees over the Average
Deferral Percentage of all other Eligible Employees must not be more than two
percentage points and the Average Deferral Percentage for those Eligible
Employees who are Highly Compensated Employees must not be more than the Average
Deferral Percentage of all other Eligible Employees multiplied by two.
Notwithstanding the foregoing, at the election of Convergys, in lieu of making
distributions to those Participants who are Highly Compensated Employees, the
Participating Companies may make special contributions on behalf of those
Participants who are not Highly Compensated Employees in an amount sufficient to
satisfy the limitations of Section 6.3.1 or 6.3.2. Such special contributions
shall be allocated among the Employer Contribution Accounts of those
Participants who are entitled
11
<PAGE> 14
to share in the Participating Companies' contributions under Section 5.1 for the
Plan Year and who are not Highly Compensated Employees in the proportion that
each such Participant's salary deferral contributions under Section 5.1 for the
Plan Year bear to all such Participants' salary deferral contributions under
Section 5.1 for the Plan Year. That portion of any Employer Contribution Account
which is attributed to special contributions under this Section 6.3 shall at all
times be fully vested and non-forfeitable. For purposes of the Plan, (a) the
"Average Contribution Percentage" for a specified group of Eligible Employees,
grouped by Compensation, shall be the average of such Eligible Employees'
Individual Contribution Percentages and (b) "Individual Contribution Percentage"
means, with respect to any Eligible Employee for any Plan Year, the ratio of the
contributions paid to the Plan on behalf of the Eligible Employee under Section
5.2 to the Eligible Employee's Compensation for such Plan Year. The Average
Contribution Percentage for any Highly Compensated Employee for any Plan Year
who is eligible to have matching employer contributions made on his behalf or to
make after-tax contributions under one or more plans described in section 401(a)
of the Code (other than an employee stock ownership plan described in section
4975(e)(7) of the Code) maintained by any Affiliated Employer in addition to
this Plan shall be determined as if all such contributions were made to this
Plan. In the event that this Plan must be combined with one or more other plans
(other than an employee stock ownership plan described in section 4975(e)(7) of
the Code) in order to satisfy the requirements of section 401(a) or 410(b) of
the Code (other than the average benefits test described in section
410(b)(2)(A)(ii) of the Code), all employee and matching contributions shall be
treated as made under a single plan for purposes of section 401(m) of the Code.
At the discretion of the Committee, contributions under Section 5.1 shall be
deemed to be contributions under Section 5.2 for purposes of applying the
limitations contained in this Section.
6.4 Section 401(m) Alternate Limitations. The alternate limitations set
forth in this Section 6.4 shall apply if, for any Plan Year, the total
contributions under Section 5.1 on behalf of those Participants who are Highly
Compensated Employees exceed the limitation contained in Section 6.2.1 and the
total contributions under Section 5.2 by or on behalf of those Participants who
are Highly Compensated Employees exceed the limitation contained in Section
6.3.1. If for any Plan Year the total contributions under Section 5.2 by or on
behalf of those Participants who are Highly Compensated Employees exceed both
the limitation contained in Section 6.4.1 and the limitation contained in
Section 6.4.2, to the extent necessary to insure that the sum of such
limitations will not be exceeded, the contributions made on behalf of such
Participants under Section 5.2 (and earnings thereon) shall be distributed to
such Participants prior to the end of the following Plan Year. Distributions
shall be made on the basis of the dollar amount of the contributions made by or
on behalf of such Participant under Section 5.2, beginning with the highest
dollar amount. Forfeitures under this Section 6.4 may not be allocated to
Participants whose contributions are reduced under this Section 6.4.
6.4.1 The sum of (a) 125% of the lesser of (i) the Average
Deferral Percentage of those Eligible Employees who are not Highly Compensated
Employees or (ii) the Average
12
<PAGE> 15
Contribution Percentage of such Eligible Employees; plus (b) the lesser of (i)
2% plus the greater of the amounts determined under clause (a) of this Section
6.4.1 or (ii) 200% of the greater of the amounts determined under clause (a) of
this Section 6.4.1.
6.4.2 The sum of (a) 125% of the greater of (i) the Average
Deferral Percentage of those Eligible Employees who are not Highly Compensated
Employees or (ii) the Average Contribution Percentage of such Eligible
Employees; plus (b) the lesser of (i) 2% plus the lesser of the amounts
determined under clause (a) of this Section 6.4.2 or (ii) 200% of the lesser of
the amounts determined under clause (a) of this Section 6.4.2.
At the discretion of the Committee, contributions under Section 5.1 shall be
deemed to be contributions under Section 5.2 for purposes of applying the
limitations contained in this Section.
6.5 Maximum Annual Additions. The total Annual Additions allocable to a
Participant's Plan Accounts for any Plan Year shall be limited in accordance
with the following provisions:
6.5.1 Notwithstanding any other provision of the Plan to the
contrary, in no event shall a Participant's Annual Additions for any Plan Year
exceed the lesser of (a) $30,000 (or such larger amount as may be determined by
the Commissioner of Internal Revenue for Plan Years beginning on or after
January 1, 1999) or (b) 25% of his Compensation for such Plan Year.
6.5.2 If for any Plan Year, as a result of reasonable error in
estimating a Participant's Compensation or other facts and circumstances
approved by the Commissioner of Internal Revenue, a Participant's Annual
Additions could exceed the limitations set forth in Section 6.5.1, the following
adjustments shall be made in the following order to the extent necessary to
insure such limitations will not be exceeded: first, the Participating
Companies' contributions for the Plan Year on behalf of the Participant under
Section 5.2 shall be allocated to a suspense account under Section 6.5.3; and
second, the Participating Companies' contributions for the Plan Year on behalf
of the Participant under Section 5.1 shall be allocated to a suspense account
under Section 6.5.3.
6.5.3 That portion of the Participating Companies'
contributions for a Plan Year which is allocated to a suspense account under
Section 6.5.2 shall be applied to reduce the contributions otherwise required of
the Participating Companies in the first Plan Year in which they can be applied
without exceeding the limitations of Section 6.5.1. The suspense account shall
not share in the income, expenses, profits or losses of the Trust. The
Participating Companies shall not contribute any amount to the Trust which
results in additional amounts being credited to the suspense account. If the
Plan is terminated, any amount credited to the suspense account which cannot be
allocated to the Participants' Plan Accounts shall be paid to the Participating
Companies.
13
<PAGE> 16
6.5.4 For purposes hereof, "Annual Additions" means, with
respect to any Participant, the sum of all Participating Company and Participant
contributions (other than rollover contributions) and forfeitures allocated to
his accounts for a Plan Year under this Plan and all other defined contribution
plans maintained by any Affiliated Employer. If a Participant in this Plan is a
participant in one or more other defined contribution plans, the limitations
contained in this Section 6.5 shall be applied to reduce the annual additions
which otherwise would have been credited to his accounts in this Plan and such
other plans, beginning with the most current annual additions.
6.5A Maximum Plan Benefit - Combined Limitation for This Plan and Other
Defined Benefit Plans
6.5A.1 General Rule. Notwithstanding any other
provision of this Plan to the contrary, except as provided in this Section 6.5A,
if a Participant in this Plan also participates in one or more defined benefit
plans (as defined in section 414(j) of the Code) maintained by an Affiliated
Employer, in no event shall the sum of the Participant's defined benefit plan
fraction and defined contribution plan fraction for any limitation year exceed
1.0. If and to the extent necessary, the Participant's retirement benefit that
is projected or payable under the defined benefit plan shall be reduced or
frozen so that this limitation is not exceeded.
6.5A.2 Defined Benefit Plan Fraction. For purposes of
this Section 6.5A, a Participant's "defined benefit plan fraction" for any
limitation year is a fraction:
(a) The numerator of which is the
Participant's projected annual benefits under all defined benefit plans
maintained by any Affiliated Employer (determined as of the close of the subject
limitation year); and
(b) The denominator of which is the lesser
of (1) 1.25 multiplied by the dollar limitation in effect under section
415(b)(1)(A) of the Code for such limitation year or (2) 1.4 multiplied by the
amount which may be taken into account for the Participant under section
415(b)(1)(B) of the Code by the close of such limitation year.
6.5A.3 Defined Contribution Plan Fraction. For
purposes of this Section 6.5A, a Participant's "defined contribution plan
fraction" for any limitation year is a fraction:
(a) The numerator of which is the sum of all
of the Annual Additions to the Participant's accounts under all of the defined
contribution plans maintained by any Affiliated Employer which have been made as
of the close of the subject limitation year (including Annual Additions made in
prior limitation years); and
(b) The denominator of which is the sum of
the lesser of the following amounts determined for the subject limitation year
and for each prior limitation year in
14
<PAGE> 17
which the Participant performed service for an Affiliated Employer: (1) 1.25
multiplied by the dollar limitation in effect under section 415(c)(1)(A) of the
Code for the applicable limitation year (determined without regard to section
415(c)(6)of the Code), or (2) 1.4 multiplied by the amount which may be taken
into account for the Participant under section 415(c)(1)(B) of the Code for the
applicable limitation year.
6.5A.4 Other Necessary Terms. For purposes of the
rules set forth in this Section 6.5A, the following terms shall apply:
(a) A Participant's "projected annual
benefit" as of the close of any limitation year means the annual benefit that
the Participant would be entitled to under the defined benefit plan if (1) the
Participant continued in employment with his current employer on the same basis
as exists as of the close of the subject limitation year until attaining his
Normal Retirement Date (or, if he has already reached such date by the close of
the subject limitation year, he immediately terminated his employment), (2) the
Participant's annual compensation for the subject limitation year remains the
same each later limitation year until he terminates employment, and (3) all
other relevant factors used to determine benefits under the defined benefit plan
for the subject limitation year remain constant for all future limitation years.
(b) "Limitation year" means the calendar
year.
6.5A.5 Adjustment of Defined Contribution Plan
Fraction. If necessary, an amount shall be subtracted from the numerator of the
defined contribution plan fraction applicable to a Participant in accordance
with regulations prescribed by the Secretary of the Treasury or his delegate so
that the sum of the Participant's defined benefit plan fraction and defined
contribution plan fraction computed as of the end of the last limitation year
beginning before January 1, 1987 does not exceed 1.0 for such limitation year.
6.6 Highly Compensated Employee. For purposes of the Plan, "Highly
Compensated Employee" means an Employee (a) who, during the Plan Year for which
the determination is being made or the preceding Plan Year, was at any time a
5-percent owner (as defined in section 416(i)(1) of the Code) of any Affiliated
Employer; or (b) who, during the Plan Year preceding the Plan Year for which the
determination is being made, received Compensation in excess of $80,000 (as
adjusted pursuant to section 414(q)(1) of the Code). For purposes of this
Section 6.6, a former Employee shall be deemed to be a Highly Compensated
Employee with respect to a Plan Year if such former Employee separated from
service (or was deemed to have separated) prior to the Plan Year, performed no
services for an Affiliated Employer during the Plan Year and was a Highly
Compensated Employee actively employed by an Affiliated Employer for either the
Plan year in which he separated or any Plan Year ending on or after the
Employee's 55th birthday.
15
<PAGE> 18
6.7 Compensation. For purposes of this Section 6 "Compensation" means
an Employee's earned income, wages, salaries, and fees for professional services
and other amounts received for personal services actually rendered in the course
of employment with an Affiliated Employer (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips and bonuses), but
excluding the following: (a) contributions by an Affiliated Employer to a plan
of deferred compensation which are not includable in the Employee's gross income
for the taxable year in which contributed, or contributions by an Affiliated
Employer under a simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any distributions from a plan
of deferred compensation; (b) amounts realized from the exercise of a
non-qualified stock option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture; (c) amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified stock option; and (d)
other amounts which received special tax benefits.
6.7.1 For purposes of Sections 6.1 and 6.5, an Employee's
Compensation for a Plan Year is the Compensation actually paid or includable in
gross income during such Plan Year.
6.7.2 For purposes of Section 6, an Employee's Compensation
for a Plan Year is the Compensation actually paid or includable in gross income
during such Plan Year plus the Compensation which would have been paid or
includable in gross income during such Plan Year but for sections 125, 402(a)(8)
and 402(h)(1)(B) of the Code.
6.7.3 For purposes of the Plan, an Employee's compensation for
any Plan Year shall not be deemed to exceed $160,000 or such greater amount as
may be permitted for such Plan Year under section 401(a)(17) of the Code.
6.7.4 For purposes of applying the limitations contained in
Sections 6.2, 6.3 and 6.4, an Employee's Compensation shall not include amounts
paid prior to the date on which he first becomes a Participant.
6.8 Section 402(g) Limitation. Notwithstanding any other provision of
the Plan, in no event shall the amount of a Participant's Elective Deferrals
during any Plan Year under this Plan and all other plans, contracts or
arrangements maintained by any Affiliated Employer exceed the amount of the
limitation in effect under Section 402(g)(1) of the Code for such Plan Year. If
a Participant has Excess Deferrals for any Plan Year, and if the Participant so
elects, the Excess Deferrals (plus any earnings and minus any losses allocable
thereto) shall be distributed to the Participant from his Salary Deferral
Account no later than April 15 following the Plan Year for which the Excess
Deferrals were made. Any election under this Section 6.8 shall be in writing,
shall be filed with the Committee no later than March 1 following the Plan Year
for which the Excess Deferrals were made, shall specify the amount of the Excess
Deferrals for the Plan Year and
16
<PAGE> 19
shall include the Participant's statement that if such Excess Deferrals are not
distributed, the sum of the Excess Deferrals plus amounts deferred by the
Participant for the Plan Year under sections 401(k), 408(k) and 403(b) of the
Code will exceed the limits imposed by section 402(g) of the Code. For purposes
of the Plan (a) "Elective Deferrals" means the amounts deferred by the
Participant for the Plan Year under sections 401(k), 408(k) and 403(b) of the
Code, and (b) "Excess Deferrals" means that portion of a Participant's Elective
Deferrals for a Plan Year in excess of the limits imposed by section 402(g) of
the Code.
6.9 Eligible Employee. For purposes of Sections 6.2, 6.3 and 6.4,
"Eligible Employee" means, with respect to any Plan Year, a Covered Employee who
is eligible to authorize salary deferral contributions under Section 5.1 during
the Plan Year.
6.10 Military Service. Notwithstanding any provision of this Plan to
the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with section 414(u) of
the Code.
SECTION 7
ACCOUNTS
7.1 Salary Deferral Accounts. A separate bookkeeping Salary Deferral
Account shall be established and maintained for each Participant which shall
reflect the salary deferral contributions properly allocable to the Participant
under the Plan and the investment thereof. The salary deferral contributions
paid to the Trustee on behalf of a Participant shall be allocated to the
Participant's Salary Deferral Account as of the date received by the Trustee.
Each Participant's Salary Deferral Account shall at all times be fully vested
and nonforfeitable. Amounts allocated to a Participant's Salary Deferral Account
shall be invested in such types of investments as may be permitted by the
Committee.
7.2 Employer Contribution Accounts. A separate bookkeeping Employer
Contribution Account shall be established and maintained for each Participant
which shall reflect the Participating Company contributions and forfeitures
properly allocable to the Participant under the Plan and the investment thereof.
Except as otherwise provided in the Plan, at any relevant time prior to his
Normal Retirement Date the vested and forfeitable percentages of a Participant's
Employer Contribution Account shall be determined from the following schedule,
based upon his full years of Vesting Service:
17
<PAGE> 20
Vesting Service Vested Percentage Forfeitable Percentage
- --------------- ----------------- ----------------------
Less than 3 years 0% 100%
3 or more years 100% 0%
Notwithstanding the foregoing, in the case of a Participant whose Plan Accounts
include a Retirement Savings Plan Account or a Savings and Security Plan
Account, that portion of his Employer Contribution Account which is attributable
to Company contributions made in Plan Years prior to the current Plan Year and
the two immediately preceding Plan Years shall at all times be fully vested and
nonforfeitable. Except as otherwise provided in this Section 7.2, amounts
allocated to a Participant's Employer Contribution Account shall be invested in
Convergys Shares.
7.2.1 Effective as of the close of the fourth Plan Year of his
Eligibility Period, an Eligible Participant may invest his entire Employer
Contribution Account in any of the types of investments permitted by the
Committee. During the first four Plan Years of his Eligibility Period, an
Eligible Participant may invest only the Unrestricted portion of his Employer
Contribution Account in any of the types of investments permitted by the
Committee and the Restricted portion of his Employer Contribution Account shall
be invested in Convergys Shares.
7.2.2 Effective as of the December 31 immediately preceding an
Eligible Participant's Eligibility Period, 20% of the value of his Employer
Contribution Account shall be deemed to be "Unrestricted" and 80% shall be
deemed to be "Restricted." Effective as of the last day of the first Plan Year
during his Eligibility Period, an additional 25% of the Employer Contribution
Account balance then deemed to be Restricted shall become "Unrestricted".
Effective as of the last day of the second Plan Year during his Eligibility
Period, an additional 33-1/3% of the Employer Contribution Account balance then
deemed to be "Restricted" shall become "Unrestricted". Effective as of the last
day of the third Plan Year during his Eligibility Period, an additional 50% of
the Employer Contribution Account balance then deemed to be "Restricted" shall
become "Unrestricted". For purposes of this Section 7.2.2, all contributions
under Section 5.2 and 5.3 made for a Plan year shall be deemed to be
"Restricted" as of the last day of the Plan Year.
7.2.3 For purposes of Section 7.2.1, (a) "Eligible
Participant" means a Participant (i) who has at least ten years of Vesting
Service, or (ii) who has attained age 45 and has at least five years of Vesting
Service, and (b) "Eligibility Period" means, with respect to any Eligible
Participant, the five-consecutive Plan Year period commencing on the later of
January 1, 1993 or the January 1 on which he first became an Eligible
Participant.
7.2.4 Notwithstanding the foregoing, that portion of a
Participant's Employer Contribution Account which is invested in Cincinnati Bell
Shares on January 1, 1999 may continue to be invested in Cincinnati Bell Shares
or in any of the other types of investments (including Convergys Shares)
permitted by the Committee, and such portion shall not be counted for purposes
18
<PAGE> 21
of determining the "Restricted" and "Unrestricted" portions of his Employer
Contribution Account under Section 7.2.2.
7.3 Rollover Accounts. A separate bookkeeping Rollover Account shall be
established and maintained for each Participant who makes rollover contributions
which shall reflect such contributions and the investment thereof. Each
Participant's rollover contributions to the Trust shall be allocated to his
Rollover Account as of the date received by the Trustee. Each Participant's
Rollover Account shall at all times be fully vested and nonforfeitable. Amounts
allocated to a Participant's Rollover Account shall be invested in such types of
investments as may be permitted by the Committee.
7.4 Voluntary Contribution Accounts. A separate bookkeeping Voluntary
Contribution Account shall be established and maintained for each Participant
which shall reflect the voluntary post-tax contributions made by the Participant
under the Plan and the investment thereof. The voluntary post-tax contributions
paid to the Trustee by a Participant shall be allocated to the Participant's
Voluntary Contribution Account as of the date received by the Trustee. Each
Participant's Voluntary Contribution Account shall at all times be fully vested
and non-forfeitable. Amounts allocated to a Participant's Voluntary Contribution
Account shall be invested in such types of investments as may be permitted by
the Committee.
7.5 ISD Accounts. A separate bookkeeping account shall be established
and maintained for each Participant who was a participant in the ISD Partnership
401(k) Retirement Savings Plan, which shall reflect the amounts transferred to
the Plan from the Participant's account in the ISD Partnership 401(k) Retirement
Savings Plan and the investment thereof. Each Participant's ISD Account shall at
all times be fully vested and nonforfeitable. Amounts allocated to a
Participant's ISD Account shall be invested in such types of investments as may
be permitted by the Committee.
7.6 Voting Convergys Shares. Before each annual or special meeting of
the shareholders of Convergys, the Trustee shall cause to be sent to each
Participant a copy of the proxy solicitation material therefore, together with a
form requesting confidential instructions to the Trustee on how to vote the
number of Convergys Shares credited to the Participant's Plan Accounts. Upon
receipt of such instructions, the Trustee shall vote the Convergys Shares as
instructed. Instructions received by the Trustee from individual Participants
shall be held in the strictest confidence and shall not be divulged or revealed
to any person, including officers or employees of any Affiliated Employer. The
Trustee shall vote any Convergys Shares for which voting instructions have not
been received in the proportions that it votes the Convergys Shares for which
voting instructions have been received.
7.7 Valuations and Adjustments. The Trustee shall value the Trust
assets at their fair market value as of each Valuation Date. Based upon the
results of such valuation, each outstanding
19
<PAGE> 22
Plan Account shall be adjusted to reflect the increase or decrease thereof, and
any applicable contributions, withdrawals, distributions or forfeitures, since
the preceding Valuation Date.
7.8 Consolidation of Plan Accounts. Except to the extent necessary to
accurately reflect the withdrawal, distribution and investment rights and vested
status of a Participant's Plan Accounts, the Committee may consolidate two or
more of a Participant's Plan Accounts or portions thereof.
SECTION 8DISTRIBUTIONS
8.1 General. Except as otherwise provided in this Section 8 and Section
9, no amount shall be distributed, withdrawn or forfeited with respect to a
Participant's Plan Accounts while he remains an Employee.
8.2 Normal Retirement. If a Participant is employed as an Employee on
or after his Normal Retirement Date, his Plan Accounts shall be fully vested and
nonforfeitable. If a Participant ceases to be an Employee on or after his Normal
Retirement Date for any reason other than his death, the Participant's Plan
Accounts shall be distributed to him in one lump sum as of the Valuation Date
coinciding with or next following the date on which he ceases to be an Employee.
Notwithstanding the foregoing, the Plan Accounts of a Participant who is a 5%
owner (as defined in section 416(i)(1) of the Code) of an Affiliated Employer
and who remains in employment shall be distributed as of the last Valuation Date
of the Plan Year in which he attains age 70-1/2 and any assets allocated to the
Participant's Plan Accounts during any subsequent Plan Year shall be distributed
as of the last Valuation Date of such subsequent Plan Year.
8.3 Disability Retirement. A Participant's Plan Accounts shall be fully
vested and nonforfeitable if he ceases to be an Employee prior to his Normal
Retirement Date by reason of a Total Disability. Subject to Section 8.7, if a
Participant ceases to be an Employee prior to his Normal Retirement Date by
reason of a Total Disability, the Participant's Plan Accounts shall be
distributed to him in one lump sum as of the Valuation Date coinciding with or
next following the date on which the Participant ceases to be an Employee.
8.4 Death During Employment. A Participant's Plan Accounts shall be
fully vested and nonforfeitable if he dies while an Employee. If a Participant
ceases to be an Employee by reason of his death, the Participant's Plan Accounts
shall be distributed to his Beneficiary in one lump sum as of the Valuation Date
coinciding with or next following the date on which the Participant's death
occurs.
20
<PAGE> 23
8.5 Vested Terminations. The Plan Accounts of a Participant who has
five or more years of Vesting Service shall be fully vested and nonforfeitable.
Subject to Section 8.7, if a Participant who has five or more years of Vesting
Service ceases to be an Employee prior to his Normal Retirement Date for any
reason other than his death or Total Disability, the Participant's Plan Accounts
shall be distributed to him in one lump sum as of the Valuation Date coinciding
with or next following the date on which he ceases to be an Employee.
8.6 Other Terminations. Subject to Section 8.7, if a Participant who
has less than five years of Vesting Service ceases to be an Employee for any
reason other than his death or Total Disability, the vested portion of his Plan
Accounts shall be distributed to him in one lump sum, and the forfeitable
portions of his Plan Accounts shall be forfeited, as of the Valuation Date
coinciding with or next following the date on which he ceases to be an Employee.
8.6.1 If distribution of the vested portion of the
Participant's Plan Accounts is deferred under Section 8.7, the forfeitable
portions of his Plan Accounts shall not be forfeited until the earlier of (1)
the date on which the vested portion of his Plan Accounts is distributed and (b)
the date on which he incurs a five year Break in Service (from the date on which
he ceased to be an Employee).
8.6.2 The amount forfeited with respect to his Plan Accounts
shall be restored if the Participant is reemployed as a Covered Employee prior
to incurring a Five Year Break in Service (from the date on which he ceased to
be an Employee) and if he repays to the Trust the amounts previously distributed
to him from his Plan Accounts, provided that such repayment must be made before
the Participant incurs a Five Year Break in Service (from the date on which such
forfeiture occurred).
8.6.3 Restorals under this Section 8.6 shall be made first
from any forfeitures arising in the Plan Year in which the restoral is made and
second from additional Company contributions. Amounts repaid or restored to the
Plan shall be credited to new Plan Accounts, in the name of the Participant, of
the same types as the Plan Accounts from which distributions and forfeitures
were made.
8.7 Deferred Distributions. Notwithstanding any other provision hereof
to the contrary, if the value of the vested portion of a Participant's Plan
Accounts is in excess (or at the time of any prior distribution was in excess)
of $5,000, distribution of such vested portion shall not be made before the
Participant attains age 70-1/2 without the Participant's written consent. If the
Participant dies after ceasing to be an Employee but prior to the date on which
the vested portion of his Plan Accounts has been distributed, the vested portion
of his Plan Accounts shall be distributed to his Beneficiary in one lump sum as
of the Valuation Date coinciding with or next following the date on which the
Participant's death occurs. If a distribution is one to which sections
401(a)(11) and 417 of the Code do not apply, such distribution may commence less
than 30 days after the notice
21
<PAGE> 24
required under section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that: (a) the Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and (b) the Participant, after
receiving the notice, affirmatively elects a distribution.
8.8 Reemployment. If a Participant who ceased to be an Employee is
reemployed as an Employee prior to the date as of which his Plan Accounts are to
be distributed or forfeited, his Plan Accounts shall not be distributed or
forfeited by reason of such cessation of employment.
8.9 Form of Distribution. To the extent that a Plan Account is invested
in investments other than Convergys Shares or common shares of Cincinnati Bell
Inc. ("Cincinnati Bell Shares") or distributions from that Plan Account shall be
in cash. To the extent that a Plan Account is invested in Convergys Shares or
Cincinnati Bell Shares, distributions with respect to that Plan Account shall be
in Convergys Shares or Cincinnati Bell Shares, as the case may be, or if the
recipient so elects, in cash.
8.10 Alternate Payees. In the case of a person who is determined by the
Committee to be an alternate payee (within the meaning of section 414(p)(8) of
the Code) with respect to the vested portion of one or more of a Participant's
Plan Accounts, unless the qualified domestic relations order applicable to the
Participant's Plan Accounts otherwise provides, the alternate payee may elect,
with respect to the alternate payee's interest in the vested portion of the
Participant's Plan Accounts, to have such interest distributed to the alternate
payee in one lump sum as soon as practical after the alternate payee is
determined to be an alternate payee. Any election under the preceding sentence
must be made within 90 days after the date on which the alternate payee is
determined to be an alternate payee. Notwithstanding the foregoing, if the value
of the alternate payee's interest in the Participant's Plan Accounts is not in
excess of $5,000, the vested portion of such interest shall be distributed to
the alternate payee as soon as practicable after the alternate payee is
determined to be an alternate payee.
8.11 Auxco Participants; CBIS Federal Participants. If the value of the
vested portion of an Auxco Participant's or CBIS Federal Participant's Plan
Accounts is at least $5,000, any distribution with respect to his Plan Accounts
shall be subject to the provision of this Section 8.11. For purposes of this
Section 8.11, "Auxco Participant" means a Participant who was a participant in
the Auxton Computer Enterprises, Incorporated Savings and Profit Sharing Plan on
December 31, 1991 and "CBIS Federal Participant" means a Participant who was a
participant in CBIS Federal Inc. Profit Sharing and Tax Referral Savings Plan as
of December 31, 1991.
8.11.1 Distribution of the vested portion of his Plan Accounts
shall be in one lump sum payment, at least annual installments or through the
purchase and distribution of an annuity contract as the Participant or his
Beneficiary (as the case may be) may elect.
22
<PAGE> 25
8.11.2 If the Participant elects an annuity contract, such
annuity contract shall provide monthly payments (a) if the Participant is
unmarried, for the life of the Participant or (b) if the Participant is married,
for the life of the Participant and, if the Participant's spouse is then living,
continuing for the life of the Participant's spouse at 50% of the monthly amount
payable during their joint lives unless the Participant otherwise elects in
accordance with Section 8.15.
8.12 Savings and Security Plan Accounts; WATS Marketing Plan. If a
Participant's Plan Accounts include amounts transferred from the Cincinnati Bell
Inc. Savings and Security Plan or the WATS Marketing of America, Inc. Incentive
Savings Plan and if distribution of the vested portion of his Plan Accounts is
being made by reason of the Participant's retirement or Total Disability, he may
elect to have his Plan Accounts distributed in up to 20 annual installments.
8.13 TMS Participants. If value of the vested portion of a TMS
Participant's Plan Accounts is at least $5,000, any distribution with respect to
his Plan Accounts shall be subject to the provisions of this Section 8.13. For
purposes of the Plan, TMS Participant means a Participant who had a TMS Account
under Article XXIA of NICE Computer Profit-Sharing Plan as of December 31, 1990.
8.13.1 Distribution of the vested portion of his Plan Accounts
shall be in one lump sum payment, the purchase and distribution of an annuity
contract as the Participant or his Beneficiary (as the case may be) may elect.
8.13.2 If the Participant elects an annuity contract, such
annuity contract shall provide monthly payments (a) if the Participant is
unmarried, for the life of the Participant or (b) if the Participant is married,
for the life of the Participant and, if the Participant's spouse is then living,
continuing for the life of the Participant's spouse at 50% of the monthly amount
payable during their joint lives unless the Participant otherwise elects in
accordance with Section 8.15.
8.14 Distribution Requirements. The provisions of this Section 8.14
shall apply to any distribution from a Participant's Plan Accounts and will have
precedence over any inconsistent provisions of the Plan.
8.14.1 All distributions required under this Section 8.14
shall be determined and made in accordance with the Proposed Regulations under
Section 401(a)(9) of the Code, including the minimum distribution incidental
benefit requirement of section 1.401(a)(9)-2 of the proposed regulations.
8.14.2 The entire vested interest of a Participant must be
distributed or begin to be distributed no later than the Participant's required
beginning date.
23
<PAGE> 26
8.14.3 As of the first distribution calendar year,
distributions, if not made in a single-sum, may only be made over one of the
following periods (or a combination thereof):
(a) the life of the Participant,
(b) the life of the Participant and a designated
beneficiary,
(c) a period certain not extending beyond the life
expectancy of the participant, or
(d) a period certain not extending beyond the joint
and last survivor expectancy of the Participant and a designated beneficiary.
8.14.4 If the Participant's vested interest is to be
distributed in other than single sum, the following minimum distribution rules
shall apply on or after the required beginning date:
(a) If a Participant's benefit is to be distributed
over (i) a period not extending beyond the life expectancy of the Participant or
the joint life and last survivor expectancy of the Participant and the
Participant's designated beneficiary or (ii) a period not extending beyond the
life expectancy of the designated beneficiary, the amount required to be
distributed for each calendar year, beginning with the distributions for the
first distribution calendar year, must at least equal the quotient obtained by
dividing the Participant's benefit by the applicable life expectancy.
(b) The amount to be distributed each year, beginning
with distributions for the first distribution calendar year, shall not be less
than the quotient obtained by dividing the Participant's benefit by the lesser
of (i) the applicable life expectancy or (ii) if the Participant's spouse is not
the designated beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of section 1.401(a)(9)-2 of the Proposed Regulations.
Distributions after the death of the Participant shall be distributed using the
applicable life expectancy in Section 8.14.4(a) above as the relevant divisor
without regard to proposed regulations section 1.401(a)(9)-2.
(c) The minimum distribution required for the
Participant's first distribution calendar year must be made on or before the
Participant's required beginning date. The minimum distribution for other
calendar years, including the minimum distribution for the distribution calendar
year in which the Participant's required beginning date occurs, must be made on
or before December 31 of that distribution calendar year.
(d) If the Participant's benefit is distributed in
the form of an annuity purchased from an insurance company, distributions
thereunder shall be made in accordance with the requirements of section
401(a)(9) of the Code and the proposed regulations thereunder.
24
<PAGE> 27
8.14.5 If the Participant dies after distribution of his
interest begins, distribution of the Participant's entire vested interest shall
be completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death except to the extent that an election is
made to receive distributions in accordance with (a) or (b) below:
(a) if any portion of the Participant's interest is
payable to a designated beneficiary, distributions may be made over the life or
over a period certain not greater than the life expectancy of the designated
beneficiary commencing on or before December 31 of the calendar year immediately
following the calendar year in which the Participant died; and
(b) if the designated beneficiary is the
Participant's surviving spouse, the date distributions are required to begin in
accordance with (a) above shall not be earlier than the later of (i) December 31
of the calendar year immediately following the calendar year in which the
Participant died and (ii) December 31 of the calendar year in which the
Participant would have attained age 70-1/2.
If the Participant has not made an election pursuant to this Section 8.14.5 by
the time of his or her death, the Participant's designated beneficiary must
elect the method of distribution no later than the earlier of (i) December 31 of
the calendar year in which distributions would be required to begin under this
section, or (ii) December 31 of the calendar year which contains he fifth
anniversary of the date of death of the Participant. If the Participant has no
designated beneficiary, or if the beneficiary does not elect a method of
distribution, distribution of the Participant's entire vested interest must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
8.14.6 For purposes of Section 8.14.5, if the surviving spouse
dies after the Participant, but before payments to such spouse begin, the
provisions of Section 8.14.5, with the exception of paragraph (b) therein, shall
be applied as if the surviving spouse were the Participant.
8.14.7 For purposes of Section 8.14.5, any amount paid to a
child of the Participant will be treated as if it had been paid to the surviving
spouse if the amount becomes payable to the surviving spouse when the child
reaches the age of majority.
8.14.8 For purposes of this Section 8.14.5, distribution of a
Participant's interest is considered to begin on the Participant's required
beginning date (or, if Section 8.14.6 above is applicable, the date distribution
is required to begin to the surviving spouse pursuant to Section 8.14.5). If
distribution in the form of an annuity irrevocably commences to the Participant
before the required beginning date, the distribution is considered to begin is
the date distribution actually commences.
8.14.9 For purposes of Section 8.14:
25
<PAGE> 28
(a) "Applicable life expectancy" means the life
expectancy (or joint and last survivor expectancy) calculated using the attained
age of the Participant (or designated beneficiary) as of the Participant's (or
designated beneficiary's) birthday in the applicable calendar year reduced by
one for each calendar year which has elapsed since the date life expectancy was
first calculated. If life expectancy is being recalculated, the applicable life
expectancy shall be the life expectancy as so recalculated. The applicable
calendar year shall be the first distribution calendar year, and if life
expectancy is being recalculated such succeeding calendar year.
(b) "Designated beneficiary" means the individual who
is designated as the Beneficiary under the Plan in accordance with section
401(a)(9) and the proposed regulations thereunder.
(c) "Distribution calendar year" means a calendar
year for which a minimum distribution is required. For distributions beginning
before the Participant's death, the first distribution calendar year is the
calendar year immediately preceding the calendar year which contains the
Participant's required beginning date. For distributions beginning after the
Participant's death, the first distribution calendar year is the calendar year
in which distributions are required to begin pursuant to Section 8.14.2.
(d) "Life expectancy" and "joint and last survivor
expectancy" are computed by use of the expected return multiples in Tables V and
VI of section 1.72-9 of the income tax regulations.
(e) "Participant's benefit" means:
(i) The account balance as of the last
valuation date in the calendar year immediately preceding the distribution
calendar year (valuation calendar year) increased by the amount of any
contributions or forfeitures allocated to the account balance as of dates in the
valuation calendar year after the valuation date and decreased by distributions
made in the valuation calendar year after the valuation date.
(ii) For purposes of paragraph (i) above, if
any portion of the minimum distribution for the first distribution calendar year
is made in the second distribution calendar year on or before the required
beginning date, the amount of the minimum distribution made in the second
distribution calendar year shall be treated as if it had been made in the
immediately preceding distribution calendar year.
(f) "Required beginning date" means the first day of
April of the calendar year following the calendar year in which the Participant
attains age 70-1/2.
26
<PAGE> 29
8.15 Waiver Election. For purposes of Sections 8.11 and 8.13, if a
Participant elects to have his Plan Accounts distributed in the form of an
annuity, not earlier than 90 days, but not later than 30 days, before the date
on which Participant's Plan Accounts are distributed, the Committee shall
provide the Participant a written explanation of the terms and conditions of the
annuities available under Section 8.11 or 8.11 (as the case may be), the
Participant's right to make, and the effect of, an election to waive such form
of annuity, the rights of the Participant's spouse regarding the waiver election
and the Participant's right to make, and the effect of, a revocation regarding
the waiver election. The Plan does not limit the number of times the Participant
may revoke a waiver of such form of annuity or make a new waiver during the
election period.
8.15.1 A married Participant's waiver election is not valid
unless (a) the Participant's spouse (to whom the survivor annuity is payable
under Section 8.11 or 8.13, as the case may be), after the Participant has
received the written explanation described in this Section 8.15, has consented
in writing to the waiver election, the spouse's consent acknowledges the effect
of the election, and a notary public or a Plan representative witnesses the
spouse's consent, (b) the spouse consents to the alternate form of payment
designated by the Participant or to any change in that designated form of
payment, and (c) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary designation or
to any change in the Participant's Beneficiary designation. The spouse's consent
to a waiver of the qualified joint and survivor annuity is irrevocable, unless
the Participant revokes the waiver election. The spouse may execute a blanket
consent to any form of payment designation or to any Beneficiary designation
made by the Participant, if the spouse acknowledges the right to limit that
consent to a specific designation but, in writing, waives that right.
8.15.2 The Committee will accept as valid a waiver election
which does not satisfy the spousal consent requirements if the Committee
establishes the Participant does not have a spouse, the Committee is not able to
locate the Participant's spouse, the Participant is legally separated or has
been abandoned (within the meaning of State law) and the Participant has a court
order to that effect, or other circumstances exist under which the Secretary of
the Treasury will excuse the consent requirement. If the Participant's spouse is
legally incompetent to give consent, the spouse's legal guardian (even if the
guardian is the Participant) may give consent.
8.16 Direct Rollovers. Any Participant or Beneficiary who is entitled
to receive a distribution from the Plan in the form of an eligible rollover
distribution may elect to have part or all of such distribution paid directly to
an eligible retirement plan. Any election under this Section 8.16 shall be made
on forms furnished and in the manner prescribed by the Committee.
Notwithstanding the foregoing, the minimum amount which a Participant or
Beneficiary may elect to have paid to an eligible retirement plan is (a)
$200.00, if the entire eligible rollover distribution is being paid to the
eligible retirement plan or (b) $500.00, if less than the entire eligible
rollover distribution is being paid to the eligible retirement plan. For
purposes of this Section 8.16, "eligible rollover distribution" means any
distribution of all or any portion of the balance to the credit of the
27
<PAGE> 30
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities). For purposes of this Section 8.16, "eligible retirement plan" means
an individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
8.17 Missing Participants. If a Participant or Beneficiary who is
entitled to receive a distribution under the Plan cannot be located within six
months, after such investigation as the Committee deems appropriate, the amount
otherwise distributable to such Participant or Beneficiary shall thereupon be
forfeited; provided that if such Participant or Beneficiary thereafter makes a
claim for the amount forfeited hereunder, the amount so forfeited (unadjusted
for any gains or losses occurring subsequent to the date of the forfeiture)
shall be restored to the Trust through additional Participating Company
contributions and paid to the Participant or Beneficiary.
SECTION 9
WITHDRAWALS DURING EMPLOYMENT; LOANS; TRANSFERS
9.1 Withdrawals After Normal Retirement Date. Subject to such rules as
the Committee may prescribe, a Participant who is an Employee may elect to
withdraw from his Plan Accounts, on or after his Normal Retirement Date, any
amount he may designate. No Participant may elect to make more than two
withdrawals in any Plan Year. All withdrawals shall be in cash.
9.2 Withdrawals Prior to Normal Retirement Date. Subject to such rules
as the Committee may prescribe, a Participant who is an Employee may elect to
make withdrawals from his Plan Accounts, prior to his Normal Retirement Date, in
accordance with the provisions of this Section 9.2.
9.2.1 A Participant whose Plan Accounts include amounts
attributable to rollover contributions described in section 402(c)(5), 403(a)(4)
or 408(d)(3) of the Code or voluntary post-tax contributions may elect to
withdraw any portion of such amounts.
28
<PAGE> 31
9.2.2 A Participant whose Plan Accounts include amounts
attributable to salary deferral contributions under section 401(k) of the Code
may elect to withdraw any portion of such amounts (other than income earned on
such contributions after December 31, 1988); provided, however, that (a) he may
not elect to make a withdrawal under this Section 9.2.2 unless he demonstrates
to the satisfaction of the Committee that such withdrawal is necessary to
alleviate a Hardship, (b) he may not elect to withdraw more than the amount
needed to alleviate the Hardship. For purposes hereof, "Hardship" means an
immediate and heavy financial need of the Participant or his dependents because
of sickness, disability, or other financial emergency, but only to the extent
consistent with section 401(k) of the Code and any regulations issued by the
Secretary of the Treasury thereunder. The determination of whether a Participant
has incurred a "Hardship" shall be made on the basis of all relevant facts and
circumstances. A financial need shall not fail to qualify merely because it was
reasonably foreseeable or voluntarily incurred. A distribution for any of the
following needs shall be deemed to be made on account of Hardship: (a) medical
expenses described in section 213(d) of the Code incurred by the Participant,
the Participant's spouse or any dependent of the Participant (as defined in
section 152 of the Code), (b) purchase (excluding mortgage payments) of a
principal residence of the Participant, (c) payment of tuition for the next
twelve months of post-secondary education for the Participant, his or her
spouse, children or dependents, and (d) the need to prevent the eviction of the
Participant from his principal residence or foreclosure on the mortgage of the
Participant's principal residence. In the event of a withdrawal from a
Participant's Plan Accounts under this Section 9.2.2, the Participant's elective
contributions and employee contributions (within the meaning of Treas. Reg.
Section 1.401(k)-1(d)(2)(iii)) to the Plan and all other plans maintained by any
Affiliated Employer shall be suspended for 12 months after the withdrawal and
the Participant's elective contributions (within the meaning of Treas. Reg.
Section 1.401(k)-1(d)(2)(iii)) to this Plan and all other plans maintained by
any Affiliated Employer for the calendar year immediately following the calendar
year in which the withdrawal occurs may not exceed the applicable limit under
section 402(g) of the Code for the calendar year immediately following the
calendar year in which the withdrawal occurs less the amount of such elective
contributions for the calendar year in which the withdrawal occurs.
9.2.3 A Participant whose Plan Accounts include employer
matching contributions transferred from the Cincinnati Bell Inc. Retirement
Savings Plan or the Cincinnati Bell Inc. Savings and Security Plan may withdraw
any non-forfeitable portion of such contributions (and the earnings thereon).
9.2.4 No Participant may elect to make more than two
withdrawals in any Plan Year. All withdrawals shall be in cash.
9.3 Loans. Subject to the provisions of this Section 9.3 and to such
other uniform and nondiscriminatory rules as may be adopted by the Committee
(which rules are incorporated herein by reference), a Participant who is a party
in interest (within the meaning of section 3(14) of ERISA) may, with the consent
of the Committee, borrow from his Plan Accounts.
29
<PAGE> 32
9.3.1 The minimum amount a Participant may borrow is $500. The
maximum amount a Participant may borrow is the lesser of: (a) 50% of the value
of the vested (nonforfeitable) portion of the Participant's Plan Accounts or (b)
$50,000 reduced by the highest outstanding balance of loans from the
Participant's Plan Accounts (and from any other qualified plan maintained by an
Affiliated Employer) during the one year period ending on the day before the
date the loan is made.
9.3.2 No Participant may have more than two loans outstanding
at any time. No Participant may borrow from his Plan Accounts more than twice in
any Plan Year.
9.3.3 Each loan shall bear a reasonable rate of interest (as
determined by the Committee) and shall be secured by the loaned portion of the
Participant's Plan Accounts. The minimum term of any loan shall be one year and
the maximum term of any loan shall be five years (fifteen years in the case of
where the loan is used to acquire the Participant's principal residence). (For
the purpose of this Section 9.3.3, the term of the loan will commence with the
first day of the month in which the loan proceeds are paid to the Participant.)
Substantially equal amortization of the loan (with payments not less frequently
than monthly) shall be required.
9.3.4 Any amounts borrowed from a Plan Account shall be deemed
to be made pro rata from the various types of investments (other than loans) of
the Plan Account.
9.3.5 Loan principal and interest payments must be made
through payroll deductions, beginning with the first paycheck of the month
following the month in which the loan proceeds are paid to the Participant;
provided that the Participant may prepay the entire outstanding balance on a
loan at any time after six months. Loan principal and interest payments shall be
credited to the Plan Account from which the loan was made. To the extent that
the Participant directs the investment of the Plan Account from which the loan
was made, loan payments to such Plan Account shall be invested according to the
Participant's investment direction in effect at the time of payment.
9.3.6 If the Participant ceases to be an Employee for any
reason (including death), the remaining balance on each outstanding loan shall
become immediately due and payable and shall be satisfied through a distribution
from the Participant's Plan Accounts under Section 8. If the Participant's pay
is insufficient to cover the loan payments due for a period of three months or
if the Participant's payroll deductions for loan payments are reduced or
suspended for any reason, unless arrangements for manual payments (satisfactory
to the Committee) are made, the remaining balance on each outstanding loan shall
become immediately due and payable and shall be satisfied through a withdrawal
from the Participant's Plan Accounts under Section 9.1.
30
<PAGE> 33
9.3.7 The Committee, in its discretion, may establish such
loan fees and prescribe such additional terms and conditions for loans as it
deems necessary or appropriate.
9.4 Transfer to CMG Plan. If a Participant in this Plan becomes CMG
Plan Eligible after January 1, 1999, he automatically shall become a Participant
in the CMG Plan on the date he becomes CMG Plan Eligible and the amounts
credited to his Plan Accounts automatically shall be transferred to the
corresponding accounts in the CMG Plan. Thereafter, the amounts transferred to
the CMG Plan shall be governed entirely by the terms of the CMG Plan. Until
changed by the Participant in accordance with the terms of the CMG Plan, any
beneficiary designation, investment direction and authorization for salary
deferral contributions in effect under this Plan shall continue in effect under
the CMG Plan.
SECTION 10
TOP-HEAVY PROVISIONS
10.1 General. If the Plan is or becomes Top-Heavy in any Plan Year, the
provisions of this Section 10 will supersede any conflicting provisions in the
Plan.
10.2 Definitions. For purposes of this Section 10, the following terms
shall have the meanings hereinafter set forth unless the context otherwise
requires:
10.2.1 "Key Employee" means any Employee or former Employee
(and the beneficiaries of any such Employee) who at any time during the
Determination Period was an officer of an Affiliated Employer if such
individual's annual compensation exceeds 50% of the dollar limitation under
section 415(b)(1)(A) of the Code, an owner (or considered an owner under section
318 of the Code) of one of the ten largest interests in an Affiliated Employer
if such individual's compensation exceeds 100% of the dollar limitation under
section 415(c)(1)(A) of the Code, a 5-percent owner of an Affiliated Employer or
a 1-percent owner of an Affiliated Employer who has an annual compensation of
more than $150,000. The "Determination Period" is the Plan Year containing the
Determination Date and the four preceding Plan Years. The determination of who
is a Key Employee will be made in accordance with section 416(i)(1) of the Code
and the regulations thereunder. For purposes of this Section 10.2.1,
compensation from all Affiliated Employers shall be aggregated.
10.2.2 For any Plan Year, this Plan is "Top-Heavy" if any of
the following conditions exists:
(a) If the Top-Heavy Ratio for this Plan exceeds 60%
and this Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group of plans,
31
<PAGE> 34
(b) If this Plan is a part of a Required Aggregation
Group of plans (but not part of a Permissive Aggregation Group) and the
Top-Heavy Ratio for the Required Aggregation Group of plans exceeds 60%, or
(c) If this Plan is a part of a Required Aggregation
Group and a Permissive Aggregation Group and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60%.
10.2.3 If an Affiliated Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan) and an
Affiliated Employer has not maintained any defined benefit plan which during the
5-year period ending on the Determination Date(s) has or has had accrued
benefits, the Top-Heavy Ratio for this Plan alone or for the Required or
Permissive Aggregation Group, as appropriate is a fraction, the numerator of
which is the sum of the account balances of all Key Employees as of the
Determination Date(s) (including any part of any account balances distributed in
the 5-year period ending on the Determination Date(s)), and the denominator of
which is the sum of all account balances (including any part of any account
balance distributed in the 5-year period ending on the Determination Date(s)),
determined in accordance with section 416 of the Code and the regulations
thereunder. Both the numerator and the denominator of the Top-Heavy Ratio are
adjusted to reflect any contributions not actually made as of the Determination
Date, but which are required to be taken into account on that date under section
416 of the Code and the regulations thereunder.
10.2.4 If an Affiliated Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan) and an
Affiliated Employer maintains or has maintained one or more defined benefit
plans which during the 5-year period ending on the Determination Date(s) has or
has had any accrued benefits, the Top-Heavy Ratio for any Required or Permissive
Aggregation Group, as appropriate, is a fraction, the numerator of which is the
sum of account balances under the aggregate defined contribution plan or plans
for all Key Employees, determined in accordance with 10.2.3 above, and the
present value of accrued benefits under the aggregated defined benefit plan or
plans for all Key Employees as of the Determination Date(s), and the denominator
of which is the sum of the account balances under the aggregated defined
contribution plan or plans for all participants, determined in accordance with
10.2.3 above, and the present value of accrued benefits under the aggregated
defined benefit plan or plans for all participants as of the Determination
Date(s), all determined in accordance with section 416 of the Code and the
regulations thereunder. The accrued benefits under a defined benefit plan in
both the numerator and denominator of the Top-Heavy Ratio are adjusted for any
distribution of an accrued benefit made in the 5-year period ending on the
Determination Date.
10.2.5 For purposes of Sections 10.2.3 and 10.2.4, the value
of account balances and the present value of accrued benefits will be determined
as of the most recent Valuation Date that
32
<PAGE> 35
falls within or ends with the 12-month period ending on the Determination Date,
except as provided in section 416 of the Code and the regulations thereunder for
the first and second Plan Years of a defined benefit plan. The account balances
and accrued benefits of a Participant (1) who is not a Key Employee but who was
a Key Employee in a prior year, or (2) who has not performed any services for
any Affiliated Employer at any time during the 5-year period ending on the
Determination Date will be disregarded. The calculation of the Top-Heavy Ratio,
and the extent to which distributions, rollovers, and transfers are taken into
account, will be made in accordance with section 416 of the Code and the
regulations thereunder. Deductible employee contributions will not be taken into
account for purposes of computing the Top-Heavy Ratio. When aggregating plans,
the value of account balances and accrued benefits will be calculated with
reference to the Determination Dates that fall within the same calendar year.
Distributions made from a terminated plan during the 5-year period ending on the
Determination Date shall be taken into account for purposes of Sections 10.2.3
and 10.2.4 if the terminated plan would have been required to be included in an
Aggregation Group if it had not been terminated.
10.2.6 "Permissive Aggregation Group" means the Required
Aggregation Group of plans plus any other plan or plans of any Affiliated
Employer which, when considered as a group with the Required Aggregation Group,
would continue to satisfy the requirements of sections 401(a)(4) and 410 of the
Code.
10.2.7 "Required Aggregation Group" means (1) each qualified
plan of any Affiliated Employer in which at least one Key Employee participates,
and (2) any other qualified plan of an Affiliated Employer which enables a plan
described in (1) to meet the requirements of section 401(a)(4) or 410 of the
Code.
10.2.8 "Determination Date" means (1) for any Plan Year
subsequent to the first Plan Year, the last day of the preceding Plan Year and
(2) for the first Plan Year of the Plan, the last day of that year.
10.2.9 "Valuation Date" means the last business day of each
Plan Year.
10.2.10 For purposes of establishing "Present Value" to
compute the Top-Heavy Ratio, any benefit shall be discounted only for mortality
and interest based on the following: (1) Interest Rate, 6%; (2) Mortality table,
the Unisex Pension Table for 1984.
10.3 Minimum Contributions. Notwithstanding any other provision in this
Plan except 10.3.2 below, for any Plan Year in which this Plan is Top-Heavy, the
Participating Company contributions (other than Salary Deferral Contributions)
and forfeitures allocated on behalf of any Participant who is not a Key Employee
but who is an Employee on the last day of such Plan Year shall not be less than
the lesser of 3% of such Participant's compensation as an Employee, or in the
case where the Participating Companies have no defined benefit plan which
designates this Plan to
33
<PAGE> 36
satisfy section 401 of the Code, the largest percentage of Participating
Employer contributions (including Salary Deferral Contributions) and
forfeitures, as a percentage of the first $200,000 (or such greater amount as
may be permitted under section 401(a)(17) of the Code) of the Key Employee's
compensation, allocated on behalf of any Key Employee for that Year. The minimum
allocation is determined without regard to any Social Security contribution.
This minimum allocation shall be made even though, under other Plan provisions,
the Participant would not otherwise be entitled to receive an allocation, or
would have received a lesser allocation for the year because of (i) the
Participant's failure to complete 1,000 hours of service (or any equivalent
provided in the Plan), or (ii) the Participant's failure to make mandatory
employee contributions to the Plan, or (iii) compensation less than a stated
amount.
10.3.1 For purposes of computing the minimum allocation,
"compensation" means Compensation within the meaning of that term as used in
Section 6.5.
10.3.2 For purposes of computing the minimum allocation,
Affiliated Employer contributions and forfeitures allocated under any other
defined contribution plan of an Affiliated Employer, in which any Key Employee
participates or which enables another defined contribution plan (in which a Key
Employee participates) to meet the requirements of section 401(a)(4) or 410 of
the Code, shall be considered contributions and forfeitures allocated under this
Plan. In the case of any non-Key Employee Participant who is also a participant
in any defined benefit plan of an Affiliated Employer which designates this Plan
to satisfy section 401 of the Code, the foregoing provisions of this Section
10.3 shall be applied, but with 7-1/2% substituted for 3%.
10.3.3 The minimum allocation required (to the extent required
to be nonforfeitable under section 416(b)) may not be suspended or forfeited
under sections 411(a)(3)(B) or 411(a)(3)(D) of the Code.
10.3.4 For purposes of this Section 10.3, the term
"Participant" shall include, with respect to any Plan Year, any Employee who is
an Eligible Employee (within the meaning of Section 6.9) with respect to such
Plan Year.
10.4 Minimum Vesting. Commencing on the first day of the first Plan
Year in which the Plan becomes Top-Heavy, with respect to any Participant who
performs at least one Hour of Service on or after such date, the Plan Accounts
of each such Participant who has been credited with at least two years of
Vesting Service shall be fully vested and nonforfeitable.
10.5 Adjustments to Section 415 Limitations. In any Plan Year in which
the Plan is Top-Heavy, the denominators of the defined benefit plan fraction and
defined contribution plan fraction in section 415 of the Code shall be computed
using 100% of the dollar limitation instead of 125%.
34
<PAGE> 37
SECTION 11
ADMINISTRATION OF THE PLAN
11.1 Employee Benefits Committee. The general administration of the
Plan and the responsibility for carrying out its provisions shall be placed in
the Convergys Employee Benefits Committee.
11.2 Service of Process. Unless another person has been appointed by
Convergys to serve as agent for receipt of legal process with respect to the
Plan, the Committee shall be the agent for receipt of legal process with respect
to the Plan.
11.3 Compensation of Committee. The members of the Committee shall not
receive compensation for their services as such, and except as required by law,
no bond or other security need be required of them in such capacity in any
jurisdiction.
11.4 Rules of Plan. Subject to the limitations of the Plan, the
Committee may, from time to time, establish rules for the administration of the
Plan and the transaction of its business. The Committee may correct errors,
however arising, and, as far as possible, adjust any benefit payments
accordingly. The determination of the Committee as to the interpretation of the
provisions of the Plan or any disputed question shall be conclusive upon all
interested parties.
11.5 Named Fiduciary. The Committee shall be a named fiduciary of the
Plan with respect to all matters entrusted to it under the terms of the Plan and
the Trust.
11.6 Agents and Employees. The Committee may authorize one or more
agents to execute or deliver any instrument. The Committee may appoint or employ
such agents, counsel (including counsel of any Affiliated Employer or the
Trustee), auditors (including auditors of any Affiliated Employer or the
Trustee), physicians, clerical help and actuaries as in its judgment may seem
reasonable or necessary for the proper administration of the Plan, and the
Committee may certify to the Trustee the expenses chargeable to the Trust for
such services.
11.7 Records. The Committee shall maintain accounts showing the fiscal
transactions of the Plan and shall keep, in convenient form, such data as may be
necessary for valuation of the assets and liabilities of the Plan. The Committee
shall prepare and submit annually to Convergys a report showing in reasonable
detail the assets and liabilities of the Plan, and giving a brief account of the
operation of the Plan for each Plan Year.
35
<PAGE> 38
11.8 Delegation of Authority. The Committee may, by resolution,
delegate to any person or persons any or all of its rights and duties hereunder.
Any such delegation shall be valid and binding on all persons, and the person or
persons to whom authority has been delegated shall, upon written acceptance of
such authority, have full power to act in all matters so delegated until the
authority expires by its terms or is revoked by the Committee.
11.9 Benefit Claims. In the event that the Committee denies, in whole
or in part, any claim for benefits under the Plan, the Committee shall promptly
notify the claimant in writing of such denial, setting forth the specific
reasons for such denial, and afford the claimant a reasonable opportunity for a
full and fair review of his claim. The Committee shall establish rules and
procedures for reviewing claims which are consistent with this Section and with
any regulations issued by the Secretary of Labor under section 503 of ERISA, as
such section now exists or is hereafter amended or renumbered.
11.10 Eligibility. The members of the Committee shall not be precluded
from becoming Participants in the Plan if they are otherwise eligible.
11.11 Non-Discrimination. All determinations required of any Affiliated
Employer and the Committee hereunder shall be made in accordance with the
provisions hereof and in accordance with other standards and policies adopted by
the Affiliated Employer or the Committee, which standards and policies shall be
consistently observed and applied in a nondiscriminatory manner to all Employees
similarly situated.
11.12 Indemnification. Convergys shall indemnify each member of the
Committee for all expenses and liabilities (including reasonable attorney's
fees) arising out of the administration of the Plan, other than any expenses or
liabilities resulting from the member's own gross negligence or willful
misconduct. The foregoing right of indemnification shall be in addition to any
other rights to which the members of the Committee may be entitled as a matter
of law.
SECTION 12
MANAGEMENT OF ASSETS
All assets of the Plan shall be held in the Trust for the exclusive
benefit of the Participants and their Beneficiaries. Except as to the costs and
expenses of the Plan and Trust not otherwise provided for and except as
otherwise provided herein, in no event shall it be possible for any of the
assets of the Plan to be used for, or diverted to purposes other than for the
exclusive benefit of the Participants and their Beneficiaries. No person shall
have any interest in or right to any part of the assets of the Plan, except as
and to the extent provided in the Plan and the Trust.
36
<PAGE> 39
SECTION 13
AMENDMENT AND TERMINATION
13.1 Amendment. Convergys reserves the right to amend the Plan either
retroactively or prospectively, conditionally or absolutely; provided that
Convergys shall have no right to amend the Plan in such manner as would cause or
permit any part of the assets of the Trust to be used for or diverted to
purposes other than for the exclusive benefit of the Participants and their
Beneficiaries; provided, further, that no amendment may be adopted changing any
vesting schedule unless the nonforfeitable percentage of each Participant's Plan
Accounts (determined as of the later of the date such amendment is adopted or
the date such amendment becomes effective) is equal to or greater than such
nonforfeitable percentage computed without regard to such amendment. If an
amendment is adopted which changes any vesting schedule under the Plan, each
Participant who has been credited with three years of service may elect to have
his nonforfeitable percentage computed under the Plan without regard to such
amendment. The period during which such election may be made shall begin on the
date the amendment is adopted and shall end on the latest of: (a) the 60th day
after the day the amendment is adopted; (b) the 60th day after the day the
amendment becomes effective; or (c) the 60th day after the day the Participant
is issued written notice of the amendment. No amendment shall eliminate an
optional form of distribution.
13.2 Termination. Convergys reserves the right to terminate the Plan,
in whole or in part, either retroactively or prospectively, conditionally or
absolutely. In the event of the termination or partial termination of the Plan
or the permanent discontinuance of Company contributions to the Plan, the Plan
Accounts of all affected Participants shall be fully vested and nonforfeitable.
To the extent permitted by law, if the Plan is terminated, each Participant's
Plan Accounts shall be distributed to him or his Beneficiary, as the case may
be, as soon as practicable thereafter.
SECTION 14
MERGERS AND CONSOLIDATIONS
Notwithstanding any other provision hereof to the contrary, in no event
shall the Plan be merged or consolidated with any other plan, nor shall any of
the assets or liabilities of the Plan be transferred to any other plan, unless
each Participant and Beneficiary would (if the transferee or surviving plan then
terminated) receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he would have been
entitled to receive immediately before the merger, consolidation or transfer (if
the Plan had then terminated).
37
<PAGE> 40
SECTION 15
NON-ALIENATION OF BENEFITS
No benefit payable under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, nor shall any such benefit be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the person entitled to
such benefit.
SECTION 16
MISCELLANEOUS
16.1 Delegation. Any matter or thing to be done by any Affiliated
Employer shall be done by its Board of Directors, except that, from time to
time, the Board by resolution may delegate to any person or committee certain of
its rights and duties hereunder. Any such delegation shall be valid and binding
on all persons and the person or committee to whom or which authority is
delegated shall have full power to act in all matters so delegated until the
authority expires by its terms or is revoked by the Board.
16.2 Administrator and Plan Sponsor. Convergys shall be the
"administrator" and "plan sponsor" of the Plan within the meaning of those terms
as used in ERISA.
16.3 Applicable Law. The Plan shall be governed by the laws of the
State of Ohio and applicable federal law.
16.4 Severability of Provisions. If any provision of the Plan is held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereof, and the Plan shall be construed and enforced as if
such provision had not been included.
16.5 Headings. Headings used throughout the Plan are for convenience
only and shall not be given legal significance.
16.6 Counterparts. The Plan may be executed in any number of
counterparts, each of which shall be deemed an original. All counterparts shall
constitute one and the same instrument, which shall be sufficiently evidenced by
any one thereof.
38
<PAGE> 41
IN WITNESS WHEREOF, Convergys Corporation and Convergys Information
Management Group Inc. have hereunto caused their names to be subscribed as of
January 1, 1999.
CONVERGYS CORPORATION
By: /s/ Thomas A. Cruz
------------------------
CONVERGYS INFORMATION
MANAGEMENT GROUP INC.
By: /s/ David F. Stelzer
------------------------
39
<PAGE> 1
Exhibit 4.4
CONVERGYS CMG
RETIREMENT SAVINGS PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999)
<PAGE> 2
TABLE OF CONTENTS
CONVERGYS CMG RETIREMENT SAVINGS PLAN
PAGE
SECTION 1 NAME AND PURPOSE OF PLAN..........................................1
SECTION 2 GENERAL DEFINITIONS; GENDER AND NUMBER............................1
SECTION 3 CREDITED SERVICE..................................................4
SECTION 4 ELIGIBILITY AND PARTICIPATION.....................................7
SECTION 5 CONTRIBUTIONS.....................................................8
SECTION 6 LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS......................9
SECTION 7 ACCOUNTS.........................................................17
SECTION 8 DISTRIBUTIONS....................................................20
SECTION 9 WITHDRAWALS DURING EMPLOYMENT; LOANS; TRANSFERS..................28
SECTION 10 TOP-HEAVY PROVISIONS.............................................31
SECTION 11 ADMINISTRATION OF THE PLAN.......................................35
SECTION 12 MANAGEMENT OF ASSETS.............................................36
SECTION 13 AMENDMENT AND TERMINATION........................................37
SECTION 14 MERGERS AND CONSOLIDATIONS.......................................37
SECTION 15 NON-ALIENATION OF BENEFITS.......................................38
SECTION 16 MISCELLANEOUS....................................................38
i
<PAGE> 3
CONVERGYS CMG RETIREMENT SAVINGS PLAN
SECTION 1
NAME AND PURPOSE OF PLAN
1.1 Name. The plan set forth herein shall be known as the Convergys CMG
Retirement Savings Plan (the "Plan").
1.2 Purpose. The Plan is designated as a plan intended to qualify as a
profit sharing plan under section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code").
1.3 Predecessor Plan. The Plan is intended to amend and supersede the
MATRIXX Marketing Inc. Profit Sharing/401(k) Plan effective January 1, 1999.
SECTION 2
GENERAL DEFINITIONS; GENDER AND NUMBER
2.1 General Definitions. For purposes of the Plan, the following terms
shall have the meanings hereinafter set forth unless the context otherwise
requires:
2.1.1 "Affiliated Employer" means Convergys, each corporation
which is a member of a controlled group of corporations (within the meaning of
section 414(b) of the Code as modified by section 415(h) of the Code) which
includes Convergys, each trade or business (whether or not incorporated) which
is under common control (within the meaning of section 414(c) of the Code as
modified by section 415(h) of the Code) with Convergys, each member of an
affiliated service group (within the meaning of section 414(m) of the Code)
which includes Convergys and each other entity required to be aggregated with
Convergys under section 414(o) of the Code.
2.1.2 "Approved Absence" means an absence from active service
with an Affiliated Employer by reason of a vacation or leave of absence approved
by the Affiliated Employer, any absence from active service with an Affiliated
Employer while employment rights with the Affiliated Employer are protected by
law and any other absence from active service with an Affiliated Employer which
does not constitute a termination of employment with the Affiliated Employer
under rules adopted by the Affiliated Employer and applied in a uniform and
nondiscriminatory manner.
<PAGE> 4
2.1.3 "Beneficiary" means the person or entity designated by a
Participant, on forms furnished and in the manner prescribed by the Committee,
to receive any benefit payable under the Plan after the Participant's death. If
a Participant fails to designate a beneficiary or if, for any reason, such
designation is not effective, his "Beneficiary" shall be his surviving spouse,
or, if none, his estate. Notwithstanding the foregoing, the "Beneficiary" of a
married Participant shall be deemed to be his spouse unless (a) he has
designated another person or entity as his beneficiary and his spouse has
consented to such designation in a written consent which acknowledges the effect
of such designation and is witnessed by a Plan representative or notary public
or (b) his spouse cannot be located.
2.1.4 "Cincinnati Bell Shares" means common shares of
Cincinnati Bell Inc.
2.1.5 "Committee" means the Convergys Employee Benefits
Committee.
2.1.6 "Convergys" means Convergys Corporation.
2.1.7 "Convergys Plan" means the Convergys Corporation
Retirement and Savings Plan (formerly known as the CBIS Retirement and Savings
Plan).
2.1.8 "Convergys Shares" means common shares of Convergys.
2.1.9 "Covered Compensation" means, with respect to any
Participant, for any computation period, the total salary, hourly wages, merit
awards, pay in lieu of vacation, holiday differential pay, disability pay,
commissions and bonuses paid to him by a Participating Company during the
computation period for services rendered as a Covered Employee, plus the
additional amount of such compensation that the Participating Company would have
paid to the Participant during the computation period for services rendered as a
Covered Employee if the Participant had not entered into a cash or deferred
arrangement described in section 401(k) of the Code or elected non-taxable
benefits under a cafeteria plan described in section 125 of the Code, but
excluding "spot" bonuses, referral bonuses, severance pay, relocation pay,
imputed income and any other special form of pay. In the case of a Participant
on international assignment, his Covered Compensation shall not be increased or
decreased by reason of any international service adjustments. For purposes of
the Plan, an Employee's "Covered Compensation" for any Plan Year compensation
for any Plan Year shall not be deemed to exceed $160,000 or such greater amount
as may be permitted for such Plan Year under section 401(a)(17) of the Code.
2.1.11 "Covered Employee" means an Employee of Convergys
Customer Management Group Inc. who is a member of Group Levels D1, D2, D3, C5 or
C6 or who is a member of Group Level C4 who is employed at one of the following
locations 01, 02, 03, 04, 08, 09, 17, 19, 46, 53, 54, 56, 62, 63, and 64,
subject to the following:
2
<PAGE> 5
(a) The term "Covered Employee" shall not include any Employee
who is a member of a collective bargaining unit unless and until his
participation in the Plan has been approved under a collective bargaining
agreement.
(b) The term "Covered Employee" shall not include any person
who is a "leased employee" within the meaning of section 414(n) of the Code. For
purposes of the preceding sentence, the term "leased employee" means any person
(other than an employee of the recipient) who pursuant to an agreement between
the recipient and any other person (leasing organization) has performed services
for the recipient (or for the recipient and related persons determined in
accordance with section 414(n)(6) of the Code) on a substantially full-time
basis for a period of at least one year, and such services are performed under
primary direction or control by the recipient.
(c) The term "Covered Employee" shall not include any Employee
(other than a Foreign Service Employee) who is employed at a location which is
not within one of the States of the United States. For the purpose of the
preceding sentence, "Foreign Service Employee" means an Employee who is a
citizen of the United States and who has been classified by the Participating
Company which employs him as a Foreign Service Employee.
(d) The term "Covered Employee" shall not include any Employee
who is a Rotational Employee. For purposes of the preceding sentence,
"Rotational Employee" means an Employee who is a nonresident alien employed
within one of the States of the United States for a period not expected to
exceed three years.
2.1.11 "Employee" means any person who is a common law
employee of an Affiliated Employer, including any such person who is absent from
active service with an Affiliated Employer by reason of an Approved Absence.
2.1.12 "Entry Date" means January 1, 1999 and the first day of
each calendar month after January 1, 1999.
2.1.13 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
2.1.14 "Normal Retirement Date" means the date on which a
Participant attains age 59-1/2.
2.1.15 "Participant" means a person who was a Participant in
the Plan on December 31, 1998, or who thereafter becomes a Participant in the
Plan in accordance with the provisions of Section 4, and who remains a
Participant.
3
<PAGE> 6
2.1.16 "Participating Company" means Convergys Customer
Management Group Inc.
2.1.17 "Plan Accounts" means, collectively, all outstanding
bookkeeping accounts maintained for a Participant in accordance with the
provisions of the Plan.
2.1.18 "Plan Year" means the calendar year.
2.1.19 "Total Disability" means a physical or mental
disability which, in the opinion of a physician selected or first approved by
the Committee, disables the Participant from performing his duties as an
Employee and is expected to continue for one year or longer.
2.1.20 "Trust" means the trust established in conjunction
with the Plan.
2.1.21 "Trustee" means the person or corporation serving as
trustee of the Trust.
2.1.22 "Valuation Date" means the last day of each Plan Year
and such other dates as may be selected by the Committee for the valuation of
the Trust assets.
2.2 Gender and Number. For purposes of the Plan, words used in any
gender shall include all other genders, words used in the singular form shall
include the plural form and words used in the plural form shall include the
singular form, as the context may require.
SECTION 3
CREDITED SERVICE
3.1 Eligibility Service. Each Employee who has completed at least 1,000
Hours of Service during the 12-month period commencing on the day he first
performs an Hour of Service for an Affiliated Employer shall be credited with
one year of Eligibility Service as of the last day of such 12-month period. Each
Employee who fails to complete at least 1,000 Hours of Service during the
12-month period commencing on the day he first performs an Hour of Service for
an Affiliated Employer shall be credited with one year of Eligibility Service as
of the last day of the first Plan Year (commencing on or after the day he first
performs an Hour of Service for an Affiliated Employer) during which he
completes at least 1,000 Hours of Service. Notwithstanding the foregoing, if an
Employee who does not have any nonforfeitable right under the Plan to an accrued
benefit derived from Affiliated Employer contributions has a Break in Service of
at least five years and if the number of Plan Years during such Break in Service
equals or exceeds the number of his years of Eligibility Service on the day
preceding such Break in Service (excluding any years of Eligibility Service
prior to such Break in Service not required to be taken into account by reason
of
4
<PAGE> 7
a prior Break in Service), his years of Eligibility Service prior to such Break
in Service shall be disregarded for purposes of determining his eligibility to
become a Participant in the Plan.
3.2 Vesting Service. Each Employee shall be credited with one year of
Vesting Service for each Plan Year during which he completes at least 1,000
Hours of Service. Notwithstanding the foregoing, if an Employee who does not
have any nonforfeitable right under the Plan to an accrued benefit derived from
Affiliated Employer contributions has a Break in Service of at least five years
and if the number of Plan Years during such Break in Service equals or exceeds
the number of his years of Vesting Service on the day preceding such Break in
Service (excluding any years of Vesting Service prior to such Break in Service
not required to be taken into account by reason of a prior Break in Service),
his years of Vesting Service prior to such Break in Service shall be disregarded
for purposes of the Plan.
3.3 Break in Service. For purposes of the Plan, the term "Break in
Service" means a period of one or more consecutive Plan Years during each of
which an Employee fails to complete more than 500 Hours of Service.
3.4 Hours of Service. Subject to the rules contained in 29 CFR Section
2530.200b-2(b) and (c) (which are incorporated herein by reference), an
Employee's "Hours of Service" shall be computed as follows:
3.4.1 One Hour of Service shall be credited for each hour for
which an Employee is paid, or entitled to payment, for the performance of duties
for an Affiliated Employer during the applicable computation period.
3.4.2 One Hour of Service shall be credited for each hour for
which an Employee is paid, or entitled to payment, by an Affiliated Employer on
account of a period of time during which no duties are performed (irrespective
of whether the employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty, military duty or
leave of absence. Notwithstanding the preceding sentence:
(a) No more than 501 Hours of Service are required to
be credited under this Section 3.4.2 to an Employee on account of any single
continuous period during which the Employee performs no duties (whether or not
such period occurs in a single computation period);
(b) An hour for which an Employee is directly or
indirectly paid, or entitled to payment, on account of a period during which no
duties are performed is not required to be credited to the Employee if such
payment is made or due under a plan maintained solely for the purpose of
complying with applicable workmen's compensation, or unemployment compensation
or disability insurance laws; and
5
<PAGE> 8
(c) Hours of Service are not required to be credited
for a payment which solely reimburses an Employee for medical or medically
related expenses incurred by the Employee.
For purposes of this Section 3.4.2, a payment shall be deemed to be made by or
due from an Affiliated Employer regardless of whether such payment is made by or
due from the Affiliated Employer directly, or indirectly through, among others,
a trust fund, or insurer, to which the Affiliated Employer contributes or pays
premiums and regardless of whether contributions made or due to the trust fund,
insurer or other entity are for the benefit of particular Employees or are on
behalf of a group of Employees in the aggregate.
3.4.3 One Hour of Service shall be credited for each hour for
which back pay, irrespective of mitigation of damages, is either awarded or
agreed to by an Affiliated Employer. The same hours of service shall not be
credited both under Section 3.4.1 or Section 3.4.2, as the case may be, and
under this Section 3.4.3. Crediting of Hours of Service for back pay awarded or
agreed to with respect to periods described in Section 3.4.2 shall be subject to
the limitations set forth in that Section.
3.4.4 For purposes only of determining whether an Employee has
incurred a Break in Service, if the Employee is absent from work for an
Affiliated Employer (a) by reason of the pregnancy of the Employee, (b) by
reason of the birth of a child of the Employee, (c) by reason of the placement
of a child with the Employee in connection with the adoption of such child by
the Employee, or (d) for purposes of caring for such a child for a period
beginning immediately following such a birth or placement, and the Employee is
not paid or entitled to be paid for such absence, the Employee will be credited
with one Hour of Service for each hour which the Employee would normally have
been scheduled for work but for such absence, or, if the Employee does not have
a regular work schedule, with eight Hours of Service for each day of such
absence. Notwithstanding the preceding sentence:
(i) No more than 501 Hours of Service will be
credited under this Section 3.4.4 to an Employee on account of any single
continuous period of such an absence;
(ii) Any Hours of Service which are to be credited to
an Employee under this Section 3.4.4 by reason of a single continuous period of
absence will be credited for the Plan Year in which such absence begins if the
Employee would be prevented from incurring a Five Year Break in Service with
respect to such Plan Year solely because of such crediting. Otherwise, such
Hours of Service will be credited for the Plan Year next following the Plan Year
in which such absence begins; and
(iii) No Hours of Service will be credited under this
Section 3.4.4 to an Employee unless the Employee furnishes to the Committee such
timely information as the
6
<PAGE> 9
Committee may reasonably require to establish that the applicable absence from
work is for reasons referred to in the first sentence of this Section 3.4.4 and
the number of days for which there was such an absence. The same Hours of
Service shall not be credited both under Section 3.4.1, 3.4.2 or 3.4.3 above and
under this Section 3.4.4.
3.5 Service with Predecessor Entities. For purposes of the Plan, in the
case of an employee of a Predecessor Entity who became an Employee as of the
date on which the Predecessor Entity was acquired by an Affiliated Employer
("Acquisition Date"), from and after the Acquisition Date his service with the
Predecessor Entity shall be deemed to be service with an Affiliated Employer.
For purposes of this Section 3.5, "Predecessor Entity" means NICE Corporation,
Automated Phone Exchange Incorporated, Telephone Marketing Services, Inc.,
Ameritel Corporation, Waveland Associates, Inc., ADI Research, Inc., WATS
Marketing of American, Inc., Software Support, Inc., Maritz, Inc. and American
Transtech, Inc. (ATI"). In the case of an employee of Scherers Communications,
Inc. ("Scherers") who became an Employee on August 7, 1996, for purposes of the
Plan, his service with Scherers prior to August 7, 1996 shall be deemed to be
service with an Affiliated Employer. In the case of an employee of AT&T Corp.
("AT&T") who became an Employee on March 1, 1998, for purposes of the Plan, his
service with AT&T prior to March 1, 1998 shall be deemed to be service with an
Affiliated Employer. In the case of an employee of AccuStaff Incorporated or
People Systems Inc. (collectively, "AccuStaff") who became an Employee during
1998 and who was supporting Convergys Customer Management Group Inc. immediately
prior to becoming an Employee, for purposes of the Plan, his service with
AccuStaff prior to the date he became an Employee shall be deemed to be service
with an Affiliated Employer.
SECTION 4
ELIGIBILITY AND PARTICIPATION
4.1 Eligibility. Each Employee (a) who is a Covered Employee, (b) who
has attained age 21 and (c) who has been credited with at least one year of
Eligibility Service shall be eligible to become a Participant in the Plan.
4.2 Participation. Each Employee may elect to become a Participant in
the Plan on any Entry Date on which he satisfies all of the eligibility
requirements of Section 4.1.1 by completing a form provided by the Committee and
filing such form with the Committee within the time prescribed by the Committee.
Each Participant shall remain a Participant so long as he remains an Employee
and until his Plan Accounts have been fully distributed or forfeited.
4.3 Transfers from Convergys Plan. If a participant in the Convergys
Plan becomes a Covered Employee after January 1, 1999, he automatically shall
become a Participant in this Plan
7
<PAGE> 10
on the date he becomes a Covered Employee and the amounts credited to his
accounts under the Convergys Plan automatically shall be transferred to the
corresponding Plan Accounts in this Plan. Until changed by the Participant, in
accordance with the provisions of this Plan, any beneficiary designation,
investment direction and authorization for salary deferral contributions in
effect under the Convergys Plan shall continue in effect under this Plan.
SECTION 5
CONTRIBUTIONS
5.1 Salary Deferral Contributions. Each Participant may authorize
salary deferral contributions, of up to such percentage of his Covered
Compensation as may be fixed by the Committee from time to time, by completing a
form supplied by the Committee and filing such form with the Committee within
the time prescribed by the Committee. A Participant may change his authorization
for salary deferral contributions from one permissible percentage to another at
such times as the Committee may direct by completing a form supplied by the
Committee and filing such form with the Committee within the time prescribed by
the Committee. A Participant may suspend his authorization for salary deferral
contributions at such times as the Committee may direct by completing a form
provided by the Committee and filing such form with the Committee within the
time prescribed by the Committee. A Participant who has suspended his
authorization for salary deferral contributions may again authorize salary
deferral contributions by completing and signing a form provided by the
Committee and filing such form with the Committee within the time prescribed by
the Committee. Subject to the limitations contained in Section 6, (a) the amount
of Covered Compensation otherwise payable to each Participant on or after
January 1, 1999 shall be reduced by the amount of the salary deferral
contributions authorized by the Participant with respect to such Covered
Compensation and (b) the Participating Companies shall contribute to the Plan,
for each such Participant, an amount equal to the amount by which his Covered
Compensation has been reduced. Salary deferral contributions under this Section
5.1 shall be paid to the Trustee no less frequently than monthly.
Salary deferral contributions under this Section 5.1 shall be made in cash.
5.2 Basic Company Contributions. The Participating Companies shall
contribute to the Plan, for each Participant who authorized salary deferral
contributions under Section 5.1, an amount equal to the lesser of (a) 4% of the
Participant's Covered Compensation with respect to which salary deferral
contributions were authorized or (b) 66-2/3% of the amount of the salary
deferral contributions made with respect to such Covered Compensation under
Section 5.1, subject to the limitations contained in Section 6. The
Participating Companies' contributions for any payroll period under this Section
5.2 shall be paid to the Trustee no less frequently than monthly. The
Participating Companies' contributions under this Section 5.2 may be made in
cash or Convergys Shares. Notwithstanding the foregoing, in the event of a
distribution of a Participant's salary deferral contributions under Section 6.2,
any Participating Company contributions (and earnings
8
<PAGE> 11
thereon) under this Section 5.2 which are attributable to such distributed
contributions also shall be distributed to the Participant at the same time;
provided, however, that if such Participating Company contributions (and
earnings thereon) would have been subject to forfeiture if the Participant had
ceased to be an Employee, such contributions and earnings shall not be
distributed but shall be forfeited.
5.3 Rollover Contributions. With the consent of the Committee, a
Covered Employee may make a rollover contribution to the Trust as described in
section 401(a)(5), 403(a)(4) or 408(d)(3) of the Code; provided that no Covered
Employee may roll over any amounts which were previously deducted by him under
section 219 of the Code. Any rollover contribution must be made in cash or
Convergys Shares. A Covered Employee who makes a rollover contribution under
this Section 5.3 prior to becoming a Participant shall thereupon become a
Participant, provided that such Participant may not authorize contributions
under Section 5.1 or share in Participating Company contributions under Section
5.2 prior to the date on which his participation otherwise could have commenced
under Section 4.2.
5.4 Mistake of Fact; Disallowance of Deduction. Any contribution made
by a Participating Company by reason of a mistake of fact or conditioned on its
deductibility under section 404 of the Code, to the extent disallowed, shall be
repaid to the Participating Company, at the Participating Company's election,
provided that such repayment is made within one year after the mistaken payment
of the contribution or within one year of the disallowance of the deduction.
Earnings attributable to such contributions may not be paid to the Participating
Company, but any losses attributable thereto shall reduce the amount which may
be repaid. All Participating Company contributions shall be conditioned on their
deductibility under section 404 of the Code.
5.5 Application of Forfeitures. Any forfeitures arising under the Plan
in any Plan Year shall be applied first, to make any restorals called for under
Section 8.6 and second, to reduce the contributions otherwise required of the
Participating Companies.
SECTION 6
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
6.1 Section 404 Limitations. In no event shall the Participating
Companies' total contributions to the Plan for any Plan Year under Sections 5.1
and 5.2 exceed 15% of the Compensation of those Participants who are entitled to
share in the Companies' contributions under such Sections for such Plan Year. If
the Companies' total contributions for any Plan Year could exceed the limitation
described in the preceding sentence, the following adjustments shall be made in
the following order so that such limitations are not exceeded: first, the
amounts to be contributed
9
<PAGE> 12
under Section 5.2 shall be reduced proportionately; and, second, the amounts to
be contributed under Section 5.1 shall be reduced proportionately.
6.2 Section 401(k) Limitations. If for any Plan Year the Participating
Companies' contributions under Section 5.1 on behalf of those Participants who
are Highly Compensated Employees exceed both the limitation contained in Section
6.2.1 and the limitation contained in Section 6.2.2, the contributions on behalf
of such Participants (together with the earnings thereon) shall, to the extent
necessary to insure that at least one of such limitations will not be exceeded,
be distributed to such Participants prior to the end of the following Plan Year.
Distributions shall be made on the basis of the dollar amount of the
contributions made under Section 5.1 by or on behalf of such Participants,
beginning with the highest dollar amount.
6.2.1 The Average Deferral Percentage for those Eligible
Employees who are Highly Compensated Employees must not be more than the Average
Deferral Percentage of all other Eligible Employees multiplied by 1.25.
6.2.2 The excess of the Average Deferral Percentage for those
Eligible Employees who are Highly Compensated Employees over the Average
Deferral Percentage of all other Eligible Employees must not be more than two
percentage points and the Average Deferral Percentage for those Eligible
Employees who are Highly Compensated Employees must not be more than the Average
Deferral Percentage of all other Eligible Employees multiplied by two.
Notwithstanding the foregoing, at the election of Convergys, in lieu of making
distributions to those Participants who are Highly Compensated Employees, (a)
the salary deferral contributions which would otherwise be distributed shall be
recharacterized as voluntary post-tax contributions (subject to the limitations
contained in Sections 6.3 and 6.4) or (b) the Participating Companies may make
special contributions on behalf of those Participants who are not Highly
Compensated Employees in an amount sufficient to satisfy the limitations of
Section 6.2.1 or 6.2.2. Such special contributions shall be allocated among the
Salary Deferral Accounts of those Participants who are entitled to share in the
Participating Companies' contributions under Section 5.1 for the Plan Year and
who are not Highly Compensated Employees in the proportion that each such
Participant's salary deferral contributions under Section 5.1 for the Plan Year
bear to all such Participants' salary deferral contributions under Section 5.1
for the Plan Year. For purposes of the Plan, (a) the "Average Deferral
Percentage" for a specified group of Eligible Employees shall be the average of
such Eligible Employees' Individual Deferral Percentages and (b) "Individual
Deferral Percentage" means, with respect to any Eligible Employee for any Plan
Year, the ratio of the salary deferral contributions paid to the Plan for the
Eligible Employee under Section 5.1 to the Eligible Employee's Compensation for
such Plan Year. For purposes of determining the Individual Deferral Percentage
of an Eligible Employee who is a Highly Compensated Employee, this Plan and all
other 401(k) plans maintained by any Affiliated Employer in which the Eligible
Employee is eligible to participate shall be treated as a single plan. In the
event this Plan must be combined with one or
10
<PAGE> 13
more plans (other than an employee stock ownership plan described in section
4975(e)(7) of the Code) in order to satisfy the requirements of section
401(a)(4) or 410(b) of the Code (other than the average benefits test described
in section 410(b)(2)(A)(ii) of the Code), then all cash or deferred arrangements
that are included in such plans shall be treated as a single arrangement for
purposes of section 401(k) of the Code.
6.3 Section 401(m) Limitations. If for any Plan Year the total
contributions under Section 5.2 on behalf of those Participants who are Highly
Compensated Employees exceed both the limitation contained in Section 6.3.1 and
the limitation contained in Section 6.3.2, the contributions on behalf of such
Participants under Section 5.2 (together with the earnings thereon) shall, to
the extent necessary to insure that at least one of such limitations will not be
exceeded, be distributed to such Participants prior to the end of the following
Plan Year. Distributions shall be made on the basis of the dollar amount of the
contributions made by or on behalf of such Participant under Section 5.2,
beginning with the highest dollar amount. Forfeitures under this Section 6.3 may
not be allocated to Participants whose contributions are reduced under this
Section 6.3.
6.3.1 The Average Contribution Percentage for those Eligible
Employees who are Highly Compensated Employees must be not more than the Average
Contribution Percentage of all other Eligible Employees multiplied by 1.25.
6.3.2 The excess of the Average Deferral Percentage for those
Eligible Employees who are Highly Compensated Employees over the Average
Deferral Percentage of all other Eligible Employees must not be more than two
percentage points and the Average Deferral Percentage for those Eligible
Employees who are Highly Compensated Employees must not be more than the Average
Deferral Percentage of all other Eligible Employees multiplied by two.
Notwithstanding the foregoing, at the election of Convergys, in lieu of making
distributions to those Participants who are Highly Compensated Employees, the
Participating Companies may make special contributions on behalf of those
Participants who are not Highly Compensated Employees in an amount sufficient to
satisfy the limitations of Section 6.3.1 or 6.3.2. Such special contributions
shall be allocated among the Employer Contribution Accounts of those
Participants who are entitled to share in the Participating Companies'
contributions under Section 5.1 for the Plan Year and who are not Highly
Compensated Employees in the proportion that each such Participant's salary
deferral contributions under Section 5.1 for the Plan Year bear to all such
Participants' salary deferral contributions under Section 5.1 for the Plan Year.
That portion of any Employer Contribution Account which is attributed to special
contributions under this Section 6.3 shall at all times be fully vested and
non-forfeitable. For purposes of the Plan, (a) the "Average Contribution
Percentage" for a specified group of Eligible Employees, grouped by
Compensation, shall be the average of such Eligible Employees' Individual
Contribution Percentages and (b) "Individual Contribution Percentage" means,
with respect to any Eligible Employee for any Plan Year, the ratio of the
contributions paid to the Plan on behalf of the Eligible Employee under Section
5.2 to the
11
<PAGE> 14
Eligible Employee's Compensation for such Plan Year. The Average Contribution
Percentage for any Highly Compensated Employee for any Plan Year who is eligible
to have matching employer contributions made on his behalf or to make after-tax
contributions under one or more plans described in section 401(a) of the Code
(other than an employee stock ownership plan described in section 4975(e)(7) of
the Code) maintained by any Affiliated Employer in addition to this Plan shall
be determined as if all such contributions were made to this Plan. In the event
that this Plan must be combined with one or more other plans (other than an
employee stock ownership plan described in section 4975(e)(7) of the Code) in
order to satisfy the requirements of section 401(a) or 410(b) of the Code (other
than the average benefits test described in section 410(b)(2)(A)(ii) of the
Code), all employee and matching contributions shall be treated as made under a
single plan for purposes of section 401(m) of the Code. At the discretion of the
Committee, contributions under Section 5.1 shall be deemed to be contributions
under Section 5.2 for purposes of applying the limitations contained in this
Section.
6.4 Section 401(m) Alternate Limitations. The alternate limitations set
forth in this Section 6.4 shall apply if, for any Plan Year, the total
contributions under Section 5.1 on behalf of those Participants who are Highly
Compensated Employees exceed the limitation contained in Section 6.2.1 and the
total contributions under Section 5.2 by or on behalf of those Participants who
are Highly Compensated Employees exceed the limitation contained in Section
6.3.1. If for any Plan Year the total contributions under Section 5.2 by or on
behalf of those Participants who are Highly Compensated Employees exceed both
the limitation contained in Section 6.4.1 and the limitation contained in
Section 6.4.2, to the extent necessary to insure that the sum of such
limitations will not be exceeded, the contributions made on behalf of such
Participants under Section 5.2 (and earnings thereon) shall be distributed to
such Participants prior to the end of the following Plan Year. Distributions
shall be made on the basis of the dollar amount of the contributions made by or
on behalf of such Participant under Section 5.2, beginning with the highest
dollar amount. Forfeitures under this Section 6.4 may not be allocated to
Participants whose contributions are reduced under this Section 6.4.
6.4.1 The sum of (a) 125% of the lesser of (i) the Average
Deferral Percentage of those Eligible Employees who are not Highly Compensated
Employees or (ii) the Average Contribution Percentage of such Eligible
Employees; plus (b) the lesser of (i) 2% plus the greater of the amounts
determined under clause (a) of this Section 6.4.1 or (ii) 200% of the greater of
the amounts determined under clause (a) of this Section 6.4.1.
6.4.2 The sum of (a) 125% of the greater of (i) the Average
Deferral Percentage of those Eligible Employees who are not Highly Compensated
Employees or (ii) the Average Contribution Percentage of such Eligible
Employees; plus (b) the lesser of (i) 2% plus the lesser of the amounts
determined under clause (a) of this Section 6.4.2 or (ii) 200% of the lesser of
the amounts determined under clause (a) of this Section 6.4.2.
12
<PAGE> 15
At the discretion of the Committee, contributions under Section 5.1 shall be
deemed to be contributions under Section 5.2 for purposes of applying the
limitations contained in this Section.
6.5 Maximum Annual Additions. The total Annual Additions allocable to a
Participant's Plan Accounts for any Plan Year shall be limited in accordance
with the following provisions:
6.5.1 Notwithstanding any other provision of the Plan to the
contrary, in no event shall a Participant's Annual Additions for any Plan Year
exceed the lesser of (a) $30,000 (or such larger amount as may be determined by
the Commissioner of Internal Revenue for Plan Years beginning on or after
January 1, 1999) or (b) 25% of his Compensation for such Plan Year.
6.5.2 If for any Plan Year, as a result of reasonable error in
estimating a Participant's Compensation or other facts and circumstances
approved by the Commissioner of Internal Revenue, a Participant's Annual
Additions could exceed the limitations set forth in Section 6.5.1, the following
adjustments shall be made in the following order to the extent necessary to
insure such limitations will not be exceeded: first, the Participating
Companies' contributions for the Plan Year on behalf of the Participant under
Section 5.2 shall be allocated to a suspense account under Section 6.5.3; and
second, the Participating Companies' contributions for the Plan Year on behalf
of the Participant under Section 5.1 shall be allocated to a suspense account
under Section 6.5.3.
6.5.3 That portion of the Participating Companies'
contributions for a Plan Year which is allocated to a suspense account under
Section 6.5.2 shall be applied to reduce the contributions otherwise required of
the Participating Companies in the first Plan Year in which they can be applied
without exceeding the limitations of Section 6.5.1. The suspense account shall
not share in the income, expenses, profits or losses of the Trust. The
Participating Companies shall not contribute any amount to the Trust which
results in additional amounts being credited to the suspense account. If the
Plan is terminated, any amount credited to the suspense account which cannot be
allocated to the Participants' Plan Accounts shall be paid to the Participating
Companies.
6.5.4 For purposes hereof, "Annual Additions" means, with
respect to any Participant, the sum of all Participating Company and Participant
contributions (other than rollover contributions) and forfeitures allocated to
his accounts for a Plan Year under this Plan and all other defined contribution
plans maintained by any Affiliated Employer. If a Participant in this Plan is a
participant in one or more other defined contribution plans, the limitations
contained in this Section 6.5 shall be applied to reduce the annual additions
which otherwise would have been credited to his accounts in this Plan and such
other plans, beginning with the most current annual additions.
6.5A Maximum Plan Benefit - Combined Limitation for This Plan and Other
Defined Benefit Plans
13
<PAGE> 16
6.5A.1 General Rule. Notwithstanding any other
provision of this Plan to the contrary, except as provided in this Section 6.5A,
if a Participant in this Plan also participates in one or more defined benefit
plans (as defined in section 414(j) of the Code) maintained by an Affiliated
Employer, in no event shall the sum of the Participant's defined benefit plan
fraction and defined contribution plan fraction for any limitation year exceed
1.0. If and to the extent necessary, the Participant's retirement benefit that
is projected or payable under the defined benefit plan shall be reduced or
frozen so that this limitation is not exceeded.
6.5A.2 Defined Benefit Plan Fraction. For purposes of
this Section 6.5A, a Participant's "defined benefit plan fraction" for any
limitation year is a fraction:
(a) The numerator of which is the
Participant's projected annual benefits under all defined benefit plans
maintained by any Affiliated Employer (determined as of the close of the subject
limitation year); and
(b) The denominator of which is the lesser
of (1) 1.25 multiplied by the dollar limitation in effect under section
415(b)(1)(A) of the Code for such limitation year or (2) 1.4 multiplied by the
amount which may be taken into account for the Participant under section
415(b)(1)(B) of the Code by the close of such limitation year.
6.5A.3 Defined Contribution Plan Fraction. For
purposes of this Section 6.5A, a Participant's "defined contribution plan
fraction" for any limitation year is a fraction:
(a) The numerator of which is the sum of all
of the Annual Additions to the Participant's accounts under all of the defined
contribution plans maintained by any Affiliated Employer which have been made as
of the close of the subject limitation year (including Annual Additions made in
prior limitation years); and
(b) The denominator of which is the sum of
the lesser of the following amounts determined for the subject limitation year
and for each prior limitation year in which the Participant performed service
for an Affiliated Employer: (1) 1.25 multiplied by the dollar limitation in
effect under section 415(c)(1)(A) of the Code for the applicable limitation year
(determined without regard to section 415(c)(6)of the Code), or (2) 1.4
multiplied by the amount which may be taken into account for the Participant
under section 415(c)(1)(B) of the Code for the applicable limitation year.
6.5A.4 Other Necessary Terms. For purposes of the
rules set forth in this Section 6.5A, the following terms shall apply:
(a) A Participant's "projected annual
benefit" as of the close of any limitation year means the annual benefit that
the Participant would be entitled to under the
14
<PAGE> 17
defined benefit plan if (1) the Participant continued in employment with his
current employer on the same basis as exists as of the close of the subject
limitation year until attaining his Normal Retirement Date (or, if he has
already reached such date by the close of the subject limitation year, he
immediately terminated his employment), (2) the Participant's annual
compensation for the subject limitation year remains the same each later
limitation year until he terminates employment, and (3) all other relevant
factors used to determine benefits under the defined benefit plan for the
subject limitation year remain constant for all future limitation years.
(b) "Limitation year" means the calendar
year.
6.5A.5 Adjustment of Defined Contribution Plan
Fraction. If necessary, an amount shall be subtracted from the numerator of the
defined contribution plan fraction applicable to a Participant in accordance
with regulations prescribed by the Secretary of the Treasury or his delegate so
that the sum of the Participant's defined benefit plan fraction and defined
contribution plan fraction computed as of the end of the last limitation year
beginning before January 1, 1987 does not exceed 1.0 for such limitation year
6.6 Highly Compensated Employee. For purposes of the Plan, "Highly
Compensated Employee" means an Employee (a) who, during the Plan Year for which
the determination is being made or the preceding Plan Year, was at any time a
5-percent owner (as defined in section 416(i)(1) of the Code) of any Affiliated
Employer; or (b) who, during the Plan Year preceding the Plan Year for which the
determination is being made, received Compensation in excess of $80,000 (as
adjusted pursuant to section 414(q)(1) of the Code). For purposes of this
Section 6.6, a former Employee shall be deemed to be a Highly Compensated
Employee with respect to a Plan Year if such former Employee separated from
service (or was deemed to have separated) prior to the Plan Year, performed no
services for an Affiliated Employer during the Plan Year and was a Highly
Compensated Employee actively employed by an Affiliated Employer for either the
Plan year in which he separated or any Plan Year ending on or after the
Employee's 55th birthday.
6.7 Compensation. For purposes of this Section 6 "Compensation" means
an Employee's earned income, wages, salaries, and fees for professional services
and other amounts received for personal services actually rendered in the course
of employment with an Affiliated Employer (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips and bonuses), but
excluding the following: (a) contributions by an Affiliated Employer to a plan
of deferred compensation which are not includable in the Employee's gross income
for the taxable year in which contributed, or contributions by an Affiliated
Employer under a simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any distributions from a plan
of deferred compensation; (b) amounts realized from the exercise of a
non-qualified stock option, or when restricted stock (or property) held by the
Employee either becomes freely
15
<PAGE> 18
transferable or is no longer subject to a substantial risk of forfeiture; (c)
amounts realized from the sale, exchange or other disposition of stock acquired
under a qualified stock option; and (d) other amounts which received special tax
benefits.
6.7.1 For purposes of Sections 6.1 and 6.5, an Employee's
Compensation for a Plan Year is the Compensation actually paid or includable in
gross income during such Plan Year.
6.7.2 For purposes of Section 6, an Employee's Compensation
for a Plan Year is the Compensation actually paid or includable in gross income
during such Plan Year plus the Compensation which would have been paid or
includable in gross income during such Plan Year but for sections 125, 402(a)(8)
and 402(h)(1)(B) of the Code.
6.7.3 For purposes of the Plan, an Employee's compensation for
any Plan Year shall not be deemed to exceed $160,000 or such greater amount as
may be permitted for such Plan Year under section 401(a)(17) of the Code.
6.7.4 For purposes of applying the limitations contained in
Sections 6.2, 6.3 and 6.4, an Employee's Compensation shall not include amounts
paid prior to the date on which he first becomes a Participant.
6.8 Section 402(g) Limitation. Notwithstanding any other provision of
the Plan, in no event shall the amount of a Participant's Elective Deferrals
during any Plan Year under this Plan and all other plans, contracts or
arrangements maintained by any Affiliated Employer exceed the amount of the
limitation in effect under Section 402(g)(1) of the Code for such Plan Year. If
a Participant has Excess Deferrals for any Plan Year, and if the Participant so
elects, the Excess Deferrals (plus any earnings and minus any losses allocable
thereto) shall be distributed to the Participant from his Salary Deferral
Account no later than April 15 following the Plan Year for which the Excess
Deferrals were made. Any election under this Section 6.8 shall be in writing,
shall be filed with the Committee no later than March 1 following the Plan Year
for which the Excess Deferrals were made, shall specify the amount of the Excess
Deferrals for the Plan Year and shall include the Participant's statement that
if such Excess Deferrals are not distributed, the sum of the Excess Deferrals
plus amounts deferred by the Participant for the Plan Year under sections
401(k), 408(k) and 403(b) of the Code will exceed the limits imposed by section
402(g) of the Code. For purposes of the Plan (a) "Elective Deferrals" means the
amounts deferred by the Participant for the Plan Year under sections 401(k),
408(k) and 403(b) of the Code, and (b) "Excess Deferrals" means that portion of
a Participant's Elective Deferrals for a Plan Year in excess of the limits
imposed by section 402(g) of the Code.
6.9 Eligible Employee. For purposes of Sections 6.2, 6.3 and 6.4,
"Eligible Employee" means, with respect to any Plan Year, a Covered Employee who
is eligible to authorize salary deferral contributions under Section 5.1 during
the Plan Year.
16
<PAGE> 19
6.10 Military Service. Notwithstanding any provision of this Plan to
the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with section 414(u) of
the Code.
SECTION 7
ACCOUNTS
7.1 Salary Deferral Accounts. A separate bookkeeping Salary Deferral
Account shall be established and maintained for each Participant which shall
reflect the salary deferral contributions properly allocable to the Participant
under the Plan and the investment thereof. The salary deferral contributions
paid to the Trustee on behalf of a Participant shall be allocated to the
Participant's Salary Deferral Account as of the date received by the Trustee.
Each Participant's Salary Deferral Account shall at all times be fully vested
and nonforfeitable. Amounts allocated to a Participant's Salary Deferral Account
shall be invested in such types of investments as may be permitted by the
Committee.
7.2 Employer Contribution Accounts. A separate bookkeeping Employer
Contribution Account shall be established and maintained for each Participant
which shall reflect the Participating Company contributions and forfeitures
properly allocable to the Participant under the Plan and the investment thereof.
Except as otherwise provided in the Plan, at any relevant time prior to his
Normal Retirement Date the vested and forfeitable percentages of a Participant's
Employer Contribution Account shall be determined from the following schedule,
based upon his full years of Vesting Service:
Vesting Service Vested Percentage Forfeitable Percentage
--------------- ----------------- ----------------------
Less than 3 years 0% 100%
3 or more years 100% 0%
Notwithstanding the foregoing, in the case of a Participant whose Plan Accounts
include a Retirement Savings Plan Account or a Savings and Security Plan
Account, that portion of his Employer Contribution Account which is attributable
to Company contributions made in Plan Years prior to the current Plan Year and
the two immediately preceding Plan Years shall at all times be fully vested and
nonforfeitable. Except as otherwise provided in this Section 7.2, amounts
allocated to a Participant's Employer Contribution Account shall be invested in
Convergys Shares.
7.2.1 Effective as of the close of the fourth Plan Year of his
Eligibility Period, an Eligible Participant may invest his entire Employer
Contribution Account in any of the types of
17
<PAGE> 20
investments permitted by the Committee. During the first four Plan Years of his
Eligibility Period, an Eligible Participant may invest only the Unrestricted
portion of his Employer Contribution Account in any of the types of investments
permitted by the Committee and the Restricted portion of his Employer
Contribution Account shall be invested in Convergys Shares.
7.2.2 Effective as of the December 31 immediately preceding an
Eligible Participant's Eligibility Period, 20% of the value of his Employer
Contribution Account shall be deemed to be "Unrestricted" and 80% shall be
deemed to be "Restricted." Effective as of the last day of the first Plan Year
during his Eligibility Period, an additional 25% of the Employer Contribution
Account balance then deemed to be Restricted shall become "Unrestricted".
Effective as of the last day of the second Plan Year during his Eligibility
Period, an additional 33-1/3% of the Employer Contribution Account balance then
deemed to be "Restricted" shall become "Unrestricted". Effective as of the last
day of the third Plan Year during his Eligibility Period, an additional 50% of
the Employer Contribution Account balance then deemed to be "Restricted" shall
become "Unrestricted". For purposes of this Section 7.2.2, all contributions
under Section 5.2 and 5.3 made for a Plan year shall be deemed to be
"Restricted" as of the last day of the Plan Year.
7.2.3 For purposes of Section 7.2.1, (a) "Eligible
Participant" means a Participant (i) who has at least ten years of Vesting
Service, or (ii) who has attained age 45 and has at least five years of Vesting
Service, and (b) "Eligibility Period" means, with respect to any Eligible
Participant, the five-consecutive Plan Year period commencing on the later of
January 1, 1993 or the January 1 on which he first became an Eligible
Participant.
7.2.4 Notwithstanding the foregoing, that portion of a
Participant's Employer Contribution Account which is invested in Cincinnati Bell
Shares on January 1, 1999 may continue to be invested in Cincinnati Bell Shares
or in any of the other types of investments (including Convergys Shares)
permitted by the Committee, and such portion shall not be counted for purposes
of determining the "Restricted" and "Unrestricted" portions of his Employer
Contribution Account under Section 7.2.2.
7.3 Rollover Accounts. A separate bookkeeping Rollover Account shall be
established and maintained for each Participant who makes rollover contributions
which shall reflect such contributions and the investment thereof. Each
Participant's rollover contributions to the Trust shall be allocated to his
Rollover Account as of the date received by the Trustee. Each Participant's
Rollover Account shall at all times be fully vested and nonforfeitable. Amounts
allocated to a Participant's Rollover Account shall be invested in such types of
investments as may be permitted by the Committee.
7.4 Voluntary Contribution Accounts. A separate bookkeeping Voluntary
Contribution Account shall be established and maintained for each Participant
which shall reflect the voluntary post-tax contributions made by the Participant
under the Plan and the investment thereof. The
18
<PAGE> 21
voluntary post-tax contributions paid to the Trustee by a Participant shall be
allocated to the Participant's Voluntary Contribution Account as of the date
received by the Trustee. Each Participant's Voluntary Contribution Account shall
at all times be fully vested and non-forfeitable. Amounts allocated to a
Participant's Voluntary Contribution Account shall be invested in such types of
investments as may be permitted by the Committee.
7.5 ISD Accounts. A separate bookkeeping account shall be established
and maintained for each Participant who was a participant in the ISD Partnership
401(k) Retirement Savings Plan, which shall reflect the amounts transferred to
the Plan from the Participant's account in the ISD Partnership 401(k) Retirement
Savings Plan and the investment thereof. Each Participant's ISD Account shall at
all times be fully vested and nonforfeitable. Amounts allocated to a
Participant's ISD Account shall be invested in such types of investments as may
be permitted by the Committee.
7.6 Voting Convergys Shares. Before each annual or special meeting of
the shareholders of Convergys, the Trustee shall cause to be sent to each
Participant a copy of the proxy solicitation material therefore, together with a
form requesting confidential instructions to the Trustee on how to vote the
number of Convergys Shares credited to the Participant's Plan Accounts. Upon
receipt of such instructions, the Trustee shall vote the Convergys Shares as
instructed. Instructions received by the Trustee from individual Participants
shall be held in the strictest confidence and shall not be divulged or revealed
to any person, including officers or employees of any Affiliated Employer. The
Trustee shall vote any Convergys Shares for which voting instructions have not
been received in the proportions that it votes the Convergys Shares for which
voting instructions have been received.
7.7 Valuations and Adjustments. The Trustee shall value the Trust
assets at their fair market value as of each Valuation Date. Based upon the
results of such valuation, each outstanding Plan Account shall be adjusted to
reflect the increase or decrease thereof, and any applicable contributions,
withdrawals, distributions or forfeitures, since the preceding Valuation Date.
7.8 Consolidation of Plan Accounts. Except to the extent necessary to
accurately reflect the withdrawal, distribution and investment rights and vested
status of a Participant's Plan Accounts, the Committee may consolidate two or
more of a Participant's Plan Accounts or portions thereof.
19
<PAGE> 22
SECTION 8
DISTRIBUTIONS
8.1 General. Except as otherwise provided in this Section 8 and Section
9, no amount shall be distributed, withdrawn or forfeited with respect to a
Participant's Plan Accounts while he remains an Employee.
8.2 Normal Retirement. If a Participant is employed as an Employee on
or after his Normal Retirement Date, his Plan Accounts shall be fully vested and
nonforfeitable. If a Participant ceases to be an Employee on or after his Normal
Retirement Date for any reason other than his death, the Participant's Plan
Accounts shall be distributed to him in one lump sum as of the Valuation Date
coinciding with or next following the date on which he ceases to be an Employee.
Notwithstanding the foregoing, the Plan Accounts of a Participant who is a 5%
owner (as defined in section 416(i)(1) of the Code) of an Affiliated Employer
and who remains in employment shall be distributed as of the last Valuation Date
of the Plan Year in which he attains age 70-1/2 and any assets allocated to the
Participant's Plan Accounts during any subsequent Plan Year shall be distributed
as of the last Valuation Date of such subsequent Plan Year.
8.3 Disability Retirement. A Participant's Plan Accounts shall be fully
vested and nonforfeitable if he ceases to be an Employee prior to his Normal
Retirement Date by reason of a Total Disability. Subject to Section 8.7, if a
Participant ceases to be an Employee prior to his Normal Retirement Date by
reason of a Total Disability, the Participant's Plan Accounts shall be
distributed to him in one lump sum as of the Valuation Date coinciding with or
next following the date on which the Participant ceases to be an Employee.
8.4 Death During Employment. A Participant's Plan Accounts shall be
fully vested and nonforfeitable if he dies while an Employee. If a Participant
ceases to be an Employee by reason of his death, the Participant's Plan Accounts
shall be distributed to his Beneficiary in one lump sum as of the Valuation Date
coinciding with or next following the date on which the Participant's death
occurs.
8.5 Vested Terminations. The Plan Accounts of a Participant who has
five or more years of Vesting Service shall be fully vested and nonforfeitable.
Subject to Section 8.7, if a Participant who has five or more years of Vesting
Service ceases to be an Employee prior to his Normal Retirement Date for any
reason other than his death or Total Disability, the Participant's Plan Accounts
shall be distributed to him in one lump sum as of the Valuation Date coinciding
with or next following the date on which he ceases to be an Employee.
8.6 Other Terminations. Subject to Section 8.7, if a Participant who
has less than five years of Vesting Service ceases to be an Employee for any
reason other than his death or Total
20
<PAGE> 23
Disability, the vested portion of his Plan Accounts shall be distributed to him
in one lump sum, and the forfeitable portions of his Plan Accounts shall be
forfeited, as of the Valuation Date coinciding with or next following the date
on which he ceases to be an Employee.
8.6.1 If distribution of the vested portion of the
Participant's Plan Accounts is deferred under Section 8.7, the forfeitable
portions of his Plan Accounts shall not be forfeited until the earlier of (1)
the date on which the vested portion of his Plan Accounts is distributed and (b)
the date on which he incurs a five year Break in Service (from the date on which
he ceased to be an Employee).
8.6.2 The amount forfeited with respect to his Plan Accounts
shall be restored if the Participant is reemployed as a Covered Employee prior
to incurring a Five Year Break in Service (from the date on which he ceased to
be an Employee) and if he repays to the Trust the amounts previously distributed
to him from his Plan Accounts, provided that such repayment must be made before
the Participant incurs a Five Year Break in Service (from the date on which such
forfeiture occurred).
8.6.3 Restorals under this Section 8.6 shall be made first
from any forfeitures arising in the Plan Year in which the restoral is made and
second from additional Company contributions. Amounts repaid or restored to the
Plan shall be credited to new Plan Accounts, in the name of the Participant, of
the same types as the Plan Accounts from which distributions and forfeitures
were made.
8.7 Deferred Distributions. Notwithstanding any other provision hereof
to the contrary, if the value of the vested portion of a Participant's Plan
Accounts is in excess (or at the time of any prior distribution was in excess)
of $5,000, distribution of such vested portion shall not be made before the
Participant attains age 70 1/2 without the Participant's written consent. If the
Participant dies after ceasing to be an Employee but prior to the date on which
the vested portion of his Plan Accounts has been distributed, the vested portion
of his Plan Accounts shall be distributed to his Beneficiary in one lump sum as
of the Valuation Date coinciding with or next following the date on which the
Participant's death occurs. If a distribution is one to which sections
401(a)(11) and 417 of the Code do not apply, such distribution may commence less
than 30 days after the notice required under section 1.411(a)-11(c) of the
Income Tax Regulations is given, provided that: (a) the Plan Administrator
clearly informs the Participant that the Participant has a right to a period of
at least 30 days after receiving the notice to consider the decision of whether
or not to elect a distribution (and, if applicable, a particular distribution
option), and (b) the Participant, after receiving the notice, affirmatively
elects a distribution.
8.8 Reemployment. If a Participant who ceased to be an Employee is
reemployed as an Employee prior to the date as of which his Plan Accounts are to
be distributed or forfeited, his Plan Accounts shall not be distributed or
forfeited by reason of such cessation of employment.
21
<PAGE> 24
8.9 Form of Distribution. To the extent that a Plan Account is invested
in investments other than Convergys Shares or common shares of Cincinnati Bell
Inc. ("Cincinnati Bell Shares") or distributions from that Plan Account shall be
in cash. To the extent that a Plan Account is invested in Convergys Shares or
Cincinnati Bell Shares, distributions with respect to that Plan Account shall be
in Convergys Shares or Cincinnati Bell Shares, as the case may be, or if the
recipient so elects, in cash.
8.10 Alternate Payees. In the case of a person who is determined by the
Committee to be an alternate payee (within the meaning of section 414(p)(8) of
the Code) with respect to the vested portion of one or more of a Participant's
Plan Accounts, unless the qualified domestic relations order applicable to the
Participant's Plan Accounts otherwise provides, the alternate payee may elect,
with respect to the alternate payee's interest in the vested portion of the
Participant's Plan Accounts, to have such interest distributed to the alternate
payee in one lump sum as soon as practical after the alternate payee is
determined to be an alternate payee. Any election under the preceding sentence
must be made within 90 days after the date on which the alternate payee is
determined to be an alternate payee. Notwithstanding the foregoing, if the value
of the alternate payee's interest in the Participant's Plan Accounts is not in
excess of $5,000, the vested portion of such interest shall be distributed to
the alternate payee as soon as practicable after the alternate payee is
determined to be an alternate payee.
8.11 Auxco Participants; CBIS Federal Participants. If the value of the
vested portion of an Auxco Participant's or CBIS Federal Participant's Plan
Accounts is at least $5,000, any distribution with respect to his Plan Accounts
shall be subject to the provision of this Section 8.11. For purposes of this
Section 8.11, "Auxco Participant" means a Participant who was a participant in
the Auxton Computer Enterprises, Incorporated Savings and Profit Sharing Plan on
December 31, 1991 and "CBIS Federal Participant" means a Participant who was a
participant in CBIS Federal Inc. Profit Sharing and Tax Referral Savings Plan as
of December 31, 1991.
8.11.1 Distribution of the vested portion of his Plan Accounts
shall be in one lump sum payment, at least annual installments or through the
purchase and distribution of an annuity contract as the Participant or his
Beneficiary (as the case may be) may elect.
8.11.2 If the Participant elects an annuity contract, such
annuity contract shall provide monthly payments (a) if the Participant is
unmarried, for the life of the Participant or (b) if the Participant is married,
for the life of the Participant and, if the Participant's spouse is then living,
continuing for the life of the Participant's spouse at 50% of the monthly amount
payable during their joint lives unless the Participant otherwise elects in
accordance with Section 8.15.
8.12 Savings and Security Plan Accounts; WATS Marketing Plan. If a
Participant's Plan Accounts include amounts transferred from the Cincinnati Bell
Inc. Savings and Security Plan or the
22
<PAGE> 25
WATS Marketing of America, Inc. Incentive Savings Plan and if distribution of
the vested portion of his Plan Accounts is being made by reason of the
Participant's retirement or Total Disability, he may elect to have his Plan
Accounts distributed in up to 20 annual installments.
8.13 TMS Participants. If value of the vested portion of a TMS
Participant's Plan Accounts is at least $5,000, any distribution with respect to
his Plan Accounts shall be subject to the provisions of this Section 8.13. For
purposes of the Plan, TMS Participant means a Participant who had a TMS Account
under Article XXIA of NICE Computer Profit-Sharing Plan as of December 31, 1990.
8.13.1 Distribution of the vested portion of his Plan Accounts
shall be in one lump sum payment, the purchase and distribution of an annuity
contract as the Participant or his Beneficiary (as the case may be) may elect.
8.13.2 If the Participant elects an annuity contract, such
annuity contract shall provide monthly payments (a) if the Participant is
unmarried, for the life of the Participant or (b) if the Participant is married,
for the life of the Participant and, if the Participant's spouse is then living,
continuing for the life of the Participant's spouse at 50% of the monthly amount
payable during their joint lives unless the Participant otherwise elects in
accordance with Section 8.15.
8.14 Distribution Requirements. The provisions of this Section 8.14
shall apply to any distribution from a Participant's Plan Accounts and will have
precedence over any inconsistent provisions of the Plan.
8.14.1 All distributions required under this Section 8.14
shall be determined and made in accordance with the Proposed Regulations under
Section 401(a)(9) of the Code, including the minimum distribution incidental
benefit requirement of section 1.401(a)(9)-2 of the proposed regulations.
8.14.2 The entire vested interest of a Participant must be
distributed or begin to be distributed no later than the Participant's required
beginning date.
8.14.3 As of the first distribution calendar year,
distributions, if not made in a single-sum, may only be made over one of the
following periods (or a combination thereof):
(a) the life of the Participant,
(b) the life of the Participant and a designated
beneficiary,
(c) a period certain not extending beyond the life
expectancy of the participant, or
23
<PAGE> 26
(d) a period certain not extending beyond the joint
and last survivor expectancy of the Participant and a designated beneficiary.
8.14.4 If the Participant's vested interest is to be
distributed in other than single sum, the following minimum distribution rules
shall apply on or after the required beginning date:
(a) If a Participant's benefit is to be distributed
over (i) a period not extending beyond the life expectancy of the Participant or
the joint life and last survivor expectancy of the Participant and the
Participant's designated beneficiary or (ii) a period not extending beyond the
life expectancy of the designated beneficiary, the amount required to be
distributed for each calendar year, beginning with the distributions for the
first distribution calendar year, must at least equal the quotient obtained by
dividing the Participant's benefit by the applicable life expectancy.
(b) The amount to be distributed each year, beginning
with distributions for the first distribution calendar year, shall not be less
than the quotient obtained by dividing the Participant's benefit by the lesser
of (i) the applicable life expectancy or (ii) if the Participant's spouse is not
the designated beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of section 1.401(a)(9)-2 of the Proposed Regulations.
Distributions after the death of the Participant shall be distributed using the
applicable life expectancy in Section 8.14.4(a) above as the relevant divisor
without regard to proposed regulations section 1.401(a)(9)-2.
(c) The minimum distribution required for the
Participant's first distribution calendar year must be made on or before the
Participant's required beginning date. The minimum distribution for other
calendar years, including the minimum distribution for the distribution calendar
year in which the Participant's required beginning date occurs, must be made on
or before December 31 of that distribution calendar year.
(d) If the Participant's benefit is distributed in
the form of an annuity purchased from an insurance company, distributions
thereunder shall be made in accordance with the requirements of section
401(a)(9) of the Code and the proposed regulations thereunder.
8.14.5 If the Participant dies after distribution of his
interest begins, distribution of the Participant's entire vested interest shall
be completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death except to the extent that an election is
made to receive distributions in accordance with (a) or (b) below:
(a) if any portion of the Participant's interest is
payable to a designated beneficiary, distributions may be made over the life or
over a period certain not greater than the life expectancy of the designated
beneficiary commencing on or before December 31 of the calendar year immediately
following the calendar year in which the Participant died; and
24
<PAGE> 27
(b) if the designated beneficiary is the
Participant's surviving spouse, the date distributions are required to begin in
accordance with (a) above shall not be earlier than the later of (i) December 31
of the calendar year immediately following the calendar year in which the
Participant died and (ii) December 31 of the calendar year in which the
Participant would have attained age 70-1/2.
If the Participant has not made an election pursuant to this Section 8.14.5 by
the time of his or her death, the Participant's designated beneficiary must
elect the method of distribution no later than the earlier of (i) December 31 of
the calendar year in which distributions would be required to begin under this
section, or (ii) December 31 of the calendar year which contains he fifth
anniversary of the date of death of the Participant. If the Participant has no
designated beneficiary, or if the beneficiary does not elect a method of
distribution, distribution of the Participant's entire vested interest must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
8.14.6 For purposes of Section 8.14.5, if the surviving spouse
dies after the Participant, but before payments to such spouse begin, the
provisions of Section 8.14.5, with the exception of paragraph (b) therein, shall
be applied as if the surviving spouse were the Participant.
8.14.7 For purposes of Section 8.14.5, any amount paid to a
child of the Participant will be treated as if it had been paid to the surviving
spouse if the amount becomes payable to the surviving spouse when the child
reaches the age of majority.
8.14.8 For purposes of this Section 8.14.5, distribution of a
Participant's interest is considered to begin on the Participant's required
beginning date (or, if Section 8.14.6 above is applicable, the date distribution
is required to begin to the surviving spouse pursuant to Section 8.14.5). If
distribution in the form of an annuity irrevocably commences to the Participant
before the required beginning date, the distribution is considered to begin is
the date distribution actually commences.
8.14.9 For purposes of Section 8.14:
(a) "Applicable life expectancy" means the life
expectancy (or joint and last survivor expectancy) calculated using the attained
age of the Participant (or designated beneficiary) as of the Participant's (or
designated beneficiary's) birthday in the applicable calendar year reduced by
one for each calendar year which has elapsed since the date life expectancy was
first calculated. If life expectancy is being recalculated, the applicable life
expectancy shall be the life expectancy as so recalculated. The applicable
calendar year shall be the first distribution calendar year, and if life
expectancy is being recalculated such succeeding calendar year.
25
<PAGE> 28
(b) "Designated beneficiary" means the individual who
is designated as the Beneficiary under the Plan in accordance with section
401(a)(9) and the proposed regulations thereunder.
(c) "Distribution calendar year" means a calendar
year for which a minimum distribution is required. For distributions beginning
before the Participant's death, the first distribution calendar year is the
calendar year immediately preceding the calendar year which contains the
Participant's required beginning date. For distributions beginning after the
Participant's death, the first distribution calendar year is the calendar year
in which distributions are required to begin pursuant to Section 8.14.2.
(d) "Life expectancy" and "joint and last survivor
expectancy" are computed by use of the expected return multiples in Tables V and
VI of section 1.72-9 of the income tax regulations.
(e) "Participant's benefit" means:
(i) The account balance as of the last
valuation date in the calendar year immediately preceding the distribution
calendar year (valuation calendar year) increased by the amount of any
contributions or forfeitures allocated to the account balance as of dates in the
valuation calendar year after the valuation date and decreased by distributions
made in the valuation calendar year after the valuation date.
(ii) For purposes of paragraph (i) above, if
any portion of the minimum distribution for the first distribution calendar year
is made in the second distribution calendar year on or before the required
beginning date, the amount of the minimum distribution made in the second
distribution calendar year shall be treated as if it had been made in the
immediately preceding distribution calendar year.
(f) "Required beginning date" means the first day of
April of the calendar year following the calendar year in which the Participant
attains age 70-1/2.
8.15 Waiver Election. For purposes of Sections 8.11 and 8.13, , if a
Participant elects to have his Plan Accounts distributed in the form of an
annuity, not earlier than 90 days, but not later than 30 days, before the date
on which Participant's Plan Accounts are distributed, the Committee shall
provide the Participant a written explanation of the terms and conditions of the
annuities available under Section 8.11 or 8.11 (as the case may be), the
Participant's right to make, and the effect of, an election to waive such form
of annuity, the rights of the Participant's spouse regarding the waiver election
and the Participant's right to make, and the effect of, a revocation regarding
the waiver election. The Plan does not limit the number of times the Participant
may revoke a waiver of such form of annuity or make a new waiver during the
election period.
26
<PAGE> 29
8.15.1 A married Participant's waiver election is not valid
unless (a) the Participant's spouse (to whom the survivor annuity is payable
under Section 8.11 or 8.13, as the case may be), after the Participant has
received the written explanation described in this Section 8.15, has consented
in writing to the waiver election, the spouse's consent acknowledges the effect
of the election, and a notary public or a Plan representative witnesses the
spouse's consent, (b) the spouse consents to the alternate form of payment
designated by the Participant or to any change in that designated form of
payment, and (c) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary designation or
to any change in the Participant's Beneficiary designation. The spouse's consent
to a waiver of the qualified joint and survivor annuity is irrevocable, unless
the Participant revokes the waiver election. The spouse may execute a blanket
consent to any form of payment designation or to any Beneficiary designation
made by the Participant, if the spouse acknowledges the right to limit that
consent to a specific designation but, in writing, waives that right.
8.15.2 The Committee will accept as valid a waiver election
which does not satisfy the spousal consent requirements if the Committee
establishes the Participant does not have a spouse, the Committee is not able to
locate the Participant's spouse, the Participant is legally separated or has
been abandoned (within the meaning of State law) and the Participant has a court
order to that effect, or other circumstances exist under which the Secretary of
the Treasury will excuse the consent requirement. If the Participant's spouse is
legally incompetent to give consent, the spouse's legal guardian (even if the
guardian is the Participant) may give consent.
8.16 Direct Rollovers. Any Participant or Beneficiary who is entitled
to receive a distribution from the Plan in the form of an eligible rollover
distribution may elect to have part or all of such distribution paid directly to
an eligible retirement plan. Any election under this Section 8.16 shall be made
on forms furnished and in the manner prescribed by the Committee.
Notwithstanding the foregoing, the minimum amount which a Participant or
Beneficiary may elect to have paid to an eligible retirement plan is (a)
$200.00, if the entire eligible rollover distribution is being paid to the
eligible retirement plan or (b) $500.00, if less than the entire eligible
rollover distribution is being paid to the eligible retirement plan. For
purposes of this Section 8.16, "eligible rollover distribution" means any
distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities). For purposes of this Section 8.16, "eligible retirement plan" means
an individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b)
27
<PAGE> 30
of the Code, an annuity plan described in section 403(a) of the Code, or a
qualified trust described in section 401(a) of the Code, that accepts the
distributee's eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an eligible retirement
plan is an individual retirement account or individual retirement annuity.
8.17 Missing Participants. If a Participant or Beneficiary who is
entitled to receive a distribution under the Plan cannot be located within six
months, after such investigation as the Committee deems appropriate, the amount
otherwise distributable to such Participant or Beneficiary shall thereupon be
forfeited; provided that if such Participant or Beneficiary thereafter makes a
claim for the amount forfeited hereunder, the amount so forfeited (unadjusted
for any gains or losses occurring subsequent to the date of the forfeiture)
shall be restored to the Trust through additional Participating Company
contributions and paid to the Participant or Beneficiary.
SECTION 9
WITHDRAWALS DURING EMPLOYMENT; LOANS; TRANSFERS
9.1 Withdrawals After Normal Retirement Date. Subject to such rules as
the Committee may prescribe, a Participant who is an Employee may elect to
withdraw from his Plan Accounts, on or after his Normal Retirement Date, any
amount he may designate. No Participant may elect to make more than two
withdrawals in any Plan Year. All withdrawals shall be in cash.
9.2 Withdrawals Prior to Normal Retirement Date. Subject to such rules
as the Committee may prescribe, a Participant who is an Employee may elect to
make withdrawals from his Plan Accounts, prior to his Normal Retirement Date, in
accordance with the provisions of this Section 9.2.
9.2.1 A Participant whose Plan Accounts include amounts
attributable to rollover contributions described in section 402(c)(5), 403(a)(4)
or 408(d)(3) of the Code or voluntary post-tax contributions may elect to
withdraw any portion of such amounts.
9.2.2 A Participant whose Plan Accounts include amounts
attributable to salary deferral contributions under section 401(k) of the Code
may elect to withdraw any portion of such amounts (other than income earned on
such contributions after December 31, 1988); provided, however, that (a) he may
not elect to make a withdrawal under this Section 9.2.2 unless he demonstrates
to the satisfaction of the Committee that such withdrawal is necessary to
alleviate a Hardship, (b) he may not elect to withdraw more than the amount
needed to alleviate the Hardship. For purposes hereof, "Hardship" means an
immediate and heavy financial need of the Participant or his dependents because
of sickness, disability, or other financial emergency, but only to the extent
consistent with section 401(k) of the Code and any regulations issued by the
Secretary of the
28
<PAGE> 31
Treasury thereunder. The determination of whether a Participant has incurred a
"Hardship" shall be made on the basis of all relevant facts and circumstances. A
financial need shall not fail to qualify merely because it was reasonably
foreseeable or voluntarily incurred. A distribution for any of the following
needs shall be deemed to be made on account of Hardship: (a) medical expenses
described in section 213(d) of the Code incurred by the Participant, the
Participant's spouse or any dependent of the Participant (as defined in section
152 of the Code), (b) purchase (excluding mortgage payments) of a principal
residence of the Participant, (c) payment of tuition for the next twelve months
of post-secondary education for the Participant, his or her spouse, children or
dependents, and (d) the need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the Participant's
principal residence. In the event of a withdrawal from a Participant's Plan
Accounts under this Section 9.2.2, the Participant's elective contributions and
employee contributions (within the meaning of Treas. Reg. Section
1.401(k)-1(d)(2)(iii)) to the Plan and all other plans maintained by any
Affiliated Employer shall be suspended for 12 months after the withdrawal and
the Participant's elective contributions (within the meaning of Treas. Reg.
Section 1.401(k)-1(d)(2)(iii)) to this Plan and all other plans maintained by
any Affiliated Employer for the calendar year immediately following the calendar
year in which the withdrawal occurs may not exceed the applicable limit under
section 402(g) of the Code for the calendar year immediately following the
calendar year in which the withdrawal occurs less the amount of such elective
contributions for the calendar year in which the withdrawal occurs.
9.2.3 A Participant whose Plan Accounts include employer
matching contributions transferred from the Cincinnati Bell Inc. Retirement
Savings Plan or the Cincinnati Bell Inc. Savings and Security Plan may withdraw
any non-forfeitable portion of such contributions (and the earnings thereon).
9.2.4 No Participant may elect to make more than two
withdrawals in any Plan Year. All withdrawals shall be in cash.
9.3 Loans. Subject to the provisions of this Section 9.3 and to such
other uniform and nondiscriminatory rules as may be adopted by the Committee
(which rules are incorporated herein by reference), a Participant who is a party
in interest (within the meaning of section 3(14) of ERISA) may, with the consent
of the Committee, borrow from his Plan Accounts.
9.3.1 The minimum amount a Participant may borrow is $500. The
maximum amount a Participant may borrow is the lesser of: (a) 50% of the value
of the vested (nonforfeitable) portion of the Participant's Plan Accounts or (b)
$50,000 reduced by the highest outstanding balance of loans from the
Participant's Plan Accounts (and from any other qualified plan maintained by an
Affiliated Employer) during the one year period ending on the day before the
date the loan is made.
29
<PAGE> 32
9.3.2 No Participant may have more than two loans outstanding
at any time. No Participant may borrow from his Plan Accounts more than twice in
any Plan Year.
9.3.3 Each loan shall bear a reasonable rate of interest (as
determined by the Committee) and shall be secured by the loaned portion of the
Participant's Plan Accounts. The minimum term of any loan shall be one year and
the maximum term of any loan shall be five years (fifteen years in the case of
where the loan is used to acquire the Participant's principal residence). (For
the purpose of this Section 9.3.3, the term of the loan will commence with the
first day of the month in which the loan proceeds are paid to the Participant.)
Substantially equal amortization of the loan (with payments not less frequently
than monthly) shall be required.
9.3.4 Any amounts borrowed from a Plan Account shall be deemed
to be made pro rata from the various types of investments (other than loans) of
the Plan Account.
9.3.5 Loan principal and interest payments must be made
through payroll deductions, beginning with the first paycheck of the month
following the month in which the loan proceeds are paid to the Participant;
provided that the Participant may prepay the entire outstanding balance on a
loan at any time after six months. Loan principal and interest payments shall be
credited to the Plan Account from which the loan was made. To the extent that
the Participant directs the investment of the Plan Account from which the loan
was made, loan payments to such Plan Account shall be invested according to the
Participant's investment direction in effect at the time of payment.
9.3.6 If the Participant ceases to be an Employee for any
reason (including death), the remaining balance on each outstanding loan shall
become immediately due and payable and shall be satisfied through a distribution
from the Participant's Plan Accounts under Section 8. If the Participant's pay
is insufficient to cover the loan payments due for a period of three months or
if the Participant's payroll deductions for loan payments are reduced or
suspended for any reason, unless arrangements for manual payments (satisfactory
to the Committee) are made, the remaining balance on each outstanding loan shall
become immediately due and payable and shall be satisfied through a withdrawal
from the Participant's Plan Accounts under Section 9.1.
9.3.7 The Committee, in its discretion, may establish such
loan fees and prescribe such additional terms and conditions for loans as it
deems necessary or appropriate.
9.4 Transfer to Convergys Plan. If a Participant in this Plan becomes
eligible to make 401(k) contributions to the Convergys Plan ("Convergys Plan
Eligible") after January 1, 1999, he automatically shall become a Participant in
the Convergys Plan on the date he becomes Convergys Plan Eligible and the
amounts credited to his Plan Accounts automatically shall be transferred to the
corresponding accounts in the Convergys Plan. Thereafter, the amounts
transferred to the Convergys Plan shall be governed entirely by the terms of the
Convergys Plan. Until changed by
30
<PAGE> 33
the Participant in accordance with the terms of the Convergys Plan, any
beneficiary designation, investment direction and authorization for salary
deferral contributions in effect under this Plan shall continue in effect under
the Convergys Plan.
SECTION 10
TOP-HEAVY PROVISIONS
10.1 General. If the Plan is or becomes Top-Heavy in any Plan Year, the
provisions of this Section 10 will supersede any conflicting provisions in the
Plan.
10.2 Definitions. For purposes of this Section 10, the following terms
shall have the meanings hereinafter set forth unless the context otherwise
requires:
10.2.1 "Key Employee" means any Employee or former Employee
(and the beneficiaries of any such Employee) who at any time during the
Determination Period was an officer of an Affiliated Employer if such
individual's annual compensation exceeds 50% of the dollar limitation under
section 415(b)(1)(A) of the Code, an owner (or considered an owner under section
318 of the Code) of one of the ten largest interests in an Affiliated Employer
if such individual's compensation exceeds 100% of the dollar limitation under
section 415(c)(1)(A) of the Code, a 5-percent owner of an Affiliated Employer or
a 1-percent owner of an Affiliated Employer who has an annual compensation of
more than $150,000. The "Determination Period" is the Plan Year containing the
Determination Date and the four preceding Plan Years. The determination of who
is a Key Employee will be made in accordance with section 416(i)(1) of the Code
and the regulations thereunder. For purposes of this Section 10.2.1,
compensation from all Affiliated Employers shall be aggregated.
10.2.2 For any Plan Year, this Plan is "Top-Heavy" if any of
the following conditions exists:
(a) If the Top-Heavy Ratio for this Plan exceeds 60%
and this Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group of plans,
(b) If this Plan is a part of a Required Aggregation
Group of plans (but not part of a Permissive Aggregation Group) and the
Top-Heavy Ratio for the Required Aggregation Group of plans exceeds 60%, or
(c) If this Plan is a part of a Required Aggregation
Group and a Permissive Aggregation Group and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60%.
31
<PAGE> 34
10.2.3 If an Affiliated Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan) and an
Affiliated Employer has not maintained any defined benefit plan which during the
5-year period ending on the Determination Date(s) has or has had accrued
benefits, the Top-Heavy Ratio for this Plan alone or for the Required or
Permissive Aggregation Group, as appropriate is a fraction, the numerator of
which is the sum of the account balances of all Key Employees as of the
Determination Date(s) (including any part of any account balances distributed in
the 5-year period ending on the Determination Date(s)), and the denominator of
which is the sum of all account balances (including any part of any account
balance distributed in the 5-year period ending on the Determination Date(s)),
determined in accordance with section 416 of the Code and the regulations
thereunder. Both the numerator and the denominator of the Top-Heavy Ratio are
adjusted to reflect any contributions not actually made as of the Determination
Date, but which are required to be taken into account on that date under section
416 of the Code and the regulations thereunder.
10.2.4 If an Affiliated Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan) and an
Affiliated Employer maintains or has maintained one or more defined benefit
plans which during the 5-year period ending on the Determination Date(s) has or
has had any accrued benefits, the Top-Heavy Ratio for any Required or Permissive
Aggregation Group, as appropriate, is a fraction, the numerator of which is the
sum of account balances under the aggregate defined contribution plan or plans
for all Key Employees, determined in accordance with 10.2.3 above, and the
present value of accrued benefits under the aggregated defined benefit plan or
plans for all Key Employees as of the Determination Date(s), and the denominator
of which is the sum of the account balances under the aggregated defined
contribution plan or plans for all participants, determined in accordance with
10.2.3 above, and the present value of accrued benefits under the aggregated
defined benefit plan or plans for all participants as of the Determination
Date(s), all determined in accordance with section 416 of the Code and the
regulations thereunder. The accrued benefits under a defined benefit plan in
both the numerator and denominator of the Top-Heavy Ratio are adjusted for any
distribution of an accrued benefit made in the 5-year period ending on the
Determination Date.
10.2.5 For purposes of Sections 10.2.3 and 10.2.4, the value
of account balances and the present value of accrued benefits will be determined
as of the most recent Valuation Date that falls within or ends with the 12-month
period ending on the Determination Date, except as provided in section 416 of
the Code and the regulations thereunder for the first and second Plan Years of a
defined benefit plan. The account balances and accrued benefits of a Participant
(1) who is not a Key Employee but who was a Key Employee in a prior year, or (2)
who has not performed any services for any Affiliated Employer at any time
during the 5-year period ending on the Determination Date will be disregarded.
The calculation of the Top-Heavy Ratio, and the extent to which distributions,
rollovers, and transfers are taken into account, will be made in accordance with
section 416 of the Code and the regulations thereunder. Deductible employee
contributions will not
32
<PAGE> 35
be taken into account for purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of account balances and accrued benefits will be
calculated with reference to the Determination Dates that fall within the same
calendar year. Distributions made from a terminated plan during the 5-year
period ending on the Determination Date shall be taken into account for purposes
of Sections 10.2.3 and 10.2.4 if the terminated plan would have been required to
be included in an Aggregation Group if it had not been terminated.
10.2.6 "Permissive Aggregation Group" means the Required
Aggregation Group of plans plus any other plan or plans of any Affiliated
Employer which, when considered as a group with the Required Aggregation Group,
would continue to satisfy the requirements of sections 401(a)(4) and 410 of the
Code.
10.2.7 "Required Aggregation Group" means (1) each qualified
plan of any Affiliated Employer in which at least one Key Employee participates,
and (2) any other qualified plan of an Affiliated Employer which enables a plan
described in (1) to meet the requirements of section 401(a)(4) or 410 of the
Code.
10.2.8 "Determination Date" means (1) for any Plan Year
subsequent to the first Plan Year, the last day of the preceding Plan Year and
(2) for the first Plan Year of the Plan, the last day of that year.
10.2.9 "Valuation Date" means the last business day of each
Plan Year.
10.2.10 For purposes of establishing "Present Value" to
compute the Top-Heavy Ratio, any benefit shall be discounted only for mortality
and interest based on the following: (1) Interest Rate, 6%; (2) Mortality table,
the Unisex Pension Table for 1984.
10.3 Minimum Contributions. Notwithstanding any other provision in this
Plan except 10.3.2 below, for any Plan Year in which this Plan is Top-Heavy, the
Participating Company contributions (other than Salary Deferral Contributions)
and forfeitures allocated on behalf of any Participant who is not a Key Employee
but who is an Employee on the last day of such Plan Year shall not be less than
the lesser of 3% of such Participant's compensation as an Employee, or in the
case where the Participating Companies have no defined benefit plan which
designates this Plan to satisfy section 401 of the Code, the largest percentage
of Participating Employer contributions (including Salary Deferral
Contributions) and forfeitures, as a percentage of the first $200,000 (or such
greater amount as may be permitted under section 401(a)(17) of the Code) of the
Key Employee's compensation, allocated on behalf of any Key Employee for that
Year. The minimum allocation is determined without regard to any Social Security
contribution. This minimum allocation shall be made even though, under other
Plan provisions, the Participant would not otherwise be entitled to receive an
allocation, or would have received a lesser allocation for the year because of
(i) the Participant's failure to complete 1,000 hours of service (or any
equivalent
33
<PAGE> 36
provided in the Plan), or (ii) the Participant's failure to make mandatory
employee contributions to the Plan, or (iii) compensation less than a stated
amount.
10.3.1 For purposes of computing the minimum allocation,
"compensation" means Compensation within the meaning of that term as used in
Section 6.5.
10.3.2 For purposes of computing the minimum allocation,
Affiliated Employer contributions and forfeitures allocated under any other
defined contribution plan of an Affiliated Employer, in which any Key Employee
participates or which enables another defined contribution plan (in which a Key
Employee participates) to meet the requirements of section 401(a)(4) or 410 of
the Code, shall be considered contributions and forfeitures allocated under this
Plan. In the case of any non-Key Employee Participant who is also a participant
in any defined benefit plan of an Affiliated Employer which designates this Plan
to satisfy section 401 of the Code, the foregoing provisions of this Section
10.3 shall be applied, but with 7-1/2% substituted for 3%.
10.3.3 The minimum allocation required (to the extent required
to be nonforfeitable under section 416(b)) may not be suspended or forfeited
under sections 411(a)(3)(B) or 411(a)(3)(D) of the Code.
10.3.4 For purposes of this Section 10.3, the term
"Participant" shall include, with respect to any Plan Year, any Employee who is
an Eligible Employee (within the meaning of Section 6.9) with respect to such
Plan Year.
10.4 Minimum Vesting. Commencing on the first day of the first Plan
Year in which the Plan becomes Top-Heavy, with respect to any Participant who
performs at least one Hour of Service on or after such date, the Plan Accounts
of each such Participant who has been credited with at least two years of
Vesting Service shall be fully vested and nonforfeitable.
10.5 Adjustments to Section 415 Limitations. In any Plan Year in which
the Plan is Top-Heavy, the denominators of the defined benefit plan fraction and
defined contribution plan fraction in section 415 of the Code shall be computed
using 100% of the dollar limitation instead of 125%.
34
<PAGE> 37
SECTION 11
ADMINISTRATION OF THE PLAN
11.1 Employee Benefits Committee. The general administration of the
Plan and the responsibility for carrying out its provisions shall be placed in
the Convergys Employee Benefits Committee.
11.2 Service of Process. Unless another person has been appointed by
Convergys to serve as agent for receipt of legal process with respect to the
Plan, the Committee shall be the agent for receipt of legal process with respect
to the Plan.
11.3 Compensation of Committee. The members of the Committee shall not
receive compensation for their services as such, and except as required by law,
no bond or other security need be required of them in such capacity in any
jurisdiction.
11.4 Rules of Plan. Subject to the limitations of the Plan, the
Committee may, from time to time, establish rules for the administration of the
Plan and the transaction of its business. The Committee may correct errors,
however arising, and, as far as possible, adjust any benefit payments
accordingly. The determination of the Committee as to the interpretation of the
provisions of the Plan or any disputed question shall be conclusive upon all
interested parties.
11.5 Named Fiduciary. The Committee shall be a named fiduciary of the
Plan with respect to all matters entrusted to it under the terms of the Plan and
the Trust.
11.6 Agents and Employees. The Committee may authorize one or more
agents to execute or deliver any instrument. The Committee may appoint or employ
such agents, counsel (including counsel of any Affiliated Employer or the
Trustee), auditors (including auditors of any Affiliated Employer or the
Trustee), physicians, clerical help and actuaries as in its judgment may seem
reasonable or necessary for the proper administration of the Plan, and the
Committee may certify to the Trustee the expenses chargeable to the Trust for
such services.
11.7 Records. The Committee shall maintain accounts showing the fiscal
transactions of the Plan and shall keep, in convenient form, such data as may be
necessary for valuation of the assets and liabilities of the Plan. The Committee
shall prepare and submit annually to Convergys a report showing in reasonable
detail the assets and liabilities of the Plan, and giving a brief account of the
operation of the Plan for each Plan Year.
11.8 Delegation of Authority. The Committee may, by resolution,
delegate to any person or persons any or all of its rights and duties hereunder.
Any such delegation shall be valid and binding on all persons, and the person or
persons to whom authority has been delegated shall, upon
35
<PAGE> 38
written acceptance of such authority, have full power to act in all matters so
delegated until the authority expires by its terms or is revoked by the
Committee.
11.9 Benefit Claims. In the event that the Committee denies, in whole
or in part, any claim for benefits under the Plan, the Committee shall promptly
notify the claimant in writing of such denial, setting forth the specific
reasons for such denial, and afford the claimant a reasonable opportunity for a
full and fair review of his claim. The Committee shall establish rules and
procedures for reviewing claims which are consistent with this Section and with
any regulations issued by the Secretary of Labor under section 503 of ERISA, as
such section now exists or is hereafter amended or renumbered.
11.10 Eligibility. The members of the Committee shall not be precluded
from becoming Participants in the Plan if they are otherwise eligible.
11.11 Non-Discrimination. All determinations required of any Affiliated
Employer and the Committee hereunder shall be made in accordance with the
provisions hereof and in accordance with other standards and policies adopted by
the Affiliated Employer or the Committee, which standards and policies shall be
consistently observed and applied in a nondiscriminatory manner to all Employees
similarly situated.
11.12 Indemnification. Convergys shall indemnify each member of the
Committee for all expenses and liabilities (including reasonable attorney's
fees) arising out of the administration of the Plan, other than any expenses or
liabilities resulting from the member's own gross negligence or willful
misconduct. The foregoing right of indemnification shall be in addition to any
other rights to which the members of the Committee may be entitled as a matter
of law.
SECTION 12
MANAGEMENT OF ASSETS
All assets of the Plan shall be held in the Trust for the exclusive
benefit of the Participants and their Beneficiaries. Except as to the costs and
expenses of the Plan and Trust not otherwise provided for and except as
otherwise provided herein, in no event shall it be possible for any of the
assets of the Plan to be used for, or diverted to purposes other than for the
exclusive benefit of the Participants and their Beneficiaries. No person shall
have any interest in or right to any part of the assets of the Plan, except as
and to the extent provided in the Plan and the Trust.
36
<PAGE> 39
SECTION 13
AMENDMENT AND TERMINATION
13.1 Amendment. Convergys reserves the right to amend the Plan either
retroactively or prospectively, conditionally or absolutely; provided that
Convergys shall have no right to amend the Plan in such manner as would cause or
permit any part of the assets of the Trust to be used for or diverted to
purposes other than for the exclusive benefit of the Participants and their
Beneficiaries; provided, further, that no amendment may be adopted changing any
vesting schedule unless the nonforfeitable percentage of each Participant's Plan
Accounts (determined as of the later of the date such amendment is adopted or
the date such amendment becomes effective) is equal to or greater than such
nonforfeitable percentage computed without regard to such amendment. If an
amendment is adopted which changes any vesting schedule under the Plan, each
Participant who has been credited with three years of service may elect to have
his nonforfeitable percentage computed under the Plan without regard to such
amendment. The period during which such election may be made shall begin on the
date the amendment is adopted and shall end on the latest of: (a) the 60th day
after the day the amendment is adopted; (b) the 60th day after the day the
amendment becomes effective; or (c) the 60th day after the day the Participant
is issued written notice of the amendment. No amendment shall eliminate an
optional form of distribution.
13.2 Termination. Convergys reserves the right to terminate the Plan,
in whole or in part, either retroactively or prospectively, conditionally or
absolutely. In the event of the termination or partial termination of the Plan
or the permanent discontinuance of Company contributions to the Plan, the Plan
Accounts of all affected Participants shall be fully vested and nonforfeitable.
To the extent permitted by law, if the Plan is terminated, each Participant's
Plan Accounts shall be distributed to him or his Beneficiary, as the case may
be, as soon as practicable thereafter.
SECTION 14
MERGERS AND CONSOLIDATIONS
Notwithstanding any other provision hereof to the contrary, in no event
shall the Plan be merged or consolidated with any other plan, nor shall any of
the assets or liabilities of the Plan be transferred to any other plan, unless
each Participant and Beneficiary would (if the transferee or surviving plan then
terminated) receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he would have been
entitled to receive immediately before the merger, consolidation or transfer (if
the Plan had then terminated).
37
<PAGE> 40
SECTION 15
NON-ALIENATION OF BENEFITS
No benefit payable under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, nor shall any such benefit be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the person entitled to
such benefit.
SECTION 16
MISCELLANEOUS
16.1 Delegation. Any matter or thing to be done by any Affiliated
Employer shall be done by its Board of Directors, except that, from time to
time, the Board by resolution may delegate to any person or committee certain of
its rights and duties hereunder. Any such delegation shall be valid and binding
on all persons and the person or committee to whom or which authority is
delegated shall have full power to act in all matters so delegated until the
authority expires by its terms or is revoked by the Board.
16.2 Administrator and Plan Sponsor. Convergys shall be the
"administrator" and "plan sponsor" of the Plan within the meaning of those terms
as used in ERISA.
16.3 Applicable Law. The Plan shall be governed by the laws of the
State of Ohio and applicable federal law.
16.4 Severability of Provisions. If any provision of the Plan is held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereof, and the Plan shall be construed and enforced as if
such provision had not been included.
16.5 Headings. Headings used throughout the Plan are for convenience
only and shall not be given legal significance.
16.6 Counterparts. The Plan may be executed in any number of
counterparts, each of which shall be deemed an original. All counterparts shall
constitute one and the same instrument, which shall be sufficiently evidenced by
any one thereof.
38
<PAGE> 41
IN WITNESS WHEREOF, Convergys Corporation and Convergys Customer
Management Group Inc. have hereunto caused their names to be subscribed as of
January 1, 1999.
CONVERGYS CORPORATION
By: /s/ Thomas A. Cruz
----------------------------
CONVERGYS CUSTOMER
MANAGEMENT GROUP INC.
By: /s/ Robert T. Enos
----------------------------
39
<PAGE> 1
Exhibit 4.5
[CONVERGYS LOGO]
EMPLOYEE STOCK
PURCHASE PLAN
Q&A
ANSWERS TO COMMONLY
ASKED QUESTIONS
December 1998
This document constitutes part of a prospectus covering
securities that have been registered under the
Securities Act of 1933.
<PAGE> 2
EMPLOYEE STOCK PURCHASE PLAN
WHAT IS THE PURPOSE OF THE PLAN?
The purpose of the Convergys Corporation Employee Stock Purchase Plan
(the "Plan") is to allow eligible employees of Convergys Corporation
("Convergys") and its subsidiaries to purchase Convergys common shares through
payroll deductions and participate in the potential future growth and
profitability of Convergys.
WHO IS ELIGIBLE TO PARTICIPATE?
Generally, all employees of Convergys and its subsidiaries who have
reached the age of majority for the state in which they reside are eligible to
participate. The Plan is not available to employees residing outside the United
States.
WHO ADMINISTERS THE PLAN?
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
administers the Plan for participants, keeps records, sends quarterly account
statements to you, and performs other administrative duties related to the Plan.
HOW DOES THE PLAN WORK?
You decide on the percentage of pay you would like to invest each pay
period, from a minimum of 1% to a maximum of 20%. Your employer regularly
deducts those funds from your paycheck. Your pay, for the purposes of this Plan,
is your pay before 401(k) contributions, deferred compensation and other
deductions. That amount is combined with all the dollars deducted from the
checks of other employees who participate in the Plan -- plus the 5% matching
contributions from the participating employers. These funds are then used to buy
shares of Convergys on a monthly basis.
When you enroll in the Plan, you authorize Merrill Lynch to open and
maintain an individual securities account for you, which is subject to the terms
and conditions shown on your enrollment form. Convergys shares will be purchased
for you and credited to your account on a monthly basis. This account is under
your control, and there are no restrictions on the retention or sale of shares
once they are credited to your account.
If you subsequently sell shares, you pay any fees for the sale and for
any additional purchases you make beyond the scope of the Plan. (See "Can I buy
additional Convergys shares through the Plan?")
WHAT ARE THE ADVANTAGES OF THE PLAN?
Purchasing shares of Convergys through this Plan ensures that 100% of
your money goes to work for you, because you pay no commissions or fees.
1
<PAGE> 3
You'll find that the Plan is convenient and encourages regular
investment. Setting aside a specific amount of money every pay period is one of
the easiest ways to build your portfolio. You save regularly, because you pay
yourself first. Simply choose the percentage of pay you want to invest, and the
rest is automatic.
The Plan also offers an affordable way to invest. Your employer will
participate with you in share purchases by contributing 5% of your investment
pay election. You don't commit to buy a specific number of shares each pay
period. Just select the percentage of your pay that you want to invest.
Though no investment program is free of risk, this Plan can help
cushion you from market fluctuations through a long-term investment technique
known as dollar-cost averaging. By placing a fixed sum regularly in the same
investment, you buy more shares when the price falls and fewer shares when the
price rises. Over time, your average cost per share generally is less than if
you bought a fixed number of shares each time. However, dollar cost averaging
does not protect your investment in a falling stock market, and its does not
guarantee that your investment will be profitable.
Finally, you always have easy access to your account. You may sell all
or any part of your Convergys shares quickly and conveniently by calling a
special toll-free telephone number.
HOW ARE SHARES PURCHASED?
Shares for the Plan may be purchased:
1. Directly from Convergys; or
2. Through market transactions. These include transactions on
securities exchanges where Convergys common shares are traded,
transactions in over-the-counter markets, and negotiated
transactions -- as well as transactions with
Convergys-sponsored employee benefit trusts.
WHAT WILL BE THE PRICE OF SHARES PURCHASED FOR THE PLAN?
The price of shares purchased from Convergys will be the average of the
daily high and low sale prices for the shares (as reported in the listings of
the New York Stock Exchange Composite Transactions) for the last five days on
which the shares were traded and ending on the actual investment date.
The price of shares purchased in market transactions will be the
average price paid by Merrill Lynch or other independent agent.
HOW OFTEN WILL SHARES BY PURCHASED UNDER THE PLAN?
If shares are purchased from Convergys, the purchased will be made on
the 15th of each month (or the first business day after the 15th).
2
<PAGE> 4
If shares are purchased in market transactions, Merrill Lynch or
another independent purchasing agent will be obligated to invest promptly. For
payroll deduction funds and your employer's 5% contributions, this will occur on
or about the 15th of each month. For dividends (see "Will I Receive the Benefits
of Dividend Reinvestment?"), it will occur on or about the dividend payment
date.
HOW MANY SHARES CAN I PURCHASE THROUGH THE PLAN?
Merrill Lynch will credit your account every month with as many whole
and fractional shares as your deductions plus your employer's contributions will
permit. If your payroll deductions are $100 each month, your employer's
contribution is $5.00, and shares cost $19.50 a share, you will purchase 5.3846
shares that month.
WILL CERTIFICATES BE ISSUED FOR CONVERGYS SHARES PURCHASES?
Convergys shares purchased under the Plan will be registered in the
name of Merrill Lynch (or its nominee) as agent, and certificates will not be
issued to you unless you ask.
Certificates for any number of whole shares credited to your account
will be issued upon your request. This request should be directed to Merrill
Lynch. Any remaining whole shares and fraction of a share will continue to be
credited to your account. Shares credited to your account may not be pledged. If
you wish to pledge these shares, you must request that certificates for such
shares be issued in your name. Certificates for fractions of shares will not be
issued.
WILL I RECEIVE THE BENEFITS OF DIVIDEND REINVESTMENT?
Although Convergys does not anticipate paying cash dividends, your
account would be credited with any dividends paid on the shares credited to your
account, and those dividends would be automatically reinvested in additional
Convergys shares. Your employer would pay all transaction fees, but would not
make a 5% matching contribution for dividend payments.
If you elect to hold share certificates in your own name, any dividends
would be paid directly to you and would not be reinvested.
CAN I BUY ADDITIONAL CONVERGYS SHARES THROUGH THE PLAN?
Yes. As a Plan participant, you have a brokerage account with Merrill
Lynch and you may purchase Convergys shares in addition to those purchased
through payroll deductions. Your employer will not contribute a 5% match for
these additional shares or pay the transaction fees. However, as a Plan
participant, these fees are discounted from Merrill Lynch rates.
Your order for additional Convergys shares is executed by Merrill Lynch
on the first business day following acceptance of your order, or as soon as
possible thereafter. Shares purchased in the open market may occur over a period
of time, and your price will be the average price of all shares purchased over
that period.
3
<PAGE> 5
HOW DO I CHANGE THE AMOUNT OF MY PAYROLL DEDUCTION?
By completing a new enrollment form, you can increase or decrease
deductions -- or discontinue deductions entirely. Requests for change will take
effect as soon as possible.
If you notify your employer to discontinue deductions, of if you cease
to be employed by a Convergys company, or if you cease to be employed by a
Convergys company that offers the Plan, or if the Plan is discontinued by your
employer (see "May the Plan be changed or discontinued?"), your account with
Merrill Lynch will remain open until you choose to close it. You can continue to
buy and sell any securities through your account, but different transaction fees
and an annual account fee may apply.
If you want to close your account, Merrill Lynch will sell your
holdings and send you a check for the net proceeds, or deliver stock
certificates for whole shares and a check for the net cash value of any
fractional share. You pay all transaction fees.
WHAT TRANSACTION RECORDS WILL I RECEIVE?
Shortly after the end of every quarter you will receive a summary
investment statement from Merrill Lynch showing:
1. Current market value of your holdings on the last day of the
quarter;
2. All account activity for the quarter, including whole and
fractional shares and the price of each purchase, sale, or
dividend;
3. A special fourth-quarter statement with an end-of-year
summary;
4. A tax-reporting statement every January for use in preparing
your income tax returns.
HOW DO I BENEFIT FROM HAVING MERRILL LYNCH HOLD MY SHARES?
o Merrill Lynch calculates all transaction activity and prepares
quarterly reports for you. Since Merrill Lynch retains your
share certificates, you avoid the cost or effort of storing
certificates or replacing missing certificates.
o Any dividends are automatically reinvested.
o You enjoy the convenience of selling your shares without
having to retrieve your share certificates.
o You can transfer any securities certificates into your Merrill
Lynch account at no cost; there is a $15 fee for removing
certificates from your account.
4
<PAGE> 6
SHOULD I KEEP MY QUARTERLY STATEMENTS?
Yes. It is important for you to keep your quarterly statements. For tax
purposes, you must know the price you paid and the price for which you sold your
shares. These statements are the only records of purchase or sale prices of your
shares. Your employer will not have this information.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES, UNDER PRESENT LAW, FOR PLAN
PARTICIPANTS?
The tax consequences under present law are as follows:
1. The 5% employer contribution is considered to be imputed
income and your paycheck will reflect it as such;
2. You will be subject to taxes on any reinvested dividends
credited to your account under the Plan;
3. Your tax basis of Convergys common shares that are purchased
with payroll deductions and your employer's 5% contribution
will be equal to the purchase price of those shares;
4. Your tax basis of Convergys common shares that are purchased
with any dividends will be equal to the amount of the
dividend;
5. Your holding period for tax purposes will begin on the day
after the investment date;
6. You will not realize any taxable gain if you elect to receive
certificates for whole shares from your account;
7. You will realize a gain or loss if you sell or exchange shares
of Convergys, whether you terminate participation in the Plan
or after you receive the shares, including cash adjustments
for a fraction of a share. The gain or loss will be the
difference between what you receive for the shares (or a
fraction of a share) and the tax basis of those shares.
The foregoing opinions are not intended to cover all tax aspects of
your participation in the Plan. The tax consequences outlined above are subject
to change by legislation, administrative action, and judicial decisions, and do
not deal with variations of state and local taxation. You should consult an
attorney or tax advisor regarding the tax effects of your participation in the
Plan.
HOW WILL MY SHARES BE VOTED?
Any Convergys shares held for you in the Plan will be voted as you
direct. You will receive a single proxy covering all Convergys shares credited
to your account under the Plan.
5
<PAGE> 7
MAY THE PLAN BE CHANGED OR DISCONTINUED?
Convergys reserves the right to suspend, modify, or terminate the Plan
at any time. All participants will receive notice of any such suspension,
modification, or termination.
WHAT PROTECTION DOES MERRILL LYNCH PROVIDE?
Cash and securities held by Merrill Lynch for your account are
protected through its membership in the Securities Investor Protection
Corporation for up to $500,000 ($100,000 for cash balances). Merrill Lynch
carries additional protection that brings total coverage for cash and securities
to $2.5 million ($100,000 for cash balances).
HOW DO I CONTACT MERRILL LYNCH FOR ACCOUNT INFORMATION?
Call the special toll-free telephone number: (800) 621-3777 or write to
Merrill Lynch at:
Merrill Lynch Group Employee Services
P.O. Box 173779
Denver, CO 80235
Attn: CMSS
CAN I ACCESS MY ACCOUNT ELECTRONICALLY?
Yes. When you join the Plan, Merrill Lynch will send you a five-digit
Personal Identification Number (PIN). Whenever you call the toll-free telephone
number, just enter your Social Security number and your PIN and follow the voice
instructions to obtain up-to-date account information.
You will also receive an instruction guide and wallet-size reference
card to assist you whenever you call.
WHAT SERVICES ARE AVAILABLE THROUGH THE TOLL-FREE NUMBER?
Using a touch-tone telephone, you can conveniently obtain your account
balance, receive company stock price quotes, execute sale riders, or change your
PIN. All these features can be executed 24 hours a day, every day.
To place buy or sell orders for securities, or to obtain additional
information, you can talk directly with a Merrill Lynch customer service
representative Mondays through Fridays from 8:00 a.m. to 7:00 p.m., Eastern
Standard Time.
6
<PAGE> 1
Exhibit 4.6
CONVERGYS CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 2
TABLE OF CONTENTS
SECTION 1 NAME AND PURPOSE OF PLAN...........................................1
SECTION 2 GENERAL DEFINITIONS; GENDER AND NUMBER.............................1
SECTION 3 DEFERRALS; COMPANY MATCH...........................................2
SECTION 4 MAINTENANCE AND VALUATION OF ACCOUNTS..............................4
SECTION 5 DISTRIBUTION.......................................................6
SECTION 6 ADMINISTRATION OF THE PLAN.........................................8
SECTION 7 FUNDING OBLIGATION.................................................9
SECTION 8 AMENDMENT AND TERMINATION.........................................10
SECTION 9 NON-ALIENATION OF BENEFITS........................................10
SECTION 10 MISCELLANEOUS.....................................................10
<PAGE> 3
CONVERGYS CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
SECTION 1
NAME AND PURPOSE OF PLAN
1.1 Name. The plan set forth herein shall be known as the Convergys
Corporation Executive Deferred Compensation Plan (the "Plan").
1.2 Purpose. The purpose of the Plan is to provide deferred
compensation for a select group of officers and highly compensated employees of
Convergys Corporation ("Convergys") and its affiliates.
1.3 Effective Date. The Plan shall be effective on January 1, 1999 (the
"Effective Date).
1.4 Predecessor Plans. The Plan is intended to amend and supersede the
MATRIXX Marketing Inc. Executive Deferred Compensation Plan (the "MATRIXX Plan")
as of the Effective Date. The Plan also is intended to assume and discharge all
of the obligations of Cincinnati Bell Inc. ("CBI") and its affiliates under
CBI's Executive Deferred Compensation Plan (the "CBI Plan") with respect to
those employees of Convergys and its affiliates who were participating in the
CBI Plan immediately prior to the Effective Date.
SECTION 2
GENERAL DEFINITIONS; GENDER AND NUMBER
2.1 General Definitions. For purposes of the Plan, the following terms
shall have the meanings hereinafter set forth unless the context otherwise
requires:
2.1.1 "Accounts" means, collectively, all outstanding Cash
Deferral Accounts, Restricted Stock Accounts and Company Matching Accounts
maintained for a Key Employee.
2.1.2 "Beneficiary" means the person or entity designated by a
Key Employee, on forms furnished and in the manner prescribed by the Committee,
to receive any benefit payable under the Plan after the Key Employee's death. If
a Key Employee
1
<PAGE> 4
fails to designate a beneficiary or if, for any reason, such designation is not
effective, his "Beneficiary" shall be his surviving spouse or, if none, his
estate.
2.1.3 "Convergys Shares" means common shares of Convergys
Corporation.
2.1.4 "Convergys Entity" means Convergys and each corporation
which is a member of a controlled group of corporations (within the meaning of
section 414(b) of the Code, as modified by section 415(h) of the Code) which
includes Convergys.
2.1.5 "Code" means the Internal Revenue Code of 1986 as such
Code now exists or is hereafter amended.
2.1.6 "Committee" means Convergys Employee Benefits Committee.
2.1.7 "Employee" means any person who is an employee of a
Convergys Entity.
2.1.8 "Key Employee" means, with respect to any calendar year,
an Employee who has been designated by the Committee as a "Key Employee" for
such calendar year.
2.2 Gender and Number. For purposes of the Plan, words used in any
gender shall include all other genders, words used in the singular form shall
include the plural form, and words used in the plural form shall include the
singular form, as the context may require.
SECTION 3
DEFERRALS; COMPANY MATCH
3.1 Election of Deferrals.
3.1.1 Subject to such rules as the Committee may prescribe, a
Key Employee may elect to defer up to 75% of his Basic Salary for any calendar
year by completing a deferral form and filing such form with the Committee prior
to January 1 of such calendar year (or such earlier date as may be prescribed by
the Committee). Notwithstanding the foregoing, if an Employee first becomes a
Key Employee after the first day of a calendar year, such Key Employee may elect
to defer a permissible percentage of his Basic Salary for the remainder of the
calendar year by completing and signing a deferral form provided by the
Committee and filing such form with the Committee within 30 days of the date
which he first becomes a Key Employee. Any election under the preceding sentence
shall be effective as of the first payroll period
2
<PAGE> 5
beginning after the date the election is filed. For purposes of the Plan, "Basic
Salary" means the basic salary payable to a Key Employee by a Convergys Entity.
3.1.2 Subject to such rules as the Committee may prescribe, a
Key Employee may elect to defer up to 100% or a specific dollar amount (not less
than $1,000) of any Cash Award otherwise payable during the calendar year by
completing a deferral form and filing such form with the Committee prior to
January 1 of such calendar year (or such earlier date as may be prescribed by
the Committee). For purposes of the Plan, "Cash Award" means an award or bonus
payable in cash to a Key Employee by a Convergys Entity.
3.1.3 Subject to such rules as the Committee may prescribe, a
Key Employee who has received a Restricted Stock Award may elect to surrender
any of the restricted Convergys Shares as of any date permitted by the Committee
(not later than six months prior to the date on which the restrictions otherwise
applicable to such shares would lapse). For purposes of the Plan, "Restricted
Stock Award" means an award of Convergys Shares under the Convergys 1998 Long
Term Incentive Plan (the "1998 LTIP") which is in the form of restricted stock.
3.2 Changing Deferrals. Subject to such rules as the Committee may
prescribe, a Key Employee who has elected to defer a portion of his Basic Salary
or Cash Awards may change the amount of his deferral from one permissible amount
to another, effective as of any January 1, by completing and signing a new
deferral form and filing such form with the Committee prior to such January 1
(or such earlier date as may be prescribed by the Committee).
3.3 Suspending Deferrals.
3.3.1 Subject to such rules as the Committee may prescribe, a
Key Employee who has elected to defer a portion of his Basic Salary may suspend
such election, as of the first day of any payroll period, by completing and
signing a form provided by the Committee and filing such form with the Committee
prior to the first day of such payroll period. A Key Employee who has suspended
his election for deferrals in accordance with this Section 3.3.1 may again elect
to defer a portion of his Basic Salary, effective as of any January 1 following
the six month period beginning on the effective date of the suspension, by
completing and signing a new deferral form and filing such form with the
Committee prior to such January 1 (or such earlier date as may be prescribed by
the Committee).
3.3.2 A Key Employee's election to defer a portion of a Cash
Award or Share Award or to surrender any portion of a Restricted Stock Award may
not be revoked during the calendar year.
3.4 Company Match. As of each day on which Basic Salary or Cash Award
deferrals are credited, under Section 4.1, to the Cash Deferral Account of a Key
3
<PAGE> 6
Employee ("Deferral Date"), there shall also be credited to such Key Employee's
Company Matching Account under Section 4.3, an amount equal to the result
obtained (not less than zero) by subtracting the Maximum 401(m) Match from the
lesser of (a) 4% of the Key Employee's Total Compensation or (b) 66-2/3% of the
amount of Basic Salary and Cash Awards deferred by the Key Employee on the
Deferral Date. For purposes of the preceding sentence, "Total Compensation"
means the Total Base Salary and Cash Awards paid to the Key Employee on a
Deferral Date or which would have been paid to the Key Employee on the Deferral
Date if he had not elected to defer under Section 3.1 and if he had not
participated in a 401(k) plan or cafeteria plan and "Maximum 401(m) Match" means
the maximum Convergys Entity match which would have been made for the Key
Employee on the Deferral Date under the Convergys Corporation Retirement and
Savings Plan (the "RSP") if the Key Employee had elected to make the maximum
401(k) contributions permitted under the terms of the RSP and had not deferred
any amounts under this Plan. For purposes of this Section 3.4 only, the term
"Cash Award" shall not include an award payable under the 1998 LTIP or any other
long term incentive plan.
SECTION 4
MAINTENANCE AND VALUATION OF ACCOUNTS
4.1 Cash Deferral Accounts. There shall be established for each Key
Employee who has elected to defer a portion of his Basic Salary or Cash Award
under Section 3.1.1 or 3.1.2 a separate Account, called a Cash Deferral Account,
which shall reflect the amounts deferred by the Key Employee and the assumed
investment thereof. Subject to such rules as the Committee may prescribe, any
amount deferred by a Key Employee under Section 3.1.1 or 3.1.2 shall be credited
to the Key Employee's Cash Deferral Account as of the day on which such deferred
amount would have otherwise been paid to the Key Employee and shall be assumed
to have been invested in the investments designated by the Key Employee on a
form provided by and filed with the Committee.
4.2 Restricted Stock Accounts. There shall be established for each Key
Employee who has elected to surrender all or a portion of a Restricted Stock
Award under Section 3.1.3 a separate Account, called a Restricted Stock Account,
which shall reflect the value of the Convergys Shares surrendered by the Key
Employee under Section 3.1.3 and the assumed investment thereof. Subject to such
rules as the Committee may prescribe, an amount equal to the value of the
Convergys Shares surrendered by the Key Employee under Section 3.1.3 shall be
credited to the Key Employee's Restricted Stock Account as of the day on which
the Convergys Shares are surrendered to Convergys. Amounts credited to the Key
Employee's Restricted Stock Account shall be assumed to have been invested
exclusively in Convergys Shares until six months after the Applicable Lapse Date
for the surrendered Convergys Shares. Thereafter, such amounts shall be assumed
to have been invested in the investments designated by the Key Employee on a
4
<PAGE> 7
form provided by and filed with the Committee. For purposes of the Plan,
"Applicable Lapse Date" means, with respect to any Restricted Stock Award, the
date on which the restrictions would have lapsed if the restricted Convergys
Shares had not been surrendered.
4.3 Company Matching Accounts. There shall be established for each Key
Employee who is entitled to a match under Section 3.4 a separate Account called
a Company Matching Account, which shall reflect the match to be credited on
behalf of the Key Employee under Section 3.4 and the assumed investment thereof.
The amount of the match shall be credited to the Key Employee's Company Matching
Account as of the day on which the deferred Basic Salary or Cash Award to which
the match relates would have otherwise been paid to the Key Employee. Amounts
credited to the Key Employee's Company Matching Account shall be assumed to have
been invested in the investments designated by the Key Employee on a form
provided by and filed with the Committee.
4.4 Valuation. As soon as practical following the end of each calendar
year, and as of such other date as the Committee may prescribe, each Key
Employee or, in the event of his death, his Beneficiary, shall be furnished a
statement as of December 31 showing the balance of the Key Employee's Accounts,
the total credits to such Accounts during the preceding calendar year, and, if
amounts credited to any such Accounts are assumed to have been invested in
securities, a description of such securities including the number of shares
assumed to have been purchased by the amounts credited to such Accounts.
4.5 Predecessor Plan Accounts. In the case of a Key Employee who had
one or more Accounts under the MATRIXX Plan or the CBI Plan (the "Predecessor
Plans") immediately prior to the Effective Date, the balance credited to each
such Account shall be transferred to the corresponding Account (Cash Deferral,
Restricted Stock or Company Matching) in this Plan as of the Effective Date.
From and after such transfer, the Key Employee shall cease to have any further
rights under any Predecessor Plan. To the extent that a Predecessor Plan Account
was assumed to have been invested in common shares of CBI ("CBI Shares")
immediately prior to the Effective Date, the Key Employee's Accounts in this
Plan shall be credited with one Convergys Share and one CBI Share (adjusted in
value to reflect the Convergys Shares distributed to CBI's shareholders on the
Effective Date) for each CBI Share credited to his Predecessor Plan Accounts
immediately prior to the Effective Date and in the case of CBI Shares credited
to a Restricted Stock Account under this Plan, references to "Convergys Shares"
in Sections 4.2 and 5.2.4 shall include such CBI Shares.
4.6 Convergys Shares. To the extent Key Employee's Accounts are assumed
to have been invested in Convergys Shares:
4.6.1. Whenever any cash dividends are paid with respect to
Convergys Shares, additional amounts shall be credited to the Key Employee's
Accounts as of the dividend payment date. The additional amount to be credited
to each account shall be
5
<PAGE> 8
determined by multiplying the per share cash dividend paid with respect to the
Convergys Shares on the dividend payment date by the number of assumed Convergys
Shares credited to the Key Employee's Accounts on the day preceding the dividend
payment date. Such additional amount credited to the Key Employee's Account
shall be assumed to have been invested in additional Convergys Shares on the day
on which such dividends are paid.
4.6.2. If there is any change in Convergys Shares through the
declaration of a stock dividend or a stock split or through a recapitalization
resulting in a stock split, or a combination or a change in shares, the number
of shares assumed to have been purchased for each Account shall be appropriately
adjusted.
4.6.3 Whenever Convergys Shares are to be valued for purposes
of the Plan, the value of each such share shall be the average of the high and
low price per share as reported on the New York Stock Exchange on the last
business day preceding the date as of which the distribution is made or, if no
sales were made on that date, on the next preceding day on which sales were
made.
SECTION 5
DISTRIBUTION
5.1 General. Except as otherwise provided in Section 5.5, no amount
shall be paid with respect to a Key Employee's Accounts while he remains an
Employee. Unless the Committee otherwise provides, all payments with respect to
a Key Employee's Accounts shall be made by the Convergys Entity which otherwise
would have paid the Basic Salary, Cash Award or Restricted Stock Award deferred
by the Key Employee.
5.2 Termination of Employment. A Key Employee may elect to receive the
amounts credited to his Accounts in up to ten annual installment payments,
commencing on the first business day of March of the calendar year following the
calendar year in which he ceases to be an Employee. If a Key Employee fails to
make such election, the amounts credited to the Key Employee's Account shall be
paid to the Key Employee in two annual installments with the first installment
being made on the first business day of March of the calendar year following the
calendar year in which the Key Employee ceases to be an Employee.
5.2.1. The amount of each annual installment payable under
this Section 5.2 shall be, at the election of the Key Employee, either (1) a
specific dollar amount specified by the Key Employee (not less than $50,000), or
(2) a fraction of the amounts credited to the Key Employee's Accounts as of the
installment payment date, the numerator of which is 1 and the denominator of
which is equal to the total number of
6
<PAGE> 9
installments remaining to be paid (including the installment to be paid on the
subject installment payment date). If a Key Employee elects (2) above and the
amount of any annual installment is less than $50,000, it shall be increased to
$50,000, as the case may be; provided that if the remaining amount credited to
the Accounts on any annual installment date is less than $50,000, the payment
shall be the amount necessary to reduce the amount credited to the Account to
$0.
5.2.2. Any election under this Section 5.2 must be made within
the time prescribed by the Key Employee's Company but in no event later than six
months prior to the effective date of the Key Employee's termination. With the
consent of the Committee, and subject to such rules as the Committee may
prescribe, a Key Employee may elect (a) to receive the amounts credited to his
Accounts in up to 120 monthly installments and (b) to accelerate the time at
which any payment may be made (to a date not earlier than the date on which he
ceases to be an Employee).
5.2.3. In its discretion, the Committee may condition the
right to receive payments with respect to a portion of all of a Key Employee's
Company Matching Account on the Key Employee's completing a minimum period of
service prior to the date on which he ceases to be an Employee. To the extent
that a Key Employee has not satisfied any applicable service requirements prior
to the date on which he ceases to be an Employee (other than by reason of his
death), he shall not be entitled to receive any payment with respect to his
Company Matching Account.
5.2.4. In the case of a Restricted Stock Account, amounts
credited to such Account under Section 4.3 shall be subject to forfeiture at the
same time and to the same extent that the Convergys Shares surrendered would
have been if such Convergys Shares had not been surrendered. The provisions of
this Section 5.2.4 shall not apply to amounts credited to the Restricted Stock
Account under Section 4.5.1 or 4.5.2.
5.3 Death. Except as provided in Section 5.2.4, if a Key Employee
ceases to be a Employee by reason of his death, or if a Key Employee dies after
ceasing to be an Employee but before the amounts credited to his Accounts have
been paid, the amounts credited to the Key Employee's Accounts shall be paid to
the Key Employee's Beneficiary in one lump sum as of the first business day of
the third quarter following the date of the Key Employee's death; provided,
however, that if the Key Employee has elected to have his Accounts distributed
in installments and if he dies after distribution has commenced, the remaining
installments shall be paid to the Beneficiary as they become due.
5.4 Distributions During Employment. Subject to such rules as the
Committee may prescribe, a Key Employee may elect to receive a distribution of
up to the entire balance in his Cash Deferral Account or Restricted Stock
Account (to the extent that the Restricted Stock Account is not subject to
forfeiture or investment restrictions). Any such election must be filed both
prior to the first day of the calendar year in which the distribution is to be
made and at least six months prior to the effective date of the
7
<PAGE> 10
distribution. A Key Employee who elects to receive a distribution under this
Section 5.4 shall not be permitted to make deferrals under Section 3.1 during
the year in which the distribution occurs.
5.5 Form of Payment. All payments under the Plan shall be made in cash.
5.6 Change in Control. If a Change in Control of Convergys occurs, each
Key Employee's Plan Accounts shall be paid to him in one lump sum as of the day
next following the date on which such Change in Control occurred. A "Change in
Control of Convergys" shall be deemed to have occurred if (i) a tender offer
shall be made and consummated for the ownership of 30% or more of the
outstanding voting securities of Convergys; (ii) Convergys shall be merged or
consolidated with another corporation and as a result of such merger or
consolidation less than 75% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of Convergys, other than affiliates (within the meaning of the
Securities Exchange Act of 1934 as in effect on the Effective Date) (the "1934
Act") of any party to such merger or consolidation, as the same shall have
existed immediately prior to such merger or consolidation; (iii) Convergys shall
sell substantially all of its assets to another corporation which is not a
wholly owned subsidiary; (iv) a person within the meaning of Section 3 (a)(9) or
of Section 13(d)(3) of the 1934 Act, shall acquire 20% or more of the
outstanding voting securities of Convergys (whether directly, indirectly,
beneficially or of record), or a person, within the meaning of Section 3(a)(9)
or Section 13(d)(3) of the 1934 Act controls in any manner the election of a
majority of the directors of Convergys; or (v) within any period of two
consecutive years after January 1, 1994, individuals who at the beginning of
such period constitute Convergys' Board of Directors cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period. For purposes hereof,
ownership of voting securities shall take into account and shall include
ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i)
pursuant to the 1934 Act.
SECTION 6
ADMINISTRATION OF THE PLAN
6.1 General. The general administration of the Plan and the
responsibility for carrying out its provisions shall be placed in the Committee.
6.2 Expenses. Expenses of administering the Plan shall be shared by
each Convergys Entity in such proportions as may be determined by the Committee.
8
<PAGE> 11
6.3 Compensation of Committee. The members of the Committee shall not
receive compensation for their services as such, and, except as required by law,
no bond or other security need be required of them in such capacity in any
jurisdiction.
6.4 Rules of Plan. Subject to the limitations of the Plan, the
Committee may, from time to time, establish rules for the administration of the
Plan and the transaction of its business. The Committee may correct errors,
however arising, and as far as possible, adjust any benefit payments
accordingly. The determination of the Committee as to the interpretation of the
provisions of the Plan or any disputed question shall be conclusive upon all
interested parties.
6.5 Agents and Employees. The Committee may authorize one or more
agents to execute or deliver any instrument. The Committee may appoint or employ
such agents, counsel (including counsel of any Company), auditors (including
auditors of any Company), physicians, clerical help and actuaries as in the
Committee's judgment may seem reasonable or necessary for the proper
administration of the Plan.
6.6 Indemnification. Each Convergys Entity shall indemnify each member
of the Committee for all expenses and liabilities (including reasonable
attorney's fees) arising out of the administration of the Plan. The foregoing
right of indemnification shall be in addition to any other rights to which the
members of the Committee may be entitled as a matter of law.
SECTION 7
FUNDING OBLIGATION
No Convergys Entity shall have any obligation to fund, either by the
purchase of Convergys Shares or the investment in any account or by any other
means, its obligation to Key Employees hereunder. If, however, a Convergys
Entity does elect to allocate assets to provide for any such obligation, the
assets allocated for such purpose shall be assets of the Convergys Entity
subject to claims against the Convergys Entity, including claims of the
Convergys Entity's creditors, to the same extent as are other corporate assets,
and the Key Employee shall have no right or claim against the assets so
allocated, other than as general creditors of the Convergys Entity.
9
<PAGE> 12
SECTION 8
AMENDMENT AND TERMINATION
The Convergys Compensation and Benefits Committee may, without the
consent of any Key Employee or Beneficiary, amend or terminate the Plan at any
time; provided that no amendment shall be made or act of termination taken which
divests any Key Employee of the right to receive payments under the plan with
respect to amount heretofore credited to the Key Employee's Accounts.
SECTION 9
NON-ALIENATION OF BENEFITS
No Key Employee or Beneficiary shall alienate, commute, anticipate,
assign, pledge, encumber or dispose of the right to receive the payments
required to be made by any Convergys Entity hereunder, which payments and the
right to receive them are expressly declared to be nonassignable and
nontransferable. In the event of any attempt to assign or transfer any such
payment or the right to receive them, no Convergys Entity shall have any further
obligation to make any payments otherwise required of it hereunder.
SECTION 10
MISCELLANEOUS
10.1 Delegation. The Committee may delegate to any Convergys Entity,
person or committee certain of its rights and duties hereunder. Any such
delegation shall be valid and binding on all persons and the person or committee
to whom or which authority is delegated shall have full power to act in all
matters so delegated until the authority expires by its terms or is revoked by
the Committee, as the case may be.
10.2 Applicable Law. The Plan shall be governed by applicable federal
law and, to the extent not preempted by applicable federal law, the laws of the
State of Ohio.
10.3 Separability of Provisions. If any provision of the Plan is held
invalid or unenforceable, such invalidity or unenforceabilty shall not affect
any other provisions hereof, and the Plan shall be construed and enforced as if
such provisions had not been included.
10
<PAGE> 13
10.4 Headings. Headings used throughout the Plan are for convenience
only and shall not be given legal significance.
10.5 Counterparts. The Plan may be executed in any number of
counterparts, each of which shall be deemed an original. All counterparts shall
constitute one and the same instrument, which shall be sufficiently evidenced by
any one thereof.
IN WITNESS WHEREOF, Convergys Corporation has caused its name to be
subscribed on the 7th day of December, 1998.
CONVERGYS CORPORATION
By /s/ Steven C. Mason
-------------------------
11
<PAGE> 1
Exhibit 5
December 22, 1998
Convergys Corporation
201 East Fourth Street
Cincinnati, Ohio 45202
Re: Convergys Corporation Form S-8 Registration Statement
Convergys Corporation 1998 Long Term Incentive Plan, Convergys
Corporation Retirement and Savings Plan, Convergys CMG
Retirement Savings Plan, Convergys Corporation Employee Stock
Purchase Plan and Convergys Corporation Executive Deferred
Compensation Plan
Gentlemen:
We are counsel for Convergys Corporation, an Ohio corporation (the
"Company"), which is named as the registrant in the Registration Statement on
Form S-8 that is being filed on or about December 7, 1998 with the Securities
and Exchange Commission (the "Commission") for the purpose of registering under
the Securities Act of 1933, as amended (the "Act"), 36,200,000 common shares,
without par value (the "Common Shares"), of the Company offered pursuant to the
Convergys Corporation 1998 Long Term Incentive Plan, the Convergys Corporation
Retirement and Savings Plan Convergys, the CMG Retirement Savings Plan, the
Convergys Corporation Employee Stock Purchase Plan and the Convergys Corporation
Executive Deferred Compensation Plan (individually a "Plan" and collectively the
"Plans").
As counsel for the Company, we have participated in the preparation of
the Registration Statement. In addition, we are generally familiar with the
records and proceedings of the Company. Furthermore, we have examined and relied
on the originals or copies, certified or otherwise identified to our
satisfaction, of corporate records or documents of the Company and such
representations of officers of the Company as we have deemed appropriate.
With respect to the Common Shares registered pursuant to such
Registration Statement as filed and as it may be amended, it is our opinion that
the Common Shares, when issued pursuant to the authorization of the Board of
Directors of the Company and when distributed pursuant to a Plan (or when issued
and paid for pursuant to the terms of a Plan), will be validly issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion with the Commission.
Very truly yours,
/s/ Frost & Jacobs LLP
<PAGE> 2
December 22, 1998
Convergys Corporation
201 East Fourth Street
Cincinnati, Ohio 45202
Re: Convergys Corporation Form S-8 Registration Statement
Convergys Corporation Executive Deferred Compensation Plan
Gentlemen:
We are counsel for Convergys Corporation, an Ohio corporation (the
"Company"), which is named as the registrant in the Registration Statement on
Form S-8 that is being filed on or about December 22, 1998 with the Securities
and Exchange Commission (the "Commission") for the purpose of registering under
the Securities Act of 1933, as amended (the "Act"), the obligations (the
"Obligations") under the Convergys Corporation Executive Deferred Compensation
Plan (the "Plan").
As counsel for the Company, we have participated in the preparation of
the Registration Statement. In addition, we are generally familiar with the
records and proceedings of the Company. Furthermore, we have examined and relied
on the originals or copies, certified or otherwise identified to our
satisfaction, of corporate records or documents of the Company and such
representations of officers of the Company as we have deemed appropriate.
With respect to the Obligations registered pursuant to such
Registration Statement as filed and as it may be amended, it is our opinion that
the Obligations, when distributed pursuant to the Plan, will be valid and
binding obligations of the Company, enforceable in accordance with their terms,
except as enforcement of the Obligations may be limited by bankruptcy,
insolvency, fraudulent transfer or conveyance, or other laws of general
applicability relating to or affecting enforcement of creditors' rights
generally, or by the application of general principles of equity.
We hereby consent to the filing of this opinion with the Commission.
Very truly yours,
/s/ Frost & Jacobs LLP
<PAGE> 1
Exhibit 23.2
PRICEWATERHOUSECOOPERS LOGO
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-8 (File No. 333-1-14379) of our report dated May 18, 1998, on our audits
of the financial statements and financial statement schedule of Convergys
Corporation. We also consent to the incorporation by reference in this
registration statement on Form S-8 of our report dated June 19, 1998, on our
audits of the CBIS Retirement and Savings Plan and of our report dated June 12,
1998 on our audits of the MATRIXX Marketing, Inc. Profit Sharing 401(k) Plan.
/s/ PricewaterhouseCoopers LLP
Cincinnati, Ohio
December 23, 1998
<PAGE> 1
Exhibit 23.3
PRICEWATERHOUSECOOPERS LOGO
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-8 (File No. 333-1-14379) of our report dated May 1, 1998, on our audits
of the financial statements of AT&T Solutions Customer Care.
/s/ PricewaterhouseCoopers LLP
Jacksonville, Florida
December 23, 1998
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred
to as the "Company"), proposes shortly to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-8 for the Convergys Corporation Retirement and Savings Plan, the
Convergys CMG Retirement Savings Plan, the Convergys Corporation Employee Stock
Purchase Plan, the Convergys Corporation 1998 Long Term Incentive Plan and the
Convergys Corporation Executive Deferred Compensation Plan; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Charles S.
Mechem, Jr., James F. Orr, Steven G. Rolls and William D. Baskett III, and each
of them singly, his attorneys for him and in his name, place and stead, and in
his office and capacity in the Company, to execute and file such report on Form
S-8, and thereafter to execute and file any amendments or supplements thereto,
hereby giving and granting to said attorneys full power and authority to do and
perform all and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he might
or could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 7th day
of December, 1998.
/s/ BRIAN H. ROWE
-----------------
Brian H. Rowe
Director
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred
to as the "Company"), proposes shortly to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-8 for the Convergys Corporation Retirement and Savings Plan, the
Convergys CMG Retirement Savings Plan, the Convergys Corporation Employee Stock
Purchase Plan, the Convergys Corporation 1998 Long Term Incentive Plan and the
Convergys Corporation Executive Deferred Compensation Plan; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Charles S.
Mechem, Jr., James F. Orr, Steven G. Rolls and William D. Baskett III, and each
of them singly, his attorneys for him and in his name, place and stead, and in
his office and capacity in the Company, to execute and file such report on Form
S-8, and thereafter to execute and file any amendments or supplements thereto,
hereby giving and granting to said attorneys full power and authority to do and
perform all and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he might
or could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 7th day
of December, 1998.
/s/ JAMES F. ORR
----------------
James F. Orr
Director
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred
to as the "Company"), proposes shortly to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-8 for the Convergys Corporation Retirement and Savings Plan, the
Convergys CMG Retirement Savings Plan, the Convergys Corporation Employee Stock
Purchase Plan, the Convergys Corporation 1998 Long Term Incentive Plan and the
Convergys Corporation Executive Deferred Compensation Plan; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Charles S.
Mechem, Jr., James F. Orr, Steven G. Rolls and William D. Baskett III, and each
of them singly, his attorneys for him and in his name, place and stead, and in
his office and capacity in the Company, to execute and file such report on Form
S-8, and thereafter to execute and file any amendments or supplements thereto,
hereby giving and granting to said attorneys full power and authority to do and
perform all and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he might
or could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 7th day
of December, 1998.
/s/ CHARLES S. MECHEM, JR.
--------------------------
Charles S. Mechem, Jr.
Director
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred
to as the "Company"), proposes shortly to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-8 for the Convergys Corporation Retirement and Savings Plan, the
Convergys CMG Retirement Savings Plan, the Convergys Corporation Employee Stock
Purchase Plan, the Convergys Corporation 1998 Long Term Incentive Plan and the
Convergys Corporation Executive Deferred Compensation Plan; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Charles S.
Mechem, Jr., James F. Orr, Steven G. Rolls and William D. Baskett III, and each
of them singly, his attorneys for him and in his name, place and stead, and in
his office and capacity in the Company, to execute and file such report on Form
S-8, and thereafter to execute and file any amendments or supplements thereto,
hereby giving and granting to said attorneys full power and authority to do and
perform all and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he might
or could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 7th day
of December, 1998.
/s/ STEVEN C. MASON
-------------------
Steven C. Mason
Director
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred
to as the "Company"), proposes shortly to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-8 for the Convergys Corporation Retirement and Savings Plan, the
Convergys CMG Retirement Savings Plan, the Convergys Corporation Employee Stock
Purchase Plan, the Convergys Corporation 1998 Long Term Incentive Plan and the
Convergys Corporation Executive Deferred Compensation Plan; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Charles S.
Mechem, Jr., James F. Orr, Steven G. Rolls and William D. Baskett III, and each
of them singly, his attorneys for him and in his name, place and stead, and in
his office and capacity in the Company, to execute and file such report on Form
S-8, and thereafter to execute and file any amendments or supplements thereto,
hereby giving and granting to said attorneys full power and authority to do and
perform all and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he might
or could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 7th day
of December, 1998.
/s/ ROGER L. HOWE
-----------------
Roger L. Howe
Director
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred
to as the "Company"), proposes shortly to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-8 for the Convergys Corporation Retirement and Savings Plan, the
Convergys CMG Retirement Savings Plan, the Convergys Corporation Employee Stock
Purchase Plan, the Convergys Corporation 1998 Long Term Incentive Plan and the
Convergys Corporation Executive Deferred Compensation Plan; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Charles S.
Mechem, Jr., James F. Orr, Steven G. Rolls and William D. Baskett III, and each
of them singly, his attorneys for him and in his name, place and stead, and in
his office and capacity in the Company, to execute and file such report on Form
S-8, and thereafter to execute and file any amendments or supplements thereto,
hereby giving and granting to said attorneys full power and authority to do and
perform all and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he might
or could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 7th day
of December, 1998.
/s/ JUDITH G. BOYNTON
---------------------
Judith G. Boynton
Director
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred
to as the "Company"), proposes shortly to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1933, as
amended, and the Rules and Regulations thereunder, a Registration Statement on
Form S-8 for the Convergys Corporation Retirement and Savings Plan, the
Convergys CMG Retirement Savings Plan, the Convergys Corporation Employee Stock
Purchase Plan, the Convergys Corporation 1998 Long Term Incentive Plan and the
Convergys Corporation Executive Deferred Compensation Plan; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Charles S.
Mechem, Jr., James F. Orr, Steven G. Rolls and William D. Baskett III, and each
of them singly, his attorneys for him and in his name, place and stead, and in
his office and capacity in the Company, to execute and file such report on Form
S-8, and thereafter to execute and file any amendments or supplements thereto,
hereby giving and granting to said attorneys full power and authority to do and
perform all and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes as he might
or could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 7th day
of December, 1998.
/s/ JOHN F. BARRETT
-------------------
John F. Barrett
Director
