Cincinnati Bell 2006 Annual Report Download - page 44

Further, the purchase or other similar price applicable to any award granted under the 2007 Directors Plan,
including a stock option granted under the plan, cannot be reduced by any amendment to the award, by the
cancellation of the award and the granting of a new award, or by any other means unless such reduction is
approved by the Company’s shareholders.
10. Federal Income Tax Consequences. The following describes, in very general terms, the federal income
tax consequences arising with respect to awards granted under the 2007 Directors Plan.
A stock option that is granted to an Outside Director will generally create no tax consequences for the
employee or the Company at the time of the grant of the award. Further, upon exercising any stock option, the
Outside Director generally must recognize ordinary income equal to the amount by which the fair market value
of the common shares that are subject to the portion of the option being exercised, as determined on the date of
exercise, exceeds the purchase price of such common shares, and the Company will be entitled to a deduction for
the same amount.
The treatment to an Outside Director of a disposition of common shares acquired through the exercise of a
stock option depends on how long the common shares have been held. Generally, there will be no tax
consequence to the Company in connection with a disposition of common shares acquired under a stock option.
With respect to a restricted stock award granted under the 2007 Directors Plan to an Outside Director, the
Outside Director generally must recognize ordinary income equal to the fair market value of the common shares
provided under the award at the first time such common shares are not subject to a substantial risk that they will
be forfeited; and the Company will be entitled to a deduction for the same amount.
In certain cases, such as an award to an Outside Director of restricted stock, the Outside Director may have
the right under Section 83(b) of the Internal Revenue Code to elect to recognize as ordinary income the value of
the award when issued instead of when no further substantial risk of forfeiture exists with respect to the award. In
the event of such an election, the Company will be entitled to a deduction for such value at the same time.
The foregoing tax rules may be slightly adjusted for an award granted to an Outside Director who is subject
to Section 16 of the Securities Exchange Act of 1934.
11. Miscellaneous. The 2007 Directors Plan generally requires that any purchase price or tax withholding
obligations that apply to an Outside Director with respect to an award granted under the plan to him or her must
be satisfied by the Outside Director when the award is exercised or when the award’s common shares are no
longer subject to a substantial risk of forfeiture. The plan gives several different methods that the Board of
Directors can use or permit to ensure that such purchase price and tax withholding requirements are satisfied.
In no event shall the Company ever be obligated to issue or deliver any common shares in connection with
an award granted under the 2007 Directors Plan unless and until the Company determines that such issuance or
delivery will not constitute a violation of the provisions of any applicable law (or regulation issued under such
law) or the rules of any securities exchange on which common shares are listed.
Recommendation
Approval of the Cincinnati Bell Inc. 2007 Stock Option Plan for Non-Employee Directors requires the
affirmative vote of the holders of a majority of the common shares and 6
3
⁄ 4 % Cumulative Convertible
Preferred Shares, voting as one class, present or represented at the annual meeting, in person or by proxy,
and entitled to vote on this proposal. Abstentions will have the same effect as votes against the proposal.
Broker non-votes will not be considered shares present and entitled to vote on the shareholder proposal
and will not have a positive or negative effect on the outcome of this proposal.
The Board unanimously recommends a vote FOR the approval of the Cincinnati Bell Inc. 2007 Stock
Option Plan for Non-Employee Directors.
Effect of Management Vote on Proposal
Because the directors and officers of the Company own beneficially 9.1 million common shares, or 3.7% of
the outstanding voting securities, their votes are not likely to have a material impact on whether or not the
proposal is adopted.
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