Cincinnati Bell 2011 Annual Report Download - page 36

PROPOSAL TO REAPPROVE THE MATERIAL TERMS OF THE PERFORMANCE GOALS UNDER
CINCINNATI BELL INC. 2007 LONG TERM INCENTIVE PLAN
(Item 3 on Proxy Card)
The Board is requesting shareholder reapproval of the material terms of the performance goals that may be
used in setting conditions for the payment of certain awards made under the Cincinnati Bell Inc. 2007 Long Term
Incentive Plan (the “2007 Long Term Incentive Plan”). The Company’s shareholders previously approved the
2007 Long Term Incentive Plan, including the material terms of the performance goals, at the 2007 annual
meeting of the Company’s shareholders. The reapproval is necessary so that certain awards to be granted under
the plan may comply with Section 162(m) of the Internal Revenue Code (the “Code”). No changes are being
made to the terms of the 2007 Long Term Incentive Plan in connection with the requested shareholder reapproval
of the material terms of the plan’s performance goals.
Section 162(m) of the Code generally provides that a publicly traded corporation may not deduct for federal
income tax purposes, with respect to any tax year of the corporation, compensation paid to an employee who is a
“covered employee” for such tax year to the extent such compensation exceeds one million dollars. For purposes
of Section 162(m) of the Code, a “covered employee” of a publicly traded corporation generally means, with
respect to any tax year of the corporation, (i) an employee who, as of the close of the tax year, is or is acting as
the corporation’s principal executive officer, and (ii) any other officer whose total compensation for that tax year
is required to be reported to the corporation’s shareholders under the Securities Exchange Act of 1934 by reason
of the officer being among the three highest compensated officers for the tax year (other than the principal
executive officer or the principal financial officer).
However, performance-based compensation that is payable to a covered employee for a tax year will be
exempt from such tax deduction limits if the material terms of such performance goals (i.e., the employees
eligible to receive such compensation, the business criteria on which such performance goals are based, and the
maximum amount of such performance-based compensation that could be paid to any employee) are disclosed to
and approved by the applicable corporation’s shareholders, generally at least every five years. “Performance-
based compensation” means compensation paid in connection with certain pre-established objective performance
goals based on business criteria being met.
In order to give the Company the ability to deduct, without regard to the deduction limits of Section 162(m) of
the Code, the performance-based compensation payable under any awards that are granted under the plan to covered
employees on or after the Company’s 2012 annual shareholder meeting, the Company’s shareholders must
reapprove the material terms of such performance goals at the 2012 annual shareholder meeting, (which is five
years from when the Company’s shareholders last approved the material terms of such performance goals).
However, even if the shareholders reapprove the material terms of the performance goals of the 2007 Long Term
Incentive Plan, the Company cannot guarantee that an award that is intended to provide performance-based
compensation to a covered employee will avoid being subject to the deduction limits of Section 162(m) of the Code.
Nevertheless, the Company wants the opportunity to deduct for federal income tax purposes, without regard to the
deduction limits of Section 162(m), performance-based compensation provided by the Company under the 2007
Long Term Incentive Plan to executives whose compensation is otherwise subject to such deduction limits.
As indicated above, the Company is asking for shareholder reapproval of the material terms of the
performance goals under which performance-based compensation can be paid under the 2007 Long Term
Incentive Plan.
Material Terms of Performance Goals
The following is a summary of the material terms of the performance goals under which compensation can
be paid under the 2007 Long Term Incentive Plan. THE FULL TEXT OF THE 2007 LONG TERM
INCENTIVE PLAN IS SET FORTH IN APPENDIX A OF THIS PROXY STATEMENT AND THE
FOLLOWING DISCUSSION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH TEXT.
1. Employees Eligible to Receive Awards
The persons who are eligible to be granted awards under the 2007 Long Term Incentive Plan are all persons
who are employees of the Company and its subsidiaries, including the covered employees, and who are not
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