Cincinnati Bell 2012 Annual Report Download - page 128

Contingencies
We are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and
regulations in the normal course of business. We believe the amounts provided in our Financial Statements, as
prescribed by GAAP, are adequate in light of the probable and estimable contingencies. However, there can be
no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings,
claims, tax examinations, and other matters, including the matters discussed below, and to comply with
applicable laws and regulations, will not exceed the amounts reflected in our Consolidated Financial Statements.
As such, costs, if any, that may be incurred in excess of those amounts provided as of December 31, 2012, cannot
be reasonably determined.
In 2011, the Company and certain directors and officers were named as defendants in a federal court and a
state court shareholder derivative action. Plaintiffs’ allegations, which defendants denied, in both the federal and
state court actions, were that the director defendants breached their duty of loyalty in connection with 2010
executive compensation decisions and the officer defendants were unjustly enriched. On March 1, 2012, the
parties to the case captioned: NECA-IBEW Pension Fund (The Decatur Plan) v. Cox, et al., Case No. 11-cv-
00451, United States District Court, Southern District of Ohio, Western Division (“the Federal Action”), reached
an agreement concerning the Federal Action. Pursuant to the agreement, the parties agreed to stipulate to the
filing of an Amended Complaint, which was docketed with the court, and thereafter, the parties jointly moved the
court to stay the Federal Action pending the entry of a judgment in the state court action, captioned:In re
Cincinnati Bell Inc. Derivative Litigation, Case No. A1105305, Court of Common Pleas, Hamilton County, Ohio
(“the State Action”). The Federal Action was stayed by the court. The parties to the State Action previously
reached a settlement of that action which includes certain changes to the Company’s corporate governance
policies. On April 16, 2012, in the State Action, the court held a hearing to consider final approval of the
settlement and fee and expense request by plaintiffs’ counsel. The court on April 16, 2012 approved the
settlement and the fees and expenses requested by plaintiffs’ counsel, including counsel for plaintiff in the
Federal Action, and entered an Order and Final Judgment, dismissing the State Action with prejudice.
Subsequently, the Federal Action was dismissed with prejudice. The settlement and counsel fees and expenses
were fully paid as of December 31, 2012.
The resolution of the above claims did not individually, or in the aggregate, have a material effect on our
financial position, results of operations or cash flows during the period ended December 31, 2012. Based on
information currently available, consultation with counsel, available insurance coverage and established reserves,
management believes the eventual outcome of all outstanding claims will not individually, or in the aggregate,
have a material effect on the Company’s financial position, results of operations or cash flows.
Off-Balance Sheet Arrangements
Indemnifications
During the normal course of business, the Company makes certain indemnities, commitments, and
guarantees under which it may be required to make payments in relation to certain transactions. These include
(a) intellectual property indemnities to customers in connection with the use, sale, and/or license of products and
services, (b) indemnities to customers in connection with losses incurred while performing services on their
premises, (c) indemnities to vendors and service providers pertaining to claims based on negligence or willful
misconduct, (d) indemnities involving the representations and warranties in certain contracts, and (e) outstanding
letters of credit which totaled $6.3 million as of December 31, 2012. In addition, the Company has made
contractual commitments to several employees providing for payments upon the occurrence of certain prescribed
events. The majority of these indemnities, commitments, and guarantees do not provide for any limitation on the
maximum potential for future payments.
On November 20, 2012, certain subsidiaries of the Company (the “Contributors”) entered into contribution
agreements (the “Contribution Agreements”) with CyrusOne LP, pursuant to which, on November 20, 2012, the
Contributors contributed direct or indirect interests in a portfolio of properties and certain other assets related to
such properties to CyrusOne LP in exchange for units of limited partnership interest in CyrusOne LP and the
assumption of liabilities by CyrusOne LP.
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Form 10-K Part II Cincinnati Bell Inc.