EMPLOYEE BENEFITS AGREEMENT
CINCINNATI BELL INC.
TABLE OF CONTENTS
ARTICLE I DEFINITIONS............................................1
ARTICLE II GENERAL PRINCIPLES.....................................2
ARTICLE III DEFINED BENEFIT PLANS..................................4
ARTICLE IV DEFINED CONTRIBUTION PLANS.............................6
ARTICLE V HEALTH AND WELFARE PLANS...............................7
ARTICLE VI EXECUTIVE BENEFITS AND NON-EMPLOYEE
ARTICLE VII GENERAL AND ADMINISTRATIVE............................14
ARTICLE VIII MISCELLANEOUS.........................................16
EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT, dated as of _____________, 1998, is by and between Cincinnati Bell Inc. ("CBI") and Convergys Corporation ("Convergys").
WHEREAS, CBI has determined to distribute to its shareholders all of the Convergys common shares owned by CBI (the "Distribution"); and
WHEREAS, in conjunction with the Distribution, the parties have agreed to enter into an agreement allocating assets, liabilities and responsibilities with respect to certain employee compensation and benefit programs;
NOW, THEREFORE, the parties agree as follows:
For purposes of this Agreement the following terms shall have the following meanings:
1.1 AGREEMENT means this Employee Benefits Agreement.
1.2 CBI ENTITY means CBI and any corporation that is, at the relevant time, a direct or indirect subsidiary of CBI, except that, for periods beginning on and after the Distribution Date, the term "CBI Entity" shall not include a Convergys Entity.
1.3 CODE means the Internal Revenue Code of 1986, as amended, or any successor federal income tax law. Reference to a specific Code provision also includes any proposed, temporary, or final regulation in force under that provision.
1.4 CONVERGYS ENTITY means Convergys and any corporation that is, at the relevant time, a direct or indirect subsidiary of Convergys, Cincinnati Bell Information Systems Inc. and its direct and indirect subsidiaries and MATRIXX Marketing Inc. and its direct and indirect subsidiaries.
1.5 CONVERGYS INDIVIDUAL means any individual (a) who is either actively employed by or on leave of absence from a Convergys Entity on the Distribution Date; (b) who is transferred from a CBI Entity to a Convergys Entity on the Distribution Date or (c) who retired or separated from a Convergys Entity prior to the Distribution Date and has not been reemployed by a CBI Entity or Convergys Entity since retiring or separating. In addition, CBI and Convergys may designate, by mutual agreement, any other individual or group of individuals as Convergys Individuals.
1.6 DISTRIBUTION DATE means the date on which the Distribution occurs.
1.7 ERISA means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific provision of ERISA also includes any proposed, temporary, or final regulation in force under that provision.
1.8 IPO DATE means the date on which the initial public offering of Convergy's common shares is closed.
1.9 NON-EMPLOYEE DIRECTOR, when immediately preceded by "CBI," means a member of CBI's Board of Directors who is not an employee of a CBI Entity or a Convergys Entity. When immediately preceded by "Convergys," Non-Employee Director means a member of Convergys's Board of Directors who is not an employee of a CBI Entity or a Convergys Entity.
1.10 PLAN, when immediately preceded by "CBI" or "Convergys," means any plan, policy, program, payroll practice, on-going arrangement, contract, trust, insurance policy or other agreement or funding vehicle providing benefits to employees, former employees or Non-Employee Directors of a CBI Entity or a Convergys Entity, as applicable.
2.1 ASSUMPTION OF LIABILITIES. Convergys hereby assumes and agrees to pay, perform, fulfill and discharge, in accordance with their respective terms, all of the following (regardless of when or where such liabilities arose or arise or were or are incurred): (i) all liabilities, other than those arising out of or relating to workers' compensation claims, arising out of or relating to Convergys Individuals and their respective dependents and beneficiaries, in each case relating to, arising out of or resulting from employment by a CBI Entity before becoming Convergys Individuals (including liabilities under CBI Plans and Convergys Plans); (ii) all other liabilities to or relating to Convergys Individuals and other employees or former employees of Convergys Entities, and their dependents and beneficiaries, to the extent relating to, arising out of or resulting from future, present or former employment with a Convergys Entity (including liabilities under CBI Plans and Convergys Plans) and (iii) all other liabilities relating to, arising out of or resulting from obligations, liabilities and responsibilities expressly assumed or retained by a Convergys Entity or a Convergys Plan pursuant to this Agreement.
2.2 CONVERGYS PARTICIPATION IN CBI PLANS.
(a) CBI'S GENERAL OBLIGATIONS AS PLAN SPONSOR. CBI shall continue through the Distribution Date to administer, or cause to be administered, in accordance with their terms and applicable law, the CBI Plans, and shall have the sole discretion and authority to interpret the CBI Plans as set forth therein. Before the Distribution Date, CBI shall not, without the prior consent of Convergys, amend any material feature of any CBI Plan in which a Convergys Entity is a participating company, except to the extent such amendment
would not affect any benefits of Convergys Individuals under such Plan or as may be necessary or appropriate to comply with any collective bargaining agreement or applicable law.
(b) CONVERGYS' GENERAL OBLIGATIONS AS PARTICIPATING COMPANY. Convergys shall perform with respect to its participation in the CBI Plans, and shall cause each other Convergys Entity that is a participating company in any CBI Plan to perform, the duties of a participating company as set forth in such Plans or any procedures adopted pursuant thereto, including: (i) assisting in the administration of claims, to the extent requested by the claims administrator of the applicable CBI Plan; (ii) cooperating fully with CBI Plan auditors, benefit personnel and benefit vendors; (iii) preserving the confidentiality of all financial arrangements CBI has or may have with any vendors, claims administrators, trustees or any other entity or individual with whom CBI has entered into an agreement relating to the CBI Plans; and (iv) preserving the confidentiality of participant health information (including health information in relation to FMLA leaves).
(c) TERMINATION OF PARTICIPATING COMPANY STATUS. Effective as of the Distribution Date, each Convergys Entity shall cease to be a participating company in the CBI Plans.
2.4 CONVERGYS PLANS. The Convergys Plans shall be, with respect to Convergys Individuals who are participating in CBI Plans, in all respects the successors in interest to, and shall not provide benefits that duplicate benefits provided by, the corresponding CBI Plans. CBI and Convergys shall agree on methods and procedures, including amending the respective plan documents, to prevent Convergys Individuals from receiving duplicative benefits from the CBI Plans and the Convergys Plans. With respect to Convergys Individuals, each Convergys Plan shall provide that all service, all compensation and all other benefit-affecting determinations that, as of the Distribution Date, were recognized under the corresponding CBI Plan shall, as of immediately after the Distribution Date, receive full recognition, credit, and validity and be taken into account under such Convergys Plan to the same extent as if such items occurred under such Convergys Plan, except to the extent that duplication of benefits would result. The provisions of this Agreement for the transfer of assets from certain trusts relating to CBI Plans to the corresponding trusts relating to Convergys Plans are based upon the understanding of the parties that each such Convergys Plan will assume all liabilities of the corresponding CBI Plan to or relating to Convergys Individuals, as provided for herein. If any such liabilities are not effectively assumed by the appropriate Convergys Plan, then the amount of assets transferred to the trust relating to such Convergys Plan from the trust relating to the corresponding CBI Plan shall be recomputed, ab initio, as set forth below but taking into account the retention of such liabilities by such CBI Plan, and assets shall be transferred by the trust relating to such Convergys Plan to the trust relating to such CBI Plan so as to place each such trust in the position it would have been in, had the initial asset transfer been made in accordance with such recomputed amount of assets.
2.5 PORTABILITY OF BENEFITS. On or before the Distribution Date, CBI and Convergys may enter into an Interchange Agreement providing for (among other things) the portability of benefits and mutual recognition of service with respect to individuals who terminate employment with a CBI Entity and who become employees of a Convergys Entity during the six month period commencing on the Distribution Date or who terminate employment with a Convergys Entity and who become employees of a CBI Entity during such six month period.
DEFINED BENEFIT PLANS
3.1 ESTABLISHMENT OF MIRROR PENSION PLAN. Effective immediately after the Distribution Date, Convergys shall establish a qualified defined benefit pension plan (the "Convergys Pension Plan") for its eligible employees the provisions of which shall mirror the provisions of CBPP and CBMPP.
3.2 ASSUMPTION OF LIABILITIES BY CONVERGYS PENSION PLAN. Immediately after the Distribution Date, all liabilities to or relating to Convergys Individuals under CBPP and CBMPP (collectively, the "CBI Pension Plans"), shall cease to be liabilities of the CBI Pension Plans and shall be assumed by the Convergys Pension Plan.
3.3 CALCULATION OF CBMPP ASSET ALLOCATION. [To Be Determined]
3.4 CALCULATION OF CBPP ASSET ALLOCATION. The asset allocation of the CBPP and the Convergys Pension Plan shall be determined by applying Section 3.3 but substituting "CBPP" for "CBMPP" wherever it appears in that Section.
3.5 TRANSFER OF CONVERGYS PENSION PLAN'S INTERESTS FROM THE CBI PENSION TRUST TO THE CONVERGYS PENSION TRUST. The actual segregation of the interests of the Convergys Pension Plan in Cincinnati Bell Pension Plans Trust (the "CBI Pension Trust") into separate trust accounts, and the transfer of the Convergys Pension Plan's allocable share of the assets from the CBI Pension Trust to the trust established in conjunction with the Convergys Pension Plan (the "Convergys Pension Trust"), shall occur as soon as practicable after the calculation of such interests pursuant to Sections 3.3 and 3.4. The assets to
be transferred from the CBI Pension Trust to the Convergys Pension Trust share shall consist of a pro rata share of each class of assets in the CBI Pension Trust, unless CBI and Convergys agree otherwise.
DEFINED CONTRIBUTION PLANS
4.1 RETIREMENT SAVINGS PLANS. Effective as of the Distribution Date, (a) a Convergys Savings Plan designated by Convergys shall assume and be solely responsible for all liabilities relating to each Convergys Individual under any CBI Savings Plan and (b) CBI shall cause the accounts of such Convergys Individual under each CBI Savings Plan to be transferred to the Convergys Savings Plan designated by Convergys and Convergys shall cause such transferred accounts to be accepted by the Convergys Savings Plan. CBI and Convergys shall take such action as may be needed to cause the assets associated with each transferred account to be transferred from the trust established in conjunction with the CBI Savings Plan to the trust established in conjunction with the Convergys Savings Plan. For purposes of this Section 4.1, "CBI Savings Plan" means Cincinnati Bell Inc. Savings and Security Plan and "Convergys Plan" means CBIS Retirement and Savings Plan and MATRIXX Marketing Inc. Profit Sharing/401(k) Plan.
4.2 CBI ESOP. The Cincinnati Bell Inc. Employee Stock Ownership Plan (the "CBI ESOP") shall be solely responsible for all liabilities relating to Convergys Individuals under the CBI ESOP. The parties acknowledge that, as a result of the Distribution, the CBI ESOP will, after the Distribution Date, hold both CBI common shares and Convergys common shares and that, in order to continue to qualify as an employee stock ownership plan, the CBI ESOP will be required to dispose of the Convergys common shares and reinvest in CBI common shares. The parties further acknowledge that applicable law generally prohibits such plans from holding securities that are not "qualifying employer securities" within the meaning of Code Section 409 for more than a reasonable time after the Distribution Date unless the Internal Revenue Service ("IRS") grants an extension of time. Accordingly, CBI shall request the IRS to grant an extension of such holding period as its financial advisors shall deem prudent to allow the CBI ESOP to dispose of the Convergys common shares received by it as a result of the Distribution and, to reinvest in CBI common shares, in a manner consistent with the best interests of the ESOP participants. It also is understood that, for purposes of the CBI ESOP, each Convergys Individual will be deemed to have terminated employmen