10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

Commission File Number: 1-8519

CINCINNATI BELL INC.

Ohio	31-1056105
(State of Incorporation)	(I.R.S. Employer Identification No.)

221 East Fourth Street, Cincinnati, Ohio 45202

Telephone 513-397-9900

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange       on which registered
Common Shares (par value $0.01 per share)	New York Stock Exchange
Preferred Share Purchase Rights	National Stock Exchange
6 3/4% Convertible Preferred Shares	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  x

The aggregate market value of the voting common shares owned by non-affiliates of the registrant was $1.4 billion, computed by reference to the closing sale price of the common stock on the New York Stock Exchange on June 30, 2007, the last trading day of the registrant’s most recently completed second fiscal quarter. The Company has no non-voting common shares.

At February 1, 2008, there were 248,375,399 common shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement relating to the Company’s 2008 Annual Meeting of Shareholders are incorporated by reference into Part III of this report to the extent described herein.

TABLE OF CONTENTS

PART I
		Page
Item 1.	Business	2
Item 1A.	Risk Factors	7
Item 1B.	Unresolved SEC Staff Comments	15
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	Submission of Matters to a Vote of the Security Holders	15
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 8.	Financial Statements and Supplementary Schedules	48
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	99
Item 9A.	Controls and Procedures	99
Item 9B.	Other Information	99
PART III
Item 10.	Directors and Executive Officers and Corporate Governance	100
Item 11.	Executive Compensation	101
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	101
Item 13.	Certain Relationships, Related Transactions and Director Independence	101
Item 14.	Principal Accountant Fees and Services	101
PART IV
Item 15.	Exhibits and Financial Statement Schedules	102
	Signatures	108

This report contains trademarks, service marks and registered marks of Cincinnati Bell Inc., as indicated.

Part I

Item 1. Business

General

Cincinnati Bell Inc. and its consolidated subsidiaries (the “Company”) is a full-service local provider of data and voice communications services and equipment and a regional provider of wireless and long distance communications services. The Company provides telecommunications service primarily on its owned local and wireless networks with a well-regarded brand name and reputation for service. The Company also sells telecommunication equipment, information technology hardware, and related services.

The Company operates in three segments: Wireline, Wireless, and Technology Solutions. The Company’s segments were realigned to be consistent with changes made in the second quarter of 2007 to its management structure and reporting. The Wireline segment combines the operations of Cincinnati Bell Telephone Company LLC (“CBT”) and Cincinnati Bell Extended Territories LLC (“CBET”), which were formerly included in the Local segment, and the operations of Cincinnati Bell Any Distance Inc. (“CBAD”), Cincinnati Bell Complete Protection Inc. (“CBCP”), the Company’s payphone business and Cincinnati Bell Entertainment Inc. (“CBE”), which were formerly included in the Other segment. The Broadband segment, which does not have any substantive on-going operations, has been eliminated. The remaining liabilities associated with the former broadband operations are now included in Corporate activities. The Wireless and Technology Solutions segments were not impacted by the segment realignment.

The Company is an Ohio corporation, incorporated under the laws of Ohio in 1983. Its principal executive offices are at 221 East Fourth Street, Cincinnati, Ohio 45202 (telephone number (513) 397-9900 and website address http://www.cincinnatibell.com). As soon as practicable after they have been electronically filed, the Company makes available its reports on Form 10-K, 10-Q, and 8-K (as well as all amendments to these reports), proxy statement and other information free of charge, on its website at the Investor Relations section.

The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”) under the Exchange Act. These reports and other information filed by the Company may be read and copied at the Public Reference Room of the SEC, 100 F Street N.E., Washington, D.C. 20549. Information may be obtained about the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy statements, and other information about issuers, like the Company, which file electronically with the SEC. The address of that site is http://www.sec.gov.

Wireline

The Wireline segment provides local voice, data, long-distance and other services. Local voice services include local telephone service, switched access, information services such as directory assistance, and value-added services, such as caller identification, voicemail, call waiting, and call return. Data services include Digital Subscriber Line (“DSL”), which provides high-speed data transmission via the internet, dial-up Internet access, dedicated network access, and Gigabit Ethernet (“Gig-E”) and Asynchronous Transfer Mode (“ATM”) based data transport, which businesses principally utilize to transport large amounts of data typically over a private network. Long distance services include long distance, audio conferencing, and voice over internet protocol (“VoIP”) services. Other services offered by the Wireline segment consist of security monitoring services, public payphones, cable television in Lebanon, Ohio, DirecTV commissioning over its entire operating area, inside wire installation for business enterprises and billing, clearinghouse and other ancillary services primarily for inter-exchange (long distance) carriers.

Cincinnati Bell Telephone Company LLC and Cincinnati Bell Extended Territories LLC

The Company provides wireline voice and data services to its historical operating territory in southwestern Ohio, northern Kentucky and southeastern Indiana through the operations of CBT, an Incumbent Local Exchange Carrier (“ILEC”). The Company’s core ILEC franchise covers approximately 2,400 square miles in a 25-mile radius around Cincinnati, Ohio. The Company has operated its core ILEC franchise for approximately 130 years.

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Over the past ten years, the Company has expanded its voice and data services beyond its ILEC territory, particularly in Dayton and Mason, Ohio, through a product suite offered to business and residential customers. CBET, a subsidiary of CBT, operates as a Competitive Local Exchange Carrier (“CLEC”) and provides substantially all of its voice and data services on its own network or through purchasing unbundled network elements (“UNE-L” or “loops”) from various incumbent local carriers. The Wireline segment links the ILEC and CLEC territories through its Synchronous Optical Fiber Network (“SONET”), which provides route diversity between the two territories via two separate paths. In March 2007, CBET purchased a local telecommunication business, which offers voice, data and cable TV services, in Lebanon, Ohio for a purchase price of $7.0 million. See Note 5 to the Consolidated Financial Statements for further information regarding this acquisition.

The Wireline segment provides voice services over a 100% digital, circuit switch-based network to end users via access lines. In recent years, the Company’s voice access lines have decreased as its customer base has increasingly employed wireless technologies in lieu of wireline voice services (“wireless substitution”), or have migrated to competitors, including cable companies, which offer VoIP solutions. Wireline had approximately 834,000 voice access lines in service on December 31, 2007, which is a 6% and 10% reduction in comparison to 887,000 and 931,000 access lines in service at December 31, 2006 and 2005, respectively.

Despite the decline in access lines, the Wireline segment has been able to nearly offset the effect of these losses on revenue by:

(1) increasing DSL penetration to existing consumer and business customers; and

(2) increasing the sale of high capacity data circuits to business customers.

The Company has deployed DSL capable electronics throughout its territory, allowing it to offer high-speed DSL internet access services to over 90% of its in-territory primary consumer access lines. The Company’s DSL subscribers were 222,000, 198,000, and 162,500 at December 31, 2007, 2006, and 2005, respectively. CBT’s in-territory primary consumer penetration of DSL service was 42% of addressable lines at the end of 2007, an increase of 8 percentage points compared to the end of 2006.

Also, CBT’s network includes the use of fiber-optic cable, with SONET rings linking Cincinnati’s downtown with other area business centers. These SONET rings offer increased reliability and redundancy to CBT’s major business customers. CBT has an extensive business-oriented data network, offering native speed Ethernet services over an interlaced ATM – Gig-E backbone network, delivered to end users via high-capacity circuits. CBT business revenues were $435.1 million, $416.3 million and $412.7 million in 2007, 2006, and 2005, respectively.

In 2007, CBT voice revenue totaled $432.4 million and data revenue totaled $258.6 million, of which $89.2 million was associated with DSL service. Approximately 96% of the voice and data revenue was generated within the Company’s ILEC operating territory.

CBT’s subsidiary, Cincinnati Bell Telecommunications Services LLC, operates the National Payphone Clearinghouse (“NPC”) in an agency function, facilitating payments from inter-exchange carriers to payphone service providers (“PSPs”) relating to the compensation due to PSPs for originating access code calls, subscriber 800 calls, and other toll free and qualifying calls pursuant to the rules of the Federal Communications Commission (“FCC”) and state regulatory agencies. As the NPC agent, the Company does not take title to any funds to be paid to the PSPs, nor does the Company accept liability for the payments owed to the PSPs.

Cincinnati Bell Any Distance Inc.

CBAD provides long distance, audio conferencing, and VoIP services to businesses and residential customers in the Greater Cincinnati and Dayton, Ohio areas. Residential customers can choose from a variety of long distance plans, which include unlimited long distance for a flat fee, purchase of minutes at a per-minute-of-use rate or a fixed number of minutes for a flat fee. In addition to long distance, business customers can choose from a variety of other services, which include audio conferencing, dedicated long distance, and starting in mid 2006, VoIP. At December 31, 2007, CBAD had approximately 548,000 long distance subscribers, consisting of 374,000 residential and 174,000 business subscribers, compared to 552,000 and 564,000 long distance subscribers at December 31, 2006 and 2005, respectively. The decrease in subscribers from 2006 was related to a 5% decline in residential subscribers, consistent with the CBT access line loss,

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partially offset by a 10% increase in business subscribers. In 2007, CBAD produced $79.3 million in revenue for the Wireline segment compared to $71.8 million in 2006, and $69.5 million in 2005. In 2007, CBAD began to provide new broadband services beyond its traditional territory to business customers. Revenue from these new services was insignificant in 2007. Also, in late 2007, CBAD committed to the acquisition of eGIX Inc. (“eGix”), a CLEC provider of voice and long distance services to business customers in Indiana. Revenues for eGIX were approximately $15 million in 2007. The Company completed this acquisition in February 2008.

Cincinnati Bell Complete Protection Inc.

CBCP provides surveillance hardware and monitoring services to residential and business customers in the Greater Cincinnati area. At December 31, 2007, CBCP had approximately 9,900 monitoring subscribers in comparison to 8,600 and 7,000 monitoring subscribers at December 31, 2006 and 2005. CBCP produced $4.0 million, $3.6 million, and $2.9 million in revenue in 2007, 2006, and 2005, respectively, for the Wireline segment.

Public Payphone Business

Public provides public payphone services primarily within the geographic area of the Wireline segment. Public had approximately 2,200, 2,900, and 3,700 stations in service as of December 31, 2007, 2006, and 2005, respectively, and generated approximately $1.9 million, $2.9 million, and $4.5 million in revenue in 2007, 2006, and 2005, respectively, or less than 1% of consolidated revenue in each year. The revenue decrease results primarily from wireless substitution as usage of payphones continues to decrease in favor of wireless products and a targeted reduction in unprofitable lines.

Cable TV and DirecTV

As a result of the Company’s acquisition of a telecommunications company in Lebanon, Ohio, Wireline now offers cable TV to 3,900 customers in Lebanon. The Company also is an authorized sales agent and offers DirecTV^© satellite programming through its retail distribution outlets to Cincinnati Bell customers. As such, the Company does not deliver satellite television services. Instead, DirecTV^© pays to the Company a commission for each subscriber and in some circumstances may offer a bundle price discount directly to the Cincinnati Bell customer subscribing to its satellite television service. At December 31, 2007, the Company had 15,000 customers that were subscribers to DirecTV^©.

The Wireline segment produced $821.7 million, $810.4 million, and $817.7 million, or 61%, 64% and 68% of revenue in 2007, 2006, and 2005, respectively. The Wireline segment produced operating income of $252.5 million, $291.8 million, and $302.7 million in 2007, 2006, and 2005, respectively.

Wireless

The Wireless segment provides advanced digital voice and data communications services through the operation of a Global System for Mobile Communications (“GSM”)/General Packet Radio Service (“GPRS”) wireless network in a licensed service territory, which includes Greater Cincinnati and Dayton, Ohio and areas of northern Kentucky and southeastern Indiana. As of December 31, 2007, Wireless served approximately 571,000 subscribers of which 400,000 were postpaid subscribers, who are billed monthly in arrears, and 171,000 were prepaid i-wireless^SM subscribers, who purchase service in advance. In support of its service business, the segment sells wireless handset devices, at or below cost, as well as related accessories. Additionally, the segment sells services to other wireless carriers for their customers to access voice and data services on the Company’s Wireline and Wireless networks through roaming agreements as well as through the lease of unoccupied space on Company-owned towers.

Cincinnati Bell Wireless LLC (“CBW”) began operations in 1998 as a joint venture. The Company owned 80.1% of CBW until February 14, 2006, when it acquired the remaining membership interest in CBW for $83.2 million. As a result, the Company recognized minority interest through the date of this purchase, but no minority interest was recorded after this date since CBW is now a wholly-owned subsidiary. Refer to Note 5 to the Consolidated Financial Statements.

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The Wireless segment competes against all of the U.S. national wireless carriers by offering superior network quality, as verified by three years of independent, third party drive tests, unique rate plans, which may be bundled with the Company’s wireline services, and extensive and conveniently located retail outlets. The segment offers unique calling plans, such as the “Unlimited Everyday Calling Plan” to any Cincinnati Bell local voice, wireless or business customers and CB Home Run, which utilizes Unlicensed Mobile Access (“UMA”) technology on a dual-mode wireless handset to provide converged wireline and wireless network services. While within the range of a wireless fidelity (“Wi-Fi”) access point, the handset sends and receives voice and data transmissions over the internet via the Company’s broadband access network. This allows for enhanced in-building wireless voice reception and faster rates of data transmission compared to alternative wireless data services.

CBW operates a digital wireless network which comprises centralized switching and messaging equipment connected to approximately 400 towers currently utilizing 30 MHz of its licensed wireless spectrum in the Cincinnati Basic Trading Area and 20 MHz of its licensed spectrum in the Dayton Basic Trading Area.

The Company purchased an additional 20 MHz of advanced wireless spectrum for the Cincinnati and Dayton, Ohio regions in the Advanced Wireless Services (“AWS”) spectrum auction conducted by the FCC in 2006. This spectrum is not yet in commercial use. To satisfy increasing demand for existing voice minutes of use by customers as well as to provide enhanced data services such as streaming video, the Company is currently building a third generation (“3G”) network to deploy on the newly purchased AWS spectrum. The Company spent approximately $11 million in 2007 and expects to spend an additional $19 million to complete an initial 3G network footprint upon which the Company expects to launch commercial service in 2008. In addition to the Cincinnati and Dayton regions, the Company also purchased advanced wireless spectrum in Indianapolis, Indiana and two other smaller geographies. The Company does not have specific plans to utilize these other spectrum licenses at this time. The Company spent $37.1 million on all spectrum purchases in 2006.

From October 2003 through June 2006, CBW operated on two separate networks, Time Divisional Multiple Access (“TDMA”) and GSM. In the first quarter of 2005, CBW upgraded GPRS to enhanced data rates for GSM evolution (“EDGE”), which provides up to three times the capacity of GPRS. TDMA was CBW’s legacy technology, which was discontinued in June 2006. In addition to the voice and short message data services that TDMA could provide, GPRS and EDGE technology provide enhanced wireless data communication services, such as mobile web browsing, Internet access, email, and picture messaging.

Postpaid subscriber service generated approximately 71% of 2007 segment revenue. A variety of rate plans are available to postpaid subscribers, and these plans can include a fixed number of national minutes, an unlimited number of CBW mobile-to-mobile (calls to and from other CBW subscribers), an unlimited number of calls to and from a CBT access line, and/or local minutes for a flat monthly rate. For plans with a fixed number of minutes, postpaid subscribers can purchase additional minutes at a per-minute-of-use rate. Prepaid i-wireless^SM subscribers, which accounted for 16% of 2007 revenue, can purchase airtime cards for use with pay per minute, pay by day, or pay by month rate plans. Revenue from other wireless service providers for the purchase of roaming minutes for the carrier’s own subscribers using minutes on CBW’s network, collocation revenue (rent received for the placement of other carriers’ radios on CBW towers), and reciprocal compensation for other carriers’ subscribers who terminate calls on CBW’s network, accounted for approximately 4% of total 2007 segment revenue.

Sales of handsets and accessories generated the remaining 9% of 2007 segment revenue. CBW sells handsets and accessories, often below its own purchase cost, to promote acquisition and retention of subscribers. Sales take place at the Company’s owned retail stores, on the Company’s website, and in retail stores pursuant to agency agreements. Equipment sales are seasonal in nature, as customers often purchase handsets and accessories as gifts during the holiday season in the Company’s fourth quarter. CBW purchases handsets and accessories from a variety of manufacturers and maintains an inventory to support sales.

The Wireless segment contributed $294.5 million, $262.0 million, and $237.5 million, or 22%, 21%, and 20% of consolidated revenue in 2007, 2006, and 2005, respectively. The Wireless segment produced operating income of $34.3 million in 2007, $20.2 million in 2006 and operating losses of $51.7 million in 2005. Included in the 2005 operating loss are impairment charges related to the TDMA network assets totaling $42.3 million and accelerated depreciation of the TDMA assets totaling $36.5 million.

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Technology Solutions

The Technology Solutions segment provides outsourced telecommunications and IT solutions, primarily through the Company’s subsidiary, Cincinnati Bell Technology Solutions Inc. (“CBTS”), in multiple states. Technology Solutions sells products, software, and labor services to customers in three separate product lines: telecom and IT equipment distribution, data center and managed services, and professional services. By offering a full range of equipment and outsourced managed services, in conjunction with the Company’s wireline network services, Technology Solutions provides end-to-end IT telecommunications infrastructure management designed to reduce cost and mitigate risk while optimizing performance for its customers.

The telecom and IT equipment distribution product line is the value-added reseller operation of Technology Solutions. With years of experience and significant local market penetration, the Company maintains relationships with over ten branded technology vendors, which allows it to sell, install, and maintain a wide array of telecommunications and computer equipment and operating systems to meet the needs of small to large businesses. This unit also manages the implementation and maintenance of traditional voice as well as converged VoIP services.

The data center and managed services product line currently operates nine data centers, totaling approximately 144,000 square feet of billable data center capacity which includes 13,000 square feet from the GramTel USA, Inc. (“GramTel”) acquisition, a network operations center that provides off-site infrastructure monitoring, and a wide array of IT infrastructure management products including network management, electronic data storage, disaster recovery, and data security management. Data center services include 24-hour monitoring of the customer’s computer equipment in the data center, power, and environmental controls. CBTS’ data centers are connected with one another and to its customers’ data networks through the fully redundant facilities of CBT’s telecommunications network and/or CBTS’ dedicated Dense Wave Division Multiplexing optical network. This connectivity and the geographical dispersion of the data centers provide enhanced data reliability and disaster recovery.

The CBTS model combines data center collocation services with value-added IT managed services into a fully managed and outsourced infrastructure service. Data center customer contracts typically range from three to fifteen years in length and produce attractive returns on invested capital. The Company intends to continue to pursue additional customers and growth specific to its data center business and is prepared to commit additional resources, including capital expenditures and working capital, to support this growth.

The professional services product line provides IT outsourcing through staff augmentation and professional IT consulting by highly technical, certified employees. These engagements can be short-term IT implementation and project-based work as well as longer term staffing and permanent placement assignments. CBTS utilizes a team of experienced recruiting and hiring personnel to provide its customers a wide range of skilled IT professionals at competitive hourly rates.

In May 2006, the Company purchased Automated Telecom Inc. (“ATI”) for a purchase price of $3.5 million to expand its geographical presence in order to better serve its customers located outside of the greater Cincinnati area. ATI is based in Louisville, Kentucky, with offices also located in St. Louis, Missouri. ATI is a reseller of, and maintenance provider for, telephony equipment.

In December 2007, the Company purchased GramTel for a purchase price of $20.3 million. GramTel provides data center services to small and medium-size companies in Chicago, northwestern Indiana, and southwestern Michigan, and has annual revenues of approximately $5 million. See Note 5 to the Consolidated Financial Statements for further discussion.

The Technology Solutions segment produced total revenue of $258.3 million, $216.6 million, and $172.7 million and constituted approximately 19%, 17%, and 14% of consolidated revenue in 2007, 2006, and 2005, respectively. The Technology Solutions segment produced operating income of $18.1 million, $15.8 million, and $13.4 million in 2007, 2006, and 2005, respectively.

Employees

At January 31, 2008, the Company had approximately 3,100 employees. CBT had approximately 1,300 employees covered under a collective bargaining agreement with the Communications Workers of America (“CWA”), which is affiliated with the AFL-CIO. This collective bargaining agreement expires in May 2008. As

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of January 31, 2008, representatives of the Company and the CWA tentatively agreed to a new contract, upon which the union membership will vote to approve or reject on February 27, 2008.

Business Segment Information

The amount of revenue, intersegment revenue, operating income, expenditures for long-lived assets, and depreciation and amortization attributable to each of the Company’s business segments for the years ended December 31, 2007, 2006, and 2005, and assets as of December 31, 2007 and 2006, is set forth in Note 15 to the Consolidated Financial Statements.

Item 1A. Risk Factors

The Company’s substantial debt could limit its ability to fund operations, expose it to interest rate volatility, limit its ability to raise additional capital and have a material adverse effect on its ability to fulfill its obligations and on its business and prospects generally.

The Company has a substantial amount of debt and has significant debt service obligations. As of December 31, 2007, the Company and its subsidiaries had outstanding indebtedness of $2.0 billion, on which it incurred $154.9 million of interest expense in 2007, and had total shareowners’ deficit of $667.6 million. In addition, the Company, at December 31, 2007, had the ability to borrow additional amounts under its revolving credit facility totaling approximately $167.9 million, subject to compliance with certain conditions. The Company may incur additional debt from time to time, subject to the restrictions contained in its credit facilities and other debt instruments.

The Company’s substantial debt could have important consequences, including the following:

• the Company will be required to use a substantial portion of its cash flow from operations to pay principal and interest on its debt, thereby reducing the availability of cash flow to fund working capital, capital expenditures, strategic acquisitions, investments and alliances, and other general corporate requirements;

• the Company’s interest expense could increase if interest rates, in general, increase because approximately 40% of the Company’s indebtedness is based on variable interest rates;

• the Company’s interest rate on its revolving credit facility depends on the level of the Company’s specified financial ratios, and therefore could increase if the Company’s specified financial ratios require a higher rate;

• the Company’s substantial debt will increase its vulnerability to general economic downturns and adverse competitive and industry conditions and could place the Company at a competitive disadvantage compared to those of its competitors that are less leveraged;

• the Company’s debt service obligations could limit its flexibility to plan for, or react to, changes in its business and the industry in which it operates;

• the Company’s level of debt and shareowners’ deficit may restrict it from raising additional financing on satisfactory terms to fund working capital, capital expenditures, strategic acquisitions, investments and joint ventures and other general corporate requirements; and

• a potential failure to comply with the financial and other restrictive covenants in the Company’s debt instruments, which, among other things, require it to maintain specified financial ratios could, if not cured or waived, have a material adverse effect on the Company’s ability to fulfill its obligations and on its business and prospects generally.

The servicing of the Company’s indebtedness requires a significant amount of cash, and its ability to generate cash depends on many factors beyond its control.

The Company’s ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory, and other factors, many of which are beyond its control. The Company cannot provide assurance that its business will generate sufficient cash flow from operations, that additional sources of debt financing will be available or that future borrowings will be available under its credit facilities, in each case, in amounts sufficient to enable the Company to service its indebtedness, or to fund other liquidity needs. If the Company cannot service its

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indebtedness, it will have to take actions such as reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures, selling assets, restructuring or refinancing indebtedness, or seeking additional equity capital, which may adversely affect its customers and affect their willingness to remain customers. The Company may not be able to negotiate remedies on commercially reasonable terms, or at all. In addition, the terms of existing or future debt instruments may restrict the Company from adopting any of these alternatives.

The Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries.

Certain of the Company’s material subsidiaries are subject to regulatory authority that may potentially limit the ability of a subsidiary to distribute funds or assets. If the Company’s subsidiaries were to be prohibited from paying dividends or making distributions to Cincinnati Bell Inc. (“CBI”), the parent company, CBI may not be able to make the scheduled interest and principal repayments on its $1.8 billion of debt. This would have a material adverse effect on the Company’s liquidity and the trading price of the Cincinnati Bell common stock, preferred stock, and debt instruments.

The Company’s creditors and preferred stockholders have claims that are superior to claims of the holders of Cincinnati Bell common stock. Accordingly, in the event of the Company’s dissolution, bankruptcy, liquidation, or reorganization, payment is first made on the claims of creditors of the Company and its subsidiaries, then preferred stockholders and finally, if amounts are available, to holders of Cincinnati Bell common stock.

The Company depends on its credit facilities to provide for its financing requirements in excess of amounts generated by operations.

The Company depends on its credit facilities to provide for temporary financing requirements in excess of amounts generated by operations. As of December 31, 2007, the Company had $55.0 million of outstanding borrowings under its revolving credit facility and had outstanding letters of credit totaling $27.1 million, leaving $167.9 million in additional borrowing availability under its $250 million revolving credit facility. The ability to borrow from the credit facilities is predicated on the Company’s compliance with covenants. Failure to satisfy these covenants would constrain or prohibit its ability to borrow under the credit facilities. As of December 31, 2007, the Company was in compliance with all of the covenants of its credit facilities.

The credit facilities and other indebtedness impose significant restrictions on the Company.

The Company’s debt instruments impose, and the terms of any future debt may impose, operating and other restrictions on the Company. These restrictions affect, and in many respects limit or prohibit, among other things, the Company’s ability to:

• incur additional indebtedness;

• create liens;

• make investments;

• enter into transactions with affiliates;

• sell assets;

• guarantee indebtedness;

• declare or pay dividends or other distributions to shareholders;

• repurchase equity interests;

• redeem debt that is junior in right of payment to such indebtedness;

• enter into agreements that restrict dividends or other payments from subsidiaries;

• issue or sell capital stock of certain of its subsidiaries; and

• consolidate, merge, or transfer all or substantially all of its assets and the assets of its subsidiaries on a consolidated basis.

In addition, the Company’s credit facilities and debt instruments include restrictive covenants that may materially limit the Company’s ability to prepay debt and preferred stock. The agreements governing the credit facilities also require the Company to achieve and maintain compliance with specified financial ratios.

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The restrictions contained in the terms of the credit facilities and its other debt instruments could:

• limit the Company’s ability to plan for or react to market conditions or meet capital needs or otherwise restrict the Company’s activities or business plans; and

• adversely affect the Company’s ability to finance its operations, strategic acquisitions, investments or alliances, or other capital needs, or to engage in other business activities that would be in its interest.

A breach of any of these restrictive covenants or the Company’s inability to comply with the required financial ratios would result in a default under some or all of the debt agreements. During the occurrence and continuance of a default, lenders may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable. Additionally, under the credit facilities, the lenders may elect not to provide loans until such default is cured or waived. The Company’s debt instruments also contain cross-acceleration provisions, which generally cause each instrument to be subject to early repayment of outstanding principal and related interest upon a qualifying acceleration of any other debt instrument.

Payments to repurchase common stock under the Company’s repurchase program (see Note 11 to the Consolidated Financial Statements) are considered restricted payments under certain of the Company’s debt agreements, and such payments are limited under these debt agreements. The Company believes it has sufficient ability under these debt agreements to make these restricted payments to buy back the amounts of outstanding common stock that it intends to repurchase in 2008. However, a downturn in the Company’s profitability could cause the Company not to have sufficient ability under its debt agreements to make its intended common stock buybacks in 2008, and/or could cause the Company not to be able to make additional common stock buybacks in the future.

The Company’s future cash flows could be adversely affected if it is unable to realize fully its deferred tax assets.

As of December 31, 2007, the Company had a net deferred tax asset of $596.2 million, which includes U.S. federal net operating loss carryforwards of approximately $492.3 million, alternative minimum tax credit carryforwards of $9.4 million, state and local net operating loss carryforwards of approximately $134.6 million, deferred tax temporary differences and other tax attributes of $99.9 million, offset by valuation allowances of $140.0 million. The valuation allowances have been provided against certain state and local net operating losses and other deferred assets due to the uncertainty of the Company’s ability to utilize the assets within the statutory expiration period. For more information concerning the Company’s net operating loss carryforwards, deferred tax assets, and valuation allowance, see Note 13 to the Consolidated Financial Statements. The use of the Company’s deferred tax assets enables it to satisfy current and future tax liabilities without the use of the Company’s cash resources. If the Company is unable for any reason to fully realize its deferred tax assets, its net income, shareowners’ equity, and future cash flows could be adversely affected.

The Company operates in highly competitive industries and its customers may not continue to purchase services, which could result in reduced revenue and loss of market share.

The telecommunications industry is very competitive. Competitors may reduce pricing, create new bundled offerings, or develop new technologies, products, or services. If the Company cannot continue to offer reliable, competitively priced, value-added services, or if the Company does not keep pace with technological advances, competitive forces could adversely affect it through a loss of market share or a decrease in revenue and profit margins. The Company has lost, and will likely continue to lose, access lines as a part of its customer base utilizes service of competitive wireline or wireless providers in lieu of the Company’s local wireline service.

The Wireline segment faces competition from other local exchange carriers, wireless service providers, inter-exchange carriers, and cable, broadband, and Internet service providers. The Company believes CBT could face greater competition as new facilities-based service providers with existing service relationships with CBT’s customers compete more aggressively and focus greater resources on the Greater Cincinnati operating area. Insight Cable, which provides cable service in the northern Kentucky portion of the Company’s ILEC territory, began to offer VoIP and long distance services in 2007. Time Warner Cable, AT&T, Verizon, and others offer VoIP and long distance services in Cincinnati and Dayton. Wireless providers offer plans with no additional fees for long distance. Partially as a result of this increased competition, the Company’s access lines decreased by 6% and long distance subscribers decreased by 1% in 2007. If the Company is unable to effectively implement strategies to retain access lines and long distance subscribers, or replace such access line loss with other sources of revenue, the Company’s Wireline business will be adversely affected.

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Wireless competes against national, well-funded wireless service providers in the Cincinnati and Dayton, Ohio metropolitan market areas, including AT&T, Sprint Nextel, T-Mobile, Verizon and Leap. In addition, Time Warner Cable entered into a joint venture with Sprint Nextel. This joint venture purchased spectrum licenses in 2006 during the AWS spectrum auction conducted by the FCC and in 2007 began to offer wireless services. The Company anticipates that continued competition could compress its margins for wireless products and services as carriers continue to offer more minutes for equivalent or lower service fees while CBW cannot offer more minutes without incremental capital expenditures and operating costs. CBW’s ability to compete will depend, in part, on its ability to anticipate and respond to various competitive factors affecting the telecommunications industry.

Furthermore, there has been a trend in the wireless communications industry towards consolidation through joint ventures, reorganizations, and acquisitions. The Company expects this consolidation trend to lead to larger competitors with greater resources and more service offerings than CBW. In addition, wireless subscribers are permitted to retain their wireless phone numbers when changing to another wireless carrier within the same geographic area. The Company generally does not enter into long-term contracts with its wireless subscribers, and therefore, this portability could have a significant adverse affect on the Company. The Company also believes that these wireless competitors and in particular, companies that offer unlimited wireless service plans for a flat monthly fee, are a cause of CBT’s access line loss.

Technology Solutions competes against numerous other information technology consulting, web-hosting, data center and computer system integration companies, many of which are larger, national in scope, and better financed. This market is rapidly evolving, highly competitive and likely to be characterized by over-capacity and industry consolidation. Other competitors may consolidate with one another or acquire software application vendors or technology providers, enabling them to more effectively compete with Technology Solutions. The Company believes that many of the participants in this market must grow rapidly and achieve a significant presence to compete effectively. This consolidation could affect prices and other competitive factors in ways that could impede Technology Solutions’ ability to compete successfully in the market.

The effect of the foregoing competition on any of the Company’s segments could have a material adverse impact on its businesses, financial condition, results of operations, and cash flows. This could result in increased reliance on borrowed funds and could impact the Company’s ability to maintain its wireline and wireless networks.

Maintaining the Company’s networks requires significant capital expenditures and its inability or failure to maintain its networks would have a material impact on its market share and ability to generate revenue.

During the year ended December 31, 2007, capital expenditures totaled $233.8 million, which included $97.4 million of capital expenditures related to data center construction and building its 3G wireless network. The Company expects to spend approximately 16% of 2008 revenue on capital expenditures, which includes approximately $19 million to finish building its 3G wireless network. The Company also purchased 10MHz of spectrum in the Indianapolis area in 2006. The Company is considering its options with respect to the Indianapolis spectrum, which include expansion of its wireless operations into this area, which would require significant capital expenditures, or lease of the spectrum to another wireless provider.

The Company currently operates nine data centers, including those acquired through the purchase of GramTel in December 2007, and any further data center expansion will involve significant capital expenditures for data center construction. In order to provide guaranteed levels of service to our data center customers, the network infrastructure must be protected against damage from human error, natural disasters, unexpected equipment failure, power loss or telecommunications failures, terrorism, sabotage, or other intentional acts of vandalism. The Company’s disaster recovery plan may not address all of the problems that may be encountered in the event of a disaster or other unanticipated problem, which may result in disruption of service to data center customers.

The Company may also incur significant additional capital expenditures as a result of unanticipated developments, regulatory changes, and other events that impact the business. If the Company is unable or fails to adequately maintain or expand its networks to meet customer needs, there could be a material adverse impact on the Company’s market share and its ability to generate revenue.

10

Maintenance of CBW’s wireless network, growth in the wireless business, or the addition of new wireless products and services may require CBW to obtain additional spectrum, and transmitting sites which may not be available or be available only on less than favorable terms.

For its GSM network, CBW uses spectrum licensed to the Company. In 2006, the Company acquired additional spectrum licenses, primarily for its current operating territory and Indianapolis. Introduction of new wireless products and services, as well as maintenance of the existing wireless business, may require CBW to obtain additional spectrum, either to supplement or to replace the existing spectrum. Furthermore, the Company network depends upon the deployment of radio frequency equipment on towers and atop of buildings. The Company both owns and leases spaces on these towers and buildings and typically leases underlying land. There can be no assurance that spectrum or the appropriate transmitting locations will be available to CBW or will be available on commercially favorable terms. Failure to obtain or to retain any needed spectrum or transmitting locations could have a materially adverse impact on the wireless business as a whole, the quality of the wireless networks, and the ability to offer new competitive products and services.

Data center business could be harmed by prolonged electrical power outages or shortages, increased costs of energy or general lack of availability of electrical resources.

Data centers are susceptible to regional costs of power, planned or unplanned power outages and shortages, and limitations on the availability of adequate power resources. Power outages, such as those that occurred in California in 2001, the Northeast in 2003, and from the tornados on the east coast of the U.S. in 2004, could harm the Company’s customers and business. The Company attempts to limit exposure to system downtime by using backup generators and power supplies; however, the Company may not be able to limit the exposure entirely even with those protections in place. In addition, global fluctuations in the price of power can increase the cost of energy, and although contractual price increase clauses may exist and, in some cases, the data center customer pays directly for the cost of power, the Company may not be able to pass all of these increased costs on to customers, or the increase in power costs may impact additional sales of data center space.

Long sales cycle for data center services may materially affect the data center business and results of its operations.

A customer’s decision to license cabinet space in one of the Company’s data centers and to purchase additional services typically involves a significant commitment of resources. In addition, some customers may be reluctant to commit to locating in the Company’s data center until they are confident that the data center has adequate carrier connections. As a result, the sale of data center space has a long sales cycle. Furthermore, the Company may expend significant time and resources in pursuing a particular sale or customer that may not result in revenue. Delays in the length of the data center sales cycle may have a material adverse effect on the Technology Solutions segment and results of its operations.

The Company’s failure to meet performance standards under its agreements could result in customers terminating their relationships with the Company or customers being entitled to receive financial compensation, which could lead to reduced revenues.

The Company’s agreements with its customers contain various requirements regarding performance and levels of service. If the Company fails to provide the levels of service or performance required by its agreements, customers may be able to receive service credits for their accounts and other financial compensation, as well as terminate their relationship with the Company. In addition, any inability to meet service level commitments or other performance standards could reduce the confidence of customers and could consequently impair the Company’s ability to obtain and retain customers, which would adversely affect both ability to generate revenues and operating results.

The regulation of the Company’s businesses by federal and state authorities may, among other things, place the Company at a competitive disadvantage, restrict its ability to price its products and services, and threaten its operating licenses.

Several of the Company’s subsidiaries are subject to regulatory oversight of varying degrees at both the state and federal levels, which may differ from the regulatory scrutiny faced by the Company’s competitors. A significant portion of CBT’s revenue is derived from pricing plans that require regulatory overview and approval.

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Different interpretations by regulatory bodies may result in adjustments to revenue in future periods. In recent years, these regulated pricing plans have required CBT to decrease or fix the rates it charges for some services while its competition has typically been able to set rates for its services with limited restriction. In the future, regulatory initiatives that would put CBT at a competitive disadvantage or mandate lower rates for its services could result in lower profitability and cash flow for the Company. In addition, different regulatory interpretations of existing regulations or guidelines may affect the Company’s revenues and expenses in future periods.

At the federal level, CBT is subject to the Telecommunications Act of 1996, including the rules subsequently adopted by the FCC to implement the 1996 Act, which has impacted CBT’s in-territory local exchange operations in the form of greater competition. At the state level, CBT conducts local exchange operations in portions of Ohio, Kentucky, and Indiana, and consequently, is subject to regulation by the Public Utilities Commissions in those states. Various regulatory decisions or initiatives at the federal or state level may from time to time have a negative impact on CBT’s ability to compete in its markets.

CBW’s FCC licenses to provide wireless services are subject to renewal and revocation. Although the FCC has routinely renewed wireless licenses in the past, the Company cannot be assured that challenges will not be brought against those licenses in the future. Revocation or non-renewal of CBW’s licenses could result in a cessation of CBW’s operations and consequently lower operating results and cash flow for the Company.

There are currently many regulatory actions under way and being contemplated by federal and state authorities regarding issues that could result in significant changes to the business conditions in the telecommunications industry. Assurances cannot be given that changes in current or future regulations adopted by the FCC or state regulators, or other legislative, administrative, or judicial initiatives relating to the telecommunications industry, will not have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows.

Future declines in the fair value of the Company’s wireless licenses could result in future impairment charges.

The market values of wireless licenses have varied dramatically over the last several years and may vary significantly in the future. In particular, valuation swings could occur if:

• Consolidation in the wireless industry allows or requires carriers to sell significant portions of their wireless spectrum holdings;

• A sudden large sale of spectrum by one or more wireless providers occurs; or

• Market prices decline as a result of the sale prices in recent and upcoming FCC auctions.

In addition, the price of wireless licenses could decline as a result of the FCC’s pursuit of policies designed to increase the number of wireless licenses available in each of the Company’s markets. For example, the FCC auctioned an additional 90 MHz of spectrum in the 1700 MHz to 2100 MHz band in the Advanced Wireless Services spectrum auction in 2006 and has announced the auctions of additional spectrum in the bands currently used by wireless providers, including an auction of 700 MHz in early 2008. If the market value of wireless licenses were to decline significantly, the value of the Company’s wireless licenses could be subject to non-cash impairment charges.

The Company reviews potential impairments to indefinite-lived intangible assets, including wireless licenses and trademarks, annually and when there is evidence that events or changes in circumstances indicate that an impairment condition may exist. A significant impairment loss, most likely resulting from reduced cash flow, could have a material adverse effect on the Company’s operating income and on the carrying value of the wireless licenses on the balance sheet.

Failure to anticipate the needs for and introduce new products and services or to compete with new technologies may compromise the Company’s success in the telecommunications industry.

The Company’s success depends, in part, on being able to anticipate the needs of current and future enterprise, carrier, and residential customers. The Company seeks to meet these needs through new product introductions, service quality, and technological superiority. The Company has implemented GSM technology and is currently building its 3G wireless network, which is expected to be operational in 2008, and works with

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vendors in its attempts to provide the newest handsets and accessories to its customers. New products are not always available to the Company, as other competitors may have exclusive agreements for those new products, such as the iPhone. New products and services are important to the Company’s success as its industry is technologically driven, such that new technologies can offer alternatives to the Company’s existing services. The development of new technologies and products could accelerate the Company’s loss of access lines and increase wireless customer churn, which could have a material adverse effect on the Company’s revenue, results of operations, and cash flows.

Terrorist attacks and other acts of violence or war may affect the financial markets and the Company’s business, financial condition, results of operations, and cash flows.

Terrorist attacks may negatively affect the Company’s operations and financial condition. There can be no assurance that there will not be further terrorist attacks against the U.S., U.S. businesses, or armed conflict involving the U.S. Further terrorist attacks or other acts of violence or war may directly impact the Company’s physical facilities or those of its customers and vendors. These events could cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and world financial markets and economy. They could result in an economic recession in the U.S. or abroad. Any of these occurrences could have a material adverse impact on the Company’s business, financial condition, results of operations, and cash flows.

The Company could incur significant costs resulting from complying with, or potential violations of, environmental, health, and human safety laws.

The Company’s operations are subject to laws and regulations relating to the protection of the environment, health, and human safety, including those governing the management and disposal of, and exposure to, hazardous materials and the cleanup of contamination, and the emission of radio frequency. While the Company believes its operations are in substantial compliance with environmental, health, and human safety laws and regulations, as an owner or operator of property, and in connection with the current and historical use of hazardous materials and other operations at our sites, the Company could incur significant costs resulting from complying with or violations of such laws, the imposition of cleanup obligations, and third-party suits. For instance, a number of the Company’s sites formerly contained underground storage tanks for the storage of used oil and fuel for back-up generators and vehicles. In addition, a few sites currently contain underground tanks for back-up generators, and many of the Company’s sites have aboveground tanks for similar purposes.

The Company generates a substantial portion of its revenue by serving a limited geographic area.

The Company generates a substantial portion of its revenue by serving customers in the Greater Cincinnati and Dayton, Ohio areas. An economic downturn or natural disaster occurring in this limited operating territory could have a disproportionate effect on the Company’s business, financial condition, results of operations, and cash flows compared to similar companies of a national scope and similar companies operating in different geographic areas.

Third parties may claim that the Company is infringing upon their intellectual property, and the Company could suffer significant litigation or licensing expenses or be prevented from selling products.

Although the Company does not believe that any of its products or services infringe upon the valid intellectual property rights of third parties, the Company may be unaware of intellectual property rights of others that may cover some of its technology, products, or services. Any litigation growing out of third-party patents or other intellectual property claims could be costly and time-consuming and could divert the Company’s management and key personnel from its business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Resolution of claims of intellectual property infringement might also require the Company to enter into costly license agreements. Likewise, the Company may not be able to obtain license agreements on acceptable terms. The Company also may be subject to significant damages or injunctions against development and sale of certain of its products. Further, the Company often relies on licenses of third-party intellectual property useful for its businesses. The Company cannot ensure these licenses will be available in the future on favorable terms or at all.

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Third parties may infringe the Company’s intellectual property, and the Company may expend significant resources enforcing its rights or suffer competitive injury.

The Company’s success depends in significant part on the competitive advantage it gains from its proprietary technology and other valuable intellectual property assets. The Company relies on a combination of patents, copyrights, trademarks and trade secrets protections, confidentiality provisions, and licensing arrangements to establish and protect its intellectual property rights. If the Company fails to successfully enforce its intellectual property rights, its competitive position could suffer, which could harm its operating results.

The Company’s pending patent and trademark registration applications may not be allowed, or competitors may challenge the validity or scope of its patents, copyrights or trademarks. Further, the Company may be required to spend significant resources to monitor and police its intellectual property rights. The Company may not be able to detect third-party infringements and its competitive position may be harmed before the Company does so. In addition, competitors may design around the Company’s technology or develop competing technologies. Furthermore, some intellectual property rights are licensed to other companies, allowing them to compete with the Company using that intellectual property.

Uncertainty in the U.S. and world securities markets and adverse medical cost trends could cause the Company’s pension and postretirement costs to increase.

The Company’s pension and postretirement costs are adversely affected by increases in medical and prescription drug costs. Investment returns of the Company’s pension and postretirement funds depend largely on trends in the U.S. and world securities markets and the U.S. and world economies in general. In particular, uncertainty in the securities markets and economy could result in investment returns less than those previously assumed and a decline in the value of plan assets used in pension and postretirement calculations, which the Company would be required to recognize over the next several years under generally accepted accounting principles. Should the securities markets decline and medical and prescription drug costs increase significantly, the Company would expect to face increasing annual combined net pension and postretirement costs. Refer to Note 9 to the Consolidated Financial Statements for further information.

Adverse changes in the value of assets or obligations associated with the Company’s employee benefit plans could negatively impact shareowner’s deficit and liquidity.

The Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees and one supplemental, nonqualified, unfunded plan for certain senior executives. The Company’s consolidated balance sheets indirectly reflect the value of all plan assets and benefit obligations under these plans. The accounting for employee benefit plans is complex, as is the process of calculating the benefit obligations under the plans. Adverse changes in interest rates or market conditions, among other assumptions and factors, could cause a significant increase in the Company’s benefit obligations or a significant decrease of the asset values without necessarily impacting the Company’s net income. In addition, the Company’s benefit obligations could increase significantly if it needs to unfavorably revise the assumptions used to calculate the obligations. As a result, these adverse changes could have a significant negative impact on its shareowners’ deficit. In addition, with respect to the Company’s pension plans, adverse changes could require the Company to contribute a material amount of cash to the plan or could accelerate the timing of any required payments.

If the Company fails to extend or renegotiate its collective bargaining agreements with its labor union when they expire, or if its unionized employees were to engage in a strike or other work stoppage, the Company’s business and operating results could be materially harmed.

The Company is a party to collective bargaining agreements with its labor union, which represents a significant number of its employees. Although the Company believes that its relations with its employees are satisfactory, no assurance can be given that the Company will be able to successfully extend or renegotiate its collective bargaining agreements when they expire. If the Company fails to extend or renegotiate its collective bargaining agreements, if disputes with its union arise, or if its unionized workers engage in a strike or a work stoppage, the Company could experience a significant disruption of operations or incur higher ongoing labor costs, either of which could have a material adverse effect on the business.

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The Company’s collective bargaining agreement with its labor union expires in May 2008. As of January 31, 2008, representatives of the Company and the CWA tentatively agreed to a new contract, upon which the union membership will vote to approve or reject on February 27, 2008.

Item 1B. Unresolved SEC Staff Comments

None.

Item 2. Properties

Cincinnati Bell Inc. and its subsidiaries own or maintain facilities in six states, which are Ohio, Kentucky, Indiana, Michigan, Illinois, and Missouri. Principal office locations are in Cincinnati, Ohio.

The property of the Company principally comprises telephone plant and equipment in its local telephone franchise area (i.e., Greater Cincinnati), and the infrastructure associated with its wireless business in the Greater Cincinnati and Dayton, Ohio operating areas. Each of the Company’s subsidiaries maintains some investment in furniture and office equipment, computer equipment and associated operating system software, application system software, leasehold improvements, and other assets.

With regard to its local telephone operations, the Company owns substantially all of the central office switching stations and the land upon which they are situated. Some business and administrative offices are located in rented facilities, some of which are recorded as capital leases. With regard to its wireless operations, CBW both owns and leases the locations that house its switching and messaging equipment. CBW owns approximately half of the tower structures and leases almost all of the land upon which its towers reside. CBW leases space primarily from other wireless carriers or tower companies for the remaining tower sites and its ground leases are typically renewable at CBW’s option with predetermined rate escalations. In addition, CBW leases 22 Company-run retail locations. CBTS operates five data centers – three owned and two leased – in Ohio and Kentucky. GramTel, which was acquired in December 2007, operates four data centers – one owned and three leased – in Indiana, Michigan, and Illinois. The data centers provide 24-hour monitoring of the customer’s computer equipment in the data center, power, environmental controls, and high-speed, high bandwidth point-to-point optical network connections. Due to the acquisition of ATI in 2006, CBTS also has leased offices located in Kentucky and Missouri.

The Company’s gross investment in property, plant, and equipment was $2,808.5 million and $2,586.5 million at December 31, 2007 and 2006, respectively, and was divided among the operating segments as follows:

	December 31,
	2007		2006
Wireline	82.1	%	86.5	%
Wireless	12.1	%	11.3	%
Technology Solutions	5.7	%	2.1	%
Corporate	0.1	%	0.1	%
Total	100.0	%	100.0	%

For additional information about the Company’s properties, see Note 4 to the Consolidated Financial Statements.

Item 3. Legal Proceedings

The information required by this Item is included in Note 12 to the Consolidated Financial Statements.

Item 4. Submission of Matters to a Vote of the Security Holders

None.

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Market Information

The Company’s common shares (symbol: CBB) are listed on the New York Stock Exchange. The high and low daily closing prices during each quarter for the last two fiscal years are listed below:

		First Quarter	Second Quarter	Third Quarter	Fourth Quarter
2007	High	$5.04	$6.14	$5.95	$5.58
	Low	$4.26	$4.70	$4.41	$4.34
2006	High	$4.52	$4.45	$5.14	$4.93
	Low	$3.45	$3.75	$3.75	$4.29

(b) Holders

As of February 1, 2008, there were 47,918 holders of record of the 248,375,399 outstanding common shares of the Company.

(c) Dividends

The Company does not currently intend to pay dividends on its common shares and furthermore certain covenants in its various debt agreements restrict its ability to pay dividends to its common shareowners. For additional information about the restrictions on the Company’s ability to pay dividends, see Note 7 to the Consolidated Financial Statements.

(d) Issuances Under Compensation Plans

The following table provides information as of December 31, 2007 regarding securities of the Company to be issued and remaining available for issuance under the equity compensation plans of the Company.

Plan Category	Number of securities to be issued upon exercise of stock options, awards, warrants and rights		Weighted- average exercise price of outstanding stock options, awards, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders	23,932,258	(1)	$	10.76	6,658,996
Equity compensation plans not approved by security holders	218,332	(2)		—	—
Total	24,150,590		$	10.76	6,658,996

(1) Includes 20,624,959 outstanding stock options not yet exercised, 375,154 shares of time-based restricted stock, and 2,932,145 shares of performance-based awards, restrictions on which have not yet expired as of December 31, 2007. Awards were granted under various incentive plans approved by Cincinnati Bell Inc. shareholders. The number of performance-based awards assumes the maximum awards that can be earned if the performance conditions are achieved.

(2) The shares to be issued relate to deferred compensation in the form of previously received special awards and annual awards to non-employee directors pursuant to the “Deferred Compensation Plan for Outside Directors.” From 1997 through 2004, the directors received an annual award of phantom stock equivalent to common shares (250 common shares in 1997, 500 common shares in 1998, 1,163 common shares in 1999 and 1,500 common shares from 2000-2004) and for years beginning after 2004, the annual award is the equivalent of 6,000 common shares. As a result of the plan amendment effective as of January 1, 2005, upon termination of Board service, directors are required to take distribution of all annual phantom stock awards in

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cash. Therefore, the number of actual shares of common stock to be issued pursuant to the plan as of December 31, 2007 has been reduced to approximately 40,000. This plan also provides that no awards are payable until such non-employee director completes at least five years of active service as a non-employee director, except if he or she dies while serving as a member of the Board of Directors.

(e) Stock Performance

The graph below shows the cumulative total shareholder return assuming the investment of $100 on December 31, 2002 (and the reinvestment of dividends thereafter) in each of (i) the Company’s common shares (ii) the S&P 500 ^® Stock Index, and (iii) the S&P ^© Integrated Telecommunications Services Index.

(f) Issuer Purchases of Equity Securities

The following table provides information regarding the Company’s purchases of its common stock during the quarter ended December 31, 2007:

	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Appropriate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs *
10/1/2007 – 10/31/2007	5,528	$	5.10	0	n/a
11/1/2007 – 11/30/2007	0		n/a	0	n/a
12/1/2007 – 12/31/2007	0		n/a	0	n/a

* Shares are purchased for the Company’s deferred compensation plan, and are purchased on the open market. Future purchases are subject to participant elections.

In February 2008, the Company’s Board of Directors approved the repurchase of the Company’s outstanding common stock in an amount up to $150.0 million for the period 2008 through 2009.

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Item 6. Selected Financial Data

The Selected Financial Data should be read in conjunction with the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this document.

(dollars in millions, except per share amounts)	2007			2006			2005			2004			2003
Operating Data
Revenue	$	1,348.6		$	1,270.1		$	1,209.6		$	1,207.1		$	1,557.8
Cost of services and products, selling, general, and administrative, depreciation and amortization expense		1,026.4			955.5			908.0			896.7			1,204.3
Restructuring, asset impairments and other charges, shareholder claim settlement (a)		39.8			9.7			42.8			14.8			6.2
Gain on sale of broadband assets (b)		—			(7.6	)					(3.7	)		(336.7	)
Operating income		282.4			312.5			258.8			299.3			684.0
Minority interest (income) expense (c)		—			(0.5	)		(11.0	)		(0.5	)		42.2
Interest expense (d)		154.9			162.1			184.4			203.3			217.8
Loss on extinguishment of debt (d)		0.7			0.1			99.8			—			17.6
Income (loss) before cumulative effect of change in accounting principle		73.2			86.3			(64.5	)		64.2			1,246.0
Net income (loss)	$	73.2		$	86.3		$	(64.5	)	$	64.2		$	1,331.9
Earnings (loss) per common share before cumulative effect of change in accounting principle
Basic	$	0.25		$	0.31		$	(0.30	)	$	0.22		$	5.44
Diluted	$	0.24		$	0.30		$	(0.30	)	$	0.21		$	5.02
Dividends declared per common share	$	—		$	—		$	—		$	—		$	—
Weighted average common shares outstanding (millions)
Basic		247.4			246.8			245.9			245.1			226.9
Diluted		256.8			253.3			245.9			250.5			253.3
Financial Position
Property, plant and equipment, net (e)	$	933.7		$	818.8		$	800.4		$	857.7		$	898.8
Total assets (f)		2,019.6			2,013.8			1,863.3			1,958.7			2,073.5
Long-term debt (d)		2,001.9			2,065.9			2,073.4			2,111.1			2,274.5
Total debt (d)		2,009.7			2,073.2			2,084.7			2,141.2			2,287.8
Total long-term obligations (g)		2,369.6			2,486.5			2,295.3			2,246.6			2,417.9
Minority interest (c)		—			—			28.2			39.2			39.7
Shareowners’ deficit		(667.6	)		(791.6	)		(737.7	)		(624.5	)		(679.4	)
Other Data
Cash flow provided by operating activities	$	308.8		$	334.7		$	322.3		$	300.7		$	310.6
Cash flow used in investing activities		(263.5	)		(260.0	)		(142.7	)		(124.3	)		(42.8	)
Cash flow used in financing activities		(98.6	)		(21.0	)		(178.8	)		(177.5	)		(286.7	)
Capital expenditures		(233.8	)		(151.3	)		(143.0	)		(133.9	)		(126.4	)

(a) See Notes 1, 3, 4, and 15 to the Consolidated Financial Statements for discussion related to 2007, 2006, and 2005.

(b) See Note 15 to the Consolidated Financial Statements for discussion related to 2006. The gain of $336.7 million recorded in 2003 was a result of selling substantially all of the broadband operating assets.

(c) See Note 10 to the Consolidated Financial Statements.

(d) See Note 7 to the Consolidated Financial Statements.

(e) See Note 4 to the Consolidated Financial Statements for discussion related to 2007, 2006, and 2005.

(f) See Notes 1, 4, 6, and 13 to the Consolidated Financial Statements for discussion related to 2007, 2006, and 2005.

(g) Total long-term obligations comprise long-term debt, accrued pension and postretirement, unearned revenue and other noncurrent liabilities.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the “Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement,” “Risk Factors,” and the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements.

Executive Summary

The Company is a full-service local provider of data and voice communications services and equipment and a regional provider of wireless and long distance communications services. The Company provides telecommunications service primarily on its owned local and wireless networks with a well-regarded brand name and reputation for service. The Company also sells telecommunications equipment, information technology hardware, and related services.

The Company operates in three segments: Wireline, Wireless, and Technology Solutions. The Company’s segments were realigned to be consistent with changes made in the second quarter of 2007 to its management structure and reporting. The Wireline segment combines the operations of Cincinnati Bell Telephone Company LLC and Cincinnati Bell Extended Territories LLC, which were formerly included in the Local segment, and the operations of Cincinnati Bell Any Distance Inc., Cincinnati Bell Complete Protection Inc., the Company’s payphone business and Cincinnati Bell Entertainment Inc., which were formerly included in the Other segment. The Broadband segment, which does not have any substantive on-going operations, has been eliminated. The remaining liabilities associated with the former broadband operations are now included in Corporate activities. The Wireless and Technology Solutions segments were not impacted by the segment realignment.

In 2007, the Company continued to make progress on its primary objectives, which are to: (1) add to the Company’s growth businesses, (2) defend its core franchise against increasing competition, and (3) reduce indebtedness.

Add to growth businesses

The Company increased its data center capacity to 144,000 square feet at December 31, 2007 compared to 91,000 square feet at December 31, 2006. Technology Solutions spent $91.8 million of capital expenditures, primarily to construct 85,000 square feet of data center space in the Greater Cincinnati area, and spent an additional $20.3 million to purchase GramTel USA, Inc. (“GramTel”), which provides data center services to small and medium size companies in South Bend, Indiana and Chicago, Illinois. Sales for data center and managed services were $67.6 million, an increase of $20.2 million compared to 2006. Sales of telecom and IT equipment, which are often generated from data center customers, totaled $180.8 million during 2007, an 11% increase over 2006. The Company intends to continue to pursue additional customers and growth specific to its data center business, and is prepared to commit additional resources, including capital expenditures and working capital, to support this growth.

In late 2006, the Company purchased 20 MHz of advanced wireless spectrum for the Cincinnati and Dayton, Ohio regions in the AWS spectrum auction conducted by the FCC. To satisfy increasing demand for existing voice minutes of use by customers as well as to provide enhanced data services such as streaming video, the Company is building a 3G network to deploy on the purchased AWS spectrum. The Company spent approximately $11 million in 2007 to construct the 3G network and expects to spend an additional $19 million in 2008. The Company expects the 3G network to be operational in 2008. The Company increased wireless subscribers by 43,000 subscribers, or 8%, from 528,000 at December 31, 2006 to 571,000 at December 31, 2007.

The Company increased data revenues in the Wireline segment by $20.4 million primarily due to the addition of 24,000 DSL subscribers. The Company finished the year with 222,000 DSL subscribers, an increase of 12% over 2006. In-territory primary consumer access line penetration of its DSL product increased to 42% in 2007, up 8 percentage points from last year.

In March 2007, the Company purchased a local telecommunication business, which offers voice, data and cable TV services, in Lebanon, Ohio for a purchase price of $7.0 million of which $4.6 million was paid in 2007. As a result of this acquisition, the Company now offers cable TV to 3,900 customers in Lebanon. The Company

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also began partnering in 2007 with DirecTV^© to offer satellite programming to Cincinnati Bell customers at discounted prices. The Company receives a commission for each subscriber, but is not involved in the delivery of the satellite television service. At December 31, 2007, the Company had 15,000 customers that were subscribers to DirecTV^©. The Lebanon acquisition and DirecTV^© offer mark the Company’s first foray into the entertainment business.

The Company also signed a definitive agreement to purchase eGIX for approximately $18.0 million and contingent consideration up to $5.2 million. eGIX is located in Carmel, Indiana and provides advanced data and voice services to businesses throughout the Midwest. In February 2008, the Company completed this acquisition.

Defend the core franchise against increasing competition

In its traditional operating area, the Company defended its core franchise through bundling, adding 11,000 net subscribers to its Custom Connections^SM “Super Bundle” which offers local, long distance, wireless, internet access, and the Company’s value-added service package, Custom Connections^®, at a price lower than the amount the customer would pay for the services individually. The Company finished the year with approximately 180,000 in-territory Super Bundle subscribers, 7% more than at the end of 2006. Total access lines declined by 6% versus 2006, in line with Company expectations given wireless substitution and other competitive factors. The Company believes that its Super Bundle customers are less likely to disconnect existing services and change services to a competitor.

Reduce indebtedness

The Company’s total indebtedness was $2,009.7 million at December 31, 2007 compared to $2,073.2 million at December 31, 2006. In 2007, the Company repaid $184.0 million of the Tranche B Term Loan using proceeds of $75.0 million from borrowings under the accounts receivables securitization facility (“receivables facility”) and the remainder from available cash. The Company expects interest savings to be approximately 1% per annum on the $75.0 million borrowed under the receivables facility as compared to interest that would have been incurred under the Tranche B Term Loan. The Company also purchased and retired $26.4 million of the 7 ¹/4% Senior Notes due 2013 and $5.0 million of 8 ³/8% Senior Subordinated Notes due 2014. The Company had borrowings of $55.0 million on its Corporate credit facility at December 31, 2007 to fund short-term working capital needs.

Results of Operations

Consolidated Overview

The financial results for 2007, 2006, and 2005 referred to in this discussion should be read in conjunction with the Consolidated Statements of Operations and Note 15 to the Consolidated Financial Statements.

2007 Compared to 2006

Consolidated revenue totaled $1,348.6 million in 2007, an increase of $78.5 million, compared to $1,270.1 million in 2006. The increase was primarily due to the following:

• $41.7 million higher revenues in the Technology Solutions segment primarily due to increased data center and managed services revenue and telecom and IT equipment revenue; and

• $32.5 million higher revenues in the Wireless segment primarily due to increased postpaid service revenue from additional subscribers.

Operating income for 2007 was $282.4 million, a decrease of $30.1 million compared to 2006. The decrease was primarily due to the following:

• $39.3 million decrease in Wireline segment operating income primarily due to 2007 restructuring costs;

• $14.1 million increase in Wireless segment operating income due to higher postpaid revenue partially offset by higher network costs, selling, general and administrative expenses and depreciation; and

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• $7.2 million increase in Corporate costs primarily related to income in 2006 from the expiration of certain warranties and guarantees, the sale of broadband fiber assets and a bankruptcy claim receivable partially offset by the 2006 settlement of a shareholder litigation claim.

Interest expense decreased to $154.9 million for 2007 compared to $162.1 million in 2006. The decrease compared to last year is primarily attributable to lower debt balances due to the repayment of portions of the Tranche B Term Loan and 7 ¹/4% Senior Notes due 2013 partially offset by higher short-term interest rates.

Income tax expense of $56.7 million in 2007 was less than the $68.3 million expense in 2006 primarily due to lower pretax income.

The Company has certain non-deductible expenses, including interest on securities originally issued to acquire its broadband business (the “Broadband Securities”) or securities that the Company has subsequently issued to refinance the Broadband Securities. In periods without tax law changes, the Company expects its effective tax rate to exceed statutory rates primarily due to the non-deductible expenses associated with the Broadband Securities. The Company used approximately $56 million federal and state net operating loss carryforwards to substantially defray payment of federal and state tax liabilities. As a result, the Company had cash income tax payments of $6.6 million during the year.

2006 Compared to 2005

Consolidated revenue totaled $1,270.1 million in 2006, an increase of $60.5 million, compared to 2005. The increase was primarily due to the following:

• $43.9 million increased revenues in the Technology Solutions segment primarily due to increased telecom and IT equipment sales;

• $24.5 million higher revenues in the Wireless segment due to an increase in postpaid service revenue from additional subscribers and increased data revenue; and

• $7.3 million lower revenues in the Wireline segment due to access line loss, partially offset by higher data and DSL revenues.

Operating income for 2006 was $312.5 million, an increase of $53.7 million compared to 2005. The increase was primarily due to the following:

• $71.9 million increase in Wireless operating income due to impairment charges of $42.3 million incurred in 2005 associated with the retirement of certain Time Division Multiple Access (“TDMA”) assets and decreased depreciation expense of $32.5 million in 2006 primarily associated with the replaced TDMA network assets;

• $10.9 million decrease in Wireline operating income due to lower revenue; and

• $9.7 million increase in corporate costs mainly related to the $6.3 million settlement of the Company’s shareholder litigation in the first quarter of 2006 and increased business development costs.

The minority interest caption relates primarily to the 19.9% minority interest in the net income of CBW until the Company’s acquisition of this minority interest on February 14, 2006. No further minority interest expense was recorded after February 14, 2006 because CBW is now wholly owned by the Company. The 2005 TDMA impairment charge noted above gave rise to CBW losses in 2005, and the minority interest income of $11.0 million represents the minority owner’s portion of the losses.

Interest expense decreased to $162.1 million for 2006 compared to $184.4 million in 2005. This decrease is primarily a result of the Company’s refinancing activities in 2005, which replaced high interest debt for debt with lower interest rates, partially offset by higher short-term interest rates.

The loss on extinguishment of debt of $99.8 million for 2005 was comprised of a $91.9 million loss related to the repurchase of the 16% Notes and $7.9 million associated with the repayment of previously existing credit facilities. See Note 7 to the Consolidated Financial Statements for further details.

Income tax expense was $68.3 million in 2006 compared to $54.3 million for 2005. This increase was primarily due to the income tax benefit in 2005 associated with the $99.8 million loss on extinguishment of debt,

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a $3.6 million charge in the first quarter of 2006 related to new Kentucky state tax regulations issued in February 2006, which limited the Company’s ability to use its state net operating loss carryforwards against future state taxable income, and higher pretax income. These increases were partially offset by an income tax charge of $47.5 million in 2005 resulting from the state of Ohio instituting a gross receipts tax and phasing out Ohio’s corporate franchise and income tax which caused certain deferred tax assets to become unrealizable. The Company used federal and state net operating loss carryforwards to substantially defray payment of federal and state tax liabilities and as a result, had cash income tax payments of $6.6 million during the year.

Discussion of Operating Segment Results

Wireline

The Wireline segment primarily provides local voice telephone service, including enhanced custom calling features, and data services, which include DSL, dial-up Internet access, dedicated network access, Gigabit Ethernet and Asynchronous Transfer Mode based data transport, to customers in southwestern Ohio, northern Kentucky, and southeastern Indiana. CBT, which operates as the Incumbent Local Exchange Carrier (“ILEC”) in its operating territory of an approximate 25-mile radius of Cincinnati, Ohio, is the primary provider of these services. CBT’s network has full digital switching capability and can provide data transmission services to over 90% of its in-territory access lines via DSL.

Outside of its ILEC territory, the Wireline segment provides these services through CBET, which operates as a competitive local exchange carrier (“CLEC”) both in the communities north of CBT’s operating territory and in the greater Dayton market. CBET provides voice and data services for residential and business customers on its own network and by purchasing unbundled network elements from the ILEC. CBET provides service through UNE-L to its customer base in the Dayton, Ohio market. The Wireline segment links its Cincinnati and Dayton geographies through its SONET, which provides route diversity via two separate paths.

In March 2007, CBET purchased a local telecommunication business, which offers voice, data and cable services, in Lebanon, Ohio.

The Wireline segment also includes the operations of CBAD, CBCP, the Company’s payphone business and CBE. CBAD provides long distance, audio conferencing and VoIP services and CBCP provides security monitoring for consumers and businesses as well as related hardware. CBE had no activity in 2007.

In late 2007, CBAD committed to the acquisition of eGIX, a CLEC provider of voice and long distance services to business customers in Indiana. Revenues for eGIX were approximately $15 million in 2007. The Company completed this acquisition in February 2008.

(dollars in millions)	2007			2006			$ Change 2007 vs. 2006			% Change 2007 vs. 2006	2005			$ Change 2006 vs. 2005			% Change 2006 vs. 2005
Revenue:
Voice — local service	$	432.4		$	463.9		$	(31.5	)	(7)%	$	491.9		$	(28.0	)	(6)%
Data		258.6			238.2			20.4		9%		219.2			19.0		9%
Long distance		79.3			71.8			7.5		10%		69.5			2.3		3%
Other		51.4			36.5			14.9		41%		37.1			(0.6	)	(2)%
Total revenue		821.7			810.4			11.3		1%		817.7			(7.3	)	(1)%
Operating costs and expenses:
Cost of services and products		276.6			264.1			12.5		5%		260.1			4.0		2%
Selling, general and administrative		151.0			145.5			5.5		4%		143.3			2.2		2%
Depreciation		105.2			106.2			(1.0	)	(1)%		110.1			(3.9	)	(4)%
Amortization		0.3			—			0.3		n/m		—			—		n/m
Restructuring		36.1			2.8			33.3		n/m		1.5			1.3		87%
Total operating costs and expenses		569.2			518.6			50.6		10%		515.0			3.6		1%
Operating income	$	252.5		$	291.8		$	(39.3	)	(13)%	$	302.7		$	(10.9	)	(4)%
Operating margin		30.7	%		36.0	%				(5) pts		37.0	%				(1) pts
Capital expenditures	$	96.3		$	92.5		$	3.8		4%	$	96.7		$	(4.2	)	(4)%

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2007 Compared to 2006

Revenue

Voice local service revenue includes local service, value added services, switched access, and information services. Voice revenue decreased in 2007 compared to 2006 primarily as a result of a 6% decrease in access lines.

Access lines within the segment’s ILEC territory decreased by 65,000, or 8%, from 837,000 at December 31, 2006 to 772,000 at December 31, 2007. The Company believes the access line loss resulted from several factors including customers electing to use wireless communication in lieu of the traditional local service, Company-initiated disconnections of customers with credit problems, and customers electing to use service from other providers. The Company has partially offset its access line loss in its ILEC territory by continuing to target voice services to residential and business customers in its CLEC territory. The Company had approximately 62,000 CLEC access lines at December 31, 2007, which is a 24% increase from December 31, 2006.

Data revenue consists of data transport, high-speed Internet access (including DSL), dial-up Internet access, digital trunking, and Local Area Network (“LAN”) interconnection services. The increase in data revenue of $20.4 million in 2007 compared to 2006 is mainly due to higher DSL and data transport revenue. An increase in DSL subscribers contributed an additional $12.5 million of revenue in 2007 versus 2006. As of December 31, 2007, the Company’s DSL penetration of addressable in-territory primary consumer access lines was approximately 42%, up 8 percentage points from December 31, 2006. Data transport revenues increased by $7.7 million for 2007, compared to 2006, primarily due to increased usage by CBW and third party users.

Long distance revenue increased $7.5 million in 2007 compared to 2006. The increase was primarily due to higher minutes of use for both long distance and audio conferencing, as well as increased revenue from the Company’s Voice over Internet Protocol (“VoIP”) product, which the Company began offering in mid-2006. The Company had approximately 548,000 subscribed long distance access lines as of December 31, 2007 compared to 552,000 as of December 31, 2006. The decrease in subscribers was due to a 5% decline in residential lines, consistent with the access line loss, partially offset by a 10% increase in business subscribers.

The Company believes its rate of access line loss would have been greater and its increase in DSL subscribers would have been less without the success of its “Super Bundle,” Custom Connections^SM. The Company’s Super Bundle offers local, long distance, wireless, internet access and the Company’s value added services package, Home Phone Pak, at a price lower than the amount the customer would pay for the services individually. In its traditional operating area, the Company added approximately 11,000 Super Bundle subscribers through 2007, bringing total subscribers to 180,000 and penetration of in-territory primary residential access lines to 38%. This package has increased the demand for and increased subscriber retention of the Company’s ZoomTown DSL offering. The number of DSL subscribers increased by 24,000 subscribers during 2007 to bring total subscribers to 222,000. As a result of this DSL growth, total lines to the customer (defined as access lines plus DSL subscribers) as of December 31, 2007 decreased only slightly compared to December 31, 2006, and revenue per household increased 4% to $52.46.

Other revenue increased $14.9 million from 2006 due to increased revenue on customer premise wiring projects, $9.5 million of which came from a large one-time business customer project, and cable TV revenue due to the purchase of a local telecommunications business.

Costs and expenses

Cost of services and products increased by $12.5 million in 2007 versus 2006. The increase was due to costs associated with a large one-time business customer premise wiring project of $9.0 million, higher network costs of $6.1 million related to higher CLEC interconnection charges due to increased subscribers and increased minutes of use for long distance, audio conferencing, and VoIP, higher facilities costs of $1.6 million and higher software development costs. The increases were partially offset by a $2.8 million decrease in pension and postretirement costs and lower property and other operating taxes of $3.9 million, primarily due to the phase out of Ohio personal property taxes.

Selling, general and administrative expenses increased $5.5 million compared to 2006 primarily due to an increase in payroll and employee-related expenses of $5.1 million and higher consulting expenses, partially

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related to the evaluation of marketing strategies for business customers. The Company is responding to competitive pressures by increasing its sales and marketing activities, particularly in the business markets.

Restructuring expenses for 2007 were primarily due to the restructuring plan announced in the fourth quarter of 2007 to reduce costs and increase operational efficiencies. Restructuring costs for 2006 primarily related to the outsourcing of certain supply chain functions. See Note 3 to the Consolidated Financial Statements for further discussions.

2006 Compared to 2005

Revenue

Voice revenue decreased in 2006 compared to 2005 primarily as a result of a 5% decrease in access lines.

Access lines within the segment’s ILEC territory decreased by 56,000, or 6%, from 893,000 at December 31, 2005 to 837,000 at December 31, 2006, which the Company believes results from several factors including customers electing to use wireless communication in lieu of the traditional local service, Company-initiated disconnections of customers with credit problems, and customers electing to use service from other providers. The Company has partially offset its access line loss in its ILEC service territory by targeting voice services to residential and small business customers in Dayton, Ohio. The Company had 50,000 total access lines outside its ILEC service territory at December 31, 2006, a 33% increase from the prior year.

The increase in data revenue of $19.0 million for 2006 as compared to 2005 is due to higher DSL revenue and data transport revenue. An increase in DSL subscribers of 36,000, partially offset by a slightly lower average rate per subscriber, produced an additional $11.9 million in revenue for 2006 as compared to 2005. Data transport revenues were $5.2 million higher in 2006 as compared to 2005 due to higher data usage by CBW and third party users. As of December 31, 2006, the Company’s DSL penetration of in-territory primary consumer access lines was approximately 34%, up from 26% at December 31, 2005.

Long distance revenue increased $2.3 million in 2006 compared to 2005. The increase was primarily due to new dedicated access business customers and a 28% increase in minutes of use for audio conferencing. The Company had approximately 552,000 subscribed long distance access lines as of December 31, 2006, a decrease of 12,000 lines compared to 2005. The decrease in subscribers from 2005 was related to a 4% decline in residential subscribers, consistent with the access line loss, partially offset by a 4% increase in business subscribers.

The Company added 23,000 Super Bundle subscribers during 2006, bringing total subscribers to 173,000, of which 162,000 were consumer ILEC subscribers, a 32% penetration of primary in-territory consumer access lines. An aggressive marketing campaign and the favorable bundled pricing associated with Custom Connections^SM “Super Bundle” increased the demand for the Company’s ZoomTown DSL offering, growing 22% compared to December 31, 2005, to 198,000 subscribers. As a result of this growth, total lines to the customer (defined as access lines plus DSL subscribers) as of December 31, 2006 decreased only slightly compared to December 31, 2005, and revenue per household increased 3% to $50.25.

Costs and Expenses

Cost of services and products increased by $4.0 million in 2006 versus 2005. The increase was mainly due to a $3.5 million increase in non-recurring operating taxes, additional network costs of $4.5 million primarily related to the increase in subscribers in the CLEC operating area and increased minutes of use for long-distance and audio conferencing, and an increase of $1.3 million in benefit expense. These increases were partially offset by lower wages of $4.5 million resulting from the outsourcing of directory services in 2005 and other Company restructuring initiatives.

Selling, general and administrative expenses increased $2.2 million compared to 2005. Higher costs of $2.9 million primarily related to pension and postretirement costs and $0.9 million for bad debt expense were partially offset by lower software maintenance and insurance costs.

Depreciation expense decreased $3.9 million in 2006 compared to 2005. The decrease was primarily due to assets becoming fully depreciated at a greater rate than capital expenditures.

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The Company incurred restructuring charges of $2.8 million primarily related to the outsourcing of certain supply chain functions in 2006. The Company incurred a $1.5 million charge in 2005 related to the outsourcing of its directory assistance services. See Note 3 to the Consolidated Financial Statements for further discussion.

Wireless

The Wireless segment provides advanced digital, voice, and data communications services through the operation of a regional wireless network in a licensed service territory, which surrounds Cincinnati and Dayton, Ohio and includes areas of northern Kentucky and southeastern Indiana. The segment offers service outside of its regional operating territory through wholesale and re-sale arrangements (“roaming agreements”) with other wireless operators. The segment also sells wireless handset devices and related accessories to support its service business.

The Wireless segment consists of CBW, which was historically a joint venture owned 80.1% by the Company and 19.9% by a minority holder. On February 14, 2006, the Company purchased the remaining 19.9% membership interest and CBW is now a wholly-owned subsidiary. See Note 5 to the Consolidated Financial Statements.

From October 2003 through June 2006, CBW deployed service on both TDMA and GSM networks. During the first quarter of 2003, CBW began to transition its subscribers to GSM technology, which provides voice communication, short message service (“SMS”) or text messaging and enhanced data communication services, such as mobile web browsing, internet access, email, and picture messaging. As of June 30, 2006, the Company had converted all of its subscribers to the GSM network and as a result discontinued the operation of its TDMA network.

To satisfy increasing demand for existing voice minutes of use by customers as well as to provide enhanced data services such as streaming video, the Company is building a third generation (“3G”) network to deploy on the purchased AWS spectrum. The Company spent approximately $11 million in 2007 to construct the 3G network and expects to spend an additional $19 million in 2008. The Company expects the network to be operational in mid 2008.

(dollars in millions, except for operating metrics)	2007			2006			$ Change 2007 vs. 2006			% Change 2007 vs. 2006	2005			$ Change 2006 vs. 2005			% Change 2006 vs. 2005
Revenue:
Service	$	267.5		$	235.7		$	31.8		13%	$	214.8		$	20.9		10%
Equipment		27.0			26.3			0.7		3%		22.7			3.6		16%
Total revenue		294.5			262.0			32.5		12%		237.5			24.5		10%
Operating costs and expenses:
Cost of services and products		152.1			146.1			6.0		4%		129.3			16.8		13%
Selling, general and administrative		68.2			62.6			5.6		9%		56.1			6.5		12%
Depreciation		34.8			29.0			5.8		20%		61.5			(32.5	)	(53)%
Amortization		3.0			4.1			(1.1	)	(27)%		—			4.1		n/m
Restructuring		2.1			—			2.1		n/m		—			—		n/m
Asset impairments and other charges		—			—			—		n/m		42.3			(42.3	)	(100)%
Total operating costs and expenses		260.2			241.8			18.4		8%		289.2			(47.4	)	(16)%
Operating income (loss)	$	34.3		$	20.2		$	14.1		70%	$	(51.7	)	$	71.9		n/m
Operating margin		11.6	%		7.7	%				4 pts		(21.8	)%				30 pts
Operating metrics
Postpaid ARPU *	$	46.55		$	46.51		$	0.04		0%	$	45.64		$	0.87		2%
Prepaid ARPU *	$	23.97		$	20.71		$	3.26		16%	$	19.62		$	1.09		6%
Capital expenditures	$	45.7		$	47.4		$	(1.7	)	(4)%	$	39.1		$	8.3		21%

* The Company has presented certain information regarding monthly average revenue per user (“ARPU”) because the Company believes ARPU provides a useful measure of the operational performance of the wireless business. ARPU is calculated by dividing service revenue by the average subscriber base for the period.

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2007 Compared to 2006

Revenue

Service revenue increased by $31.8 million in 2007 as compared to 2006 primarily due to the following:

• Postpaid service revenue increased $26.5 million primarily due to an increase in subscribers. Postpaid subscribers increased 9% from 366,000 subscribers at December 31, 2006 to 400,000 at December 31, 2007. The average monthly churn of 1.6% for 2007 was flat compared to 2006. The year-over-year postpaid subscriber growth is due to the introduction of more attractive rate plans and continuing network quality improvements; and

• Prepaid service revenue increased $5.3 million compared to 2006 primarily due to the increase in ARPU of $3.26. The increase in ARPU was partially driven by a 33% increase in data revenue. As of December 31, 2007, prepaid subscribers totaled approximately 171,000 compared to 162,000 subscribers at December 31, 2006. The Company lost subscribers in the summer of 2006 due to increased competition, but has regained subscribers as well as increased ARPU with the introduction of more attractive rate plans.

Equipment revenue for 2007 increased $0.7 million as compared to 2006 primarily due to revenue increases per handset sale.

Cost and expenses

Cost of services and products consists largely of network operation costs, interconnection expenses with other telecommunications providers, roaming expense (which are costs incurred for subscribers to use their handsets in the territories of other wireless service providers), and cost of handsets and accessories sold. These expenses increased $6.0 million in 2007 compared to 2006. The increase primarily resulted from higher network costs of $7.7 million due to the higher number of subscribers offset by lower subsidies and handset costs of $2.2 million. The decrease in subsidies and handset costs resulted from high subsidies in 2006 caused by the migration from the TDMA network to the GSM network and a change in third party dealer compensation practice in the second quarter of 2006. As a result of this change, the Company now predominantly pays a commission, which is reported as a selling expense, rather than incurring a subsidy by selling handsets to dealers at a rate below retail price.

Selling, general, and administrative expenses increased $5.6 million in 2007 compared to 2006. The increase was primarily due to higher commissions of $2.0 million resulting from the change in compensation practice for the third party commissions discussed above and higher activations, and increased retail store costs of $2.6 million.

Depreciation expense increased $5.8 million for 2007 versus 2006. The increase was primarily due to the shortening of the useful lives of certain GSM assets as a result of the Company constructing its 3G wireless network, which the Company expects to complete in 2008.

Amortization expense results from the allocation of the purchase price to certain intangibles associated with the purchase of the remaining 19.9% membership interest in CBW. The decrease in amortization results from the accelerated amortization methodology used, which causes a decrease in amortization in each subsequent year. See Note 5 to the Consolidated Financial Statements for further discussion.

Restructuring expenses for 2007 were primarily due to the restructuring plan announced in the fourth quarter of 2007 to reduce costs and increase operational efficiencies. See Note 3 to the Consolidated Financial Statements for further discussions.

26

2006 Compared to 2005

Revenue

Service revenue increased by $20.9 million in 2006 as compared to 2005. This increase is primarily attributed to the following:

• Postpaid service revenue increased $22.1 million primarily due to more subscribers and a $9.4 million increase in data revenue from $11.4 million in 2005 to $20.8 million in 2006. Postpaid subscribers increased 16% from 315,100 subscribers at December 31, 2005 to 366,000 at December 31, 2006. Average monthly churn for the year was 1.6% in 2006 compared to 2.2% in 2005. The improved churn rate and increased number of subscribers were due to the introduction of more attractive rate plans in late 2005 and the improved wireless network;

• Prepaid service revenue increased $0.7 million compared to 2005 as the effect of higher ARPU of $1.09 was offset by a lower number of subscribers. As of December 31, 2006, prepaid subscribers totaled approximately 162,000 compared to 180,500 subscribers at December 31, 2005; and

• Postpaid roaming and other revenue decreased $1.9 million due to a decrease in minutes of use and in roaming revenue per minute. As a result of the merger between Cingular and AT&T Wireless Services Inc., CBW lost roaming revenue as Cingular customers are not using CBW’s network.

Equipment revenue for 2006 increased $3.6 million compared to 2005 due to the increase in subscriber additions and the migration to the GSM network. The Company subsidized the price of handset sales to promote acquisitions and retention of subscribers and during the first half of 2006, to accelerate the migration to its GSM network.

Costs and Expenses

The increase in costs of $16.8 million compared to 2005 was due to a $9.2 million increase in network expense, resulting from increased voice minutes and data services usage, and a $5.2 million increase for handset and accessory costs due to higher activations and the migration of subscribers from the TDMA network to the GSM network. The remaining cost increases resulted from higher operating taxes and customer service costs related to increased subscribers.

Selling, general and administrative expenses increased $6.5 million in 2006 as compared to 2005. The increase was primarily due to increased commissions and other payroll related costs of $5.3 million from the higher number of subscriber activations and increased bad debt expense.

Depreciation expense decreased $32.5 million in 2006 versus 2005 primarily from the accelerated depreciation expense in 2005 on the TDMA assets.

Amortization expense in 2006 resulted from the allocation of the purchase price to certain intangibles associated with the purchase of the CBW minority interest. See Note 5 to the Consolidated Financial Statements.

The Company incurred charges of $42.3 million in 2005 to write down the recorded value of its TDMA network assets. A portion of the TDMA assets were taken out of service in 2005 in order to optimize the remaining spectrum associated with TDMA assets. In addition, an impairment charge was incurred to write down the remaining TDMA assets in use to fair value. Due to the rapid migration of TDMA subscribers to the Company’s GSM network and lower ARPU associated with the remaining TDMA customers, the remaining future cash flows associated with the TDMA assets could no longer support the recorded value of the TDMA assets, which resulted in the impairment charge.

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Technology Solutions

The Technology Solutions segment provides business technology solutions through the Company’s subsidiary, Cincinnati Bell Technology Solutions, Inc. (“CBTS”) and GramTel, which was purchased on December 31, 2007. See Note 5 to the Consolidated Financial Statements for further discussion.

(dollars in millions)	2007			2006			$ Change 2007 vs. 2006		% Change 2007 vs. 2006	2005			$ Change 2006 vs. 2005			% Change 2006 vs. 2005
Revenue:
Telecom and IT equipment distribution	$	180.8		$	162.2		$	18.6	11%	$	126.7		$	35.5		28%
Data center and managed services		67.6			47.4			20.2	43%		37.1			10.3		28%
Professional services		9.9			7.0			2.9	41%		8.9			(1.9	)	(21)%
Total revenue		258.3			216.6			41.7	19%		172.7			43.9		25%
Operating costs and expenses:
Cost of services and products		204.6			175.2			29.4	17%		139.5			35.7		26%
Selling, general and administrative		27.2			21.9			5.3	24%		17.4			4.5		26%
Depreciation		7.0			3.4			3.6	n/m		2.3			1.1		48%
Amortization		0.4			0.3			0.1	33%		—			0.3		n/m
Restructuring		1.0			—			1.0	n/m		0.1			(0.1	)	(100)%
Total operating costs and expenses		240.2			200.8			39.4	20%		159.3			41.5		26%
Operating income	$	18.1		$	15.8		$	2.3	15%	$	13.4		$	2.4		18%
Operating margin		7.0	%		7.3	%			0 pts		7.8	%				(1) pts
Capital expenditures	$	91.8		$	11.2		$	80.6	n/m	$	7.2		$	4.0		56%

2007 Compared to 2006

Revenue

Revenue from telecom and IT equipment distribution represents the sale, installation, and maintenance of major, branded IT and telephony equipment. The increased data center customers have given rise to increased revenue associated with IT and telephony equipment. Revenue from telecom and IT equipment distribution increased by $18.6 million in 2007 versus 2006 primarily as a result of increased equipment sales of $15.6 million and higher installation and maintenance services.

Data center and managed services revenue consists of recurring collocation rents from customers residing in the Company’s data centers, managed VOIP Solutions and IT services that include network management, electronic data storage, disaster recovery and data security management. Revenue increased $20.2 million in 2007 as compared to the same period a year ago primarily due to increased product penetration within managed services and increased billable data center space. Data center billed utilization at December 31, 2007 was 93% on approximately 144,000 square feet of data center capacity, which includes 13,000 square feet of data center capacity due to the acquisition of GramTel, compared to billed utilization of 91% on approximately 91,000 square feet of data center capacity at December 31, 2006. Substantially all of the Technology Solutions capital expenditures in 2007 were to build data center capacity. The Company intends to continue to pursue additional customers and growth in its data center business, and is prepared to commit additional resources, including capital expenditures and working capital, to support this growth.

Professional services revenue consists of long-term and short-term IT outsourcing and consulting engagements. Revenue for 2007 increased by $2.9 million compared to 2006. Early in 2007, the Company expanded its team of recruiting and hiring personnel in order to focus on selling these outsourcing and consulting engagements.

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Costs and Expenses

Cost of services and products increased by $29.4 million in 2007 compared to 2006. The increase in 2007 primarily resulted from a $12.3 million increase in the cost of goods sold related to higher IT and equipment revenue, $13.7 million increase in payroll and contracted services due to growth in data center and managed service revenue, and increased data center facilities costs.

The increase in selling, general, and administrative expenses for 2007 was primarily due to an increase in labor and employee related costs associated with increased headcount to support the growing operations.

The increase in depreciation expense for 2007 compared to 2006 was primarily due to capital expenditures associated with expanding data center capacity.

Amortization expense results from the allocation of a portion of the purchase price to the customer relationship intangible asset associated with the ATI acquisition in May 2006. See Note 5 to the Consolidated Financial Statements.

Restructuring expenses for 2007 were primarily due to the restructuring plan announced in the fourth quarter of 2007 to reduce costs and increase operational efficiencies. See Note 3 to the Consolidated Financial Statements for further discussions.

2006 Compared to 2005

Revenue

Revenue from telecom and IT equipment distribution increased by $35.5 million in 2006 versus 2005 mainly due to the addition of new products for resale and the acquisition of ATI. See Note 5 to Consolidated Financial Statements.

Data center and managed services revenue increased $10.3 million versus 2005 mainly due to both increased product penetration within managed services and increased billable data center space. CBTS had a billed utilization rate of 91% with approximately 91,000 square feet of billable data center capacity at December 31, 2006 compared to a billed utilization rate of 99% with approximately 71,000 square feet of billable data center capacity at December 31, 2005.

Professional services revenue declined by $1.9 million versus 2005 mainly due to the transfer of the Company’s internal IT support group to CBT and a pricing decrease associated with the renegotiation of a major long-term contract.

Costs and Expenses

Cost of services and products increased by $35.7 million in 2006 versus 2005. The increase results from a $28.4 million increase in cost of goods sold mainly due to the increased IT and equipment sales, a $5.0 million increase in payroll and contracted services costs to support the increased revenue growth of the data center and managed services unit, higher rent of $1.1 million primarily due to the opening of a data center in June 2005 and higher utilities.

The increase in selling, general and administrative expenses in 2006 compared to 2005 was primarily due to an increase in labor costs associated with increased headcount to support the growing operations.

Depreciation expense was higher in 2006 primarily due to the increased capital expenditures for the data centers.

Amortization expense in 2006 results from the allocation of a portion of the purchase price to the customer relationship intangible asset associated with the ATI acquisition. See Note 5 to the Consolidated Financial Statements.

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The Company’s Financial Condition, Liquidity, and Capital Resources

Capital Investment, Resources and Liquidity

As of December 31, 2007, the Company held $26.1 million in cash and cash equivalents, which is a $53.3 million decrease compared to December 31, 2006. At December 31, 2006, the Company held excess cash to make significant payments of capital expenditures in early 2007.

The Company’s primary sources of cash in 2008 will be cash generated by operations and borrowings from the revolving credit facility under which the Company had $167.9 million of availability at December 31, 2007. Cash flows from operations totaled $308.8 million in 2007. These 2007 cash flows from operations included payments totaling $56 million for operating taxes and early pension contributions that the Company does not expect will be required in 2008. Additionally, the Company expects that its payments for interest costs will be reduced by approximately $13 million as compared to 2007 due to lower interest rates and debt balances.

In 2008, the Company expects to spend approximately 16% of 2008 revenue on capital expenditures (revenue for 2008 is expected to be $1.4 billion), which includes $16.3 million in February 2008 for the purchase of a building to be converted into a data center facility. Cash of $18 million will also be used for the acquisition of eGix, a company that provides advanced data and voice services to businesses in the Midwest. Other uses of cash will include repayments and repurchases of debt and related interest, dividends on the 6 ³/4% Cumulative Convertible Preferred Stock and working capital. Additionally, in February 2008, the Company’s Board of Directors has authorized the repurchase of the Company’s outstanding common stock in an amount up to $150 million over 2008 and 2009. The common stock repurchases will be made from excess cash earned by the Company over this time period.

The Company believes the cash generated by operations and borrowings on its Corporate credit facility are sufficient to fund its primary uses of cash.

The Corporate credit facility financial covenants require that the Company maintain certain leverage ratios, interest coverage, and fixed charge ratios. The facility also contains certain covenants which, among other things, limit the Company’s ability to incur additional debt or liens, pay dividends, repurchase Company common stock, sell, transfer, lease, or dispose of assets, and make investments or merge with another company. If the Company were to violate any of its covenants and was unable to obtain a waiver, it would be considered a default. If the Company were in default under its credit facilities, no additional borrowings under the credit facilities would be available until the default was waived or cured. The Company is in compliance with its Corporate credit facility covenants.

Various issuances of the Company’s public debt, which include the 7 ¹/4% Senior Notes due 2013 (“7 ¹/4% Notes due 2013”), 8³/₈% Senior Subordinated Notes due 2014 (“8³/₈% Notes”), and the 7% Notes due 2015 (“7% Notes”), contain covenants that, among other things, limit the Company’s ability to incur additional debt or liens, pay dividends or make other restricted payments, sell, transfer, lease, or dispose of assets and make investments or merge with another company. Restricted payments include common stock dividends, repurchase of common stock, and certain other public debt repayments. The Company believes it has sufficient ability under its public debt indentures to make its intended restricted payments in 2008. The Company is in compliance with its public debt indentures.

Reasons for Debt and Accumulated Deficit

As of December 31, 2007, the Company had $2.0 billion of outstanding indebtedness and an accumulated deficit of $3.5 billion. The Company incurred a significant amount of indebtedness and accumulated deficit from the purchase and operation of a broadband business over the period of 1999 to 2002, which caused outstanding indebtedness and accumulated deficit to reach their respective year-end peaks of $2.6 billion and $4.9 billion at December 31, 2002. In 1999, the Company acquired IXC Communications, Inc. (“IXC”) for approximately $3.2 billion. In connection with the acquisition, the Company assumed approximately $1.0 billion of debt. IXC, subsequently renamed BRCOM (f/k/a Broadwing Communications Inc.), provided long haul voice, data, and Internet service over an 18,700 mile fiber optic network. In 2001, the business environment for BRCOM and the broader telecommunications industry deteriorated rapidly and significantly, causing the Company to incur substantial operating and net losses. From the acquisition of BRCOM in 1999 through to its sale in June 2003, the Company used a total of approximately $2.3 billion of both cash flow from its other businesses and borrowings under its credit facilities to finance the buildout of BRCOM’s national optical network and to meet BRCOM’s other cash needs.

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2007 Debt Repayments

In 2007, the Company repaid $184.0 million of the Tranche B Term Loan, composed of a prepayment of $180.0 million and normal maturities of $4.0 million. The prepayment was made using proceeds of $75.0 million from borrowings under the accounts receivables securitization facility (“receivables facility”) and the remainder from available cash. The Company expects interest savings to be approximately 1% per annum on the $75.0 million borrowed under the receivables facility as compared to interest that would have been incurred under the Tranche B Term Loan. The Company also purchased and retired $26.4 million of the 7 ¹/4% Notes due 2013 and $5.0 million of 8³/₈% Notes. Remaining 2007 debt repayments were primarily comprised of payments on capital leases. As of December 31, 2007, the Company had $55.0 million of outstanding borrowings under its revolving credit facility and had outstanding letters of credit totaling $27.1 million, leaving $167.9 million in additional borrowing availability under its $250 million revolving credit facility. Outstanding letters of credit at December 31, 2007 include one issued for $23.0 million in December 2007 for the benefit of a data center customer. This permits the customer to draw on the letter of credit if the Company is not able to perform its data center contractual obligations due to bankruptcy. The Company agreed to issue the letter of credit because the customer had prepaid $21.5 million for data center services.

2006 Debt Repayments

During 2006, the Company repaid debt in the amount of $13.3 million. This debt repayment amount was lower than 2007 and 2005 because the Company used its cash to fund the purchases of ATI and the 19.9% interest in CBW for $86.7 million, and the wireless spectrum licenses for $37.1 million.

2005 Financing Transactions and Credit Facilities

In 2005, the Company completed the refinancing plan of its 16% Senior Subordinated Discount Notes due 2009 (“16% Notes”).

The Company:

• issued $250 million new 7% Notes and $100 million in additional 8 ³/8% Notes (collectively, the “New Bonds”);

• established a new credit facility (“Corporate credit facility”) with a $250 million revolving line of credit that matures in February 2010;

• used the proceeds from the New Bonds and borrowings from the new Corporate credit facility to repay $438.8 million outstanding at December 31, 2004 on its previous credit facility;

• executed $350 million notional interest rate swaps to change the fixed rate nature of a portion of its bonds to approximate the floating rate characteristics of the terminated credit facility;

• issued $400 million of new term notes (the “Tranche B Term Loan”) under the terms of the Corporate credit facility; and

• retired the 16% Notes for $447.8 million, including repayment of accrued interest, using the proceeds from the Tranche B Term Loan and additional borrowings under the new Corporate credit facility.

In total, the Company recognized $99.8 million of loss upon extinguishment of debt.

In addition to financial transactions consummated under the refinancing plan discussed above, the Company made a scheduled payment of $20.0 million to extinguish certain outstanding notes of Cincinnati Bell Telephone.

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Contractual Obligations

The following table summarizes the Company’s contractual obligations as of December 31, 2007:

	Payments Due by Period
(dollars in millions)	Total		< 1 Year		1-3 Years		3-5 Years		Thereafter
Long-term debt (1)	$	1,976.8	$	4.2	$	63.1	$	274.0	$	1,635.5
Capital leases		29.4		3.6		11.6		11.5		2.7
Interest payments on long-term debt and capital leases (2)		1,020.9		131.1		264.5		262.7		362.6
Noncancelable operating lease obligations		112.3		17.2		29.8		25.8		39.5
Purchase obligations (3)		173.2		117.6		55.6		—		—
Accrued pension and postretirement benefits (4)		64.1		13.3		14.7		15.7		20.4
Other noncurrent liabilities (5)		42.8		6.9		21.2		2.5		12.2
Acquisitions (6)		28.5		20.1		5.8		0.2		2.4
Total	$	3,448.0	$	314.0	$	466.3	$	592.4	$	2,075.3

(1) Long-term debt excludes net unamortized premiums and the fair value of the Company’s interest rate swaps.

(2) Interest payments on long-term debt and capital leases include interest obligations on both fixed and variable rate debt, assuming no early payment of debt in future periods. The Company used the interest rate forward curve at December 31, 2007 to compute the amount of the contractual obligation for interest payments on variable rate debt and interest rate swaps.

(3) Purchase obligations primarily consist of the Company’s service agreement with Convergys as discussed below in “Commitments and Contingencies” and amounts under open purchase orders.

(4) Included in accrued pension and postretirement benefits are payments for the Company’s postretirement benefits, qualified pension plans, non-qualified pension plan and other employee retirement agreements. Amount includes $11 million of expected cash contributions in 2008 for postretirement benefits. Although the Company currently expects to continue operating the plans past 2008, its contractual obligation related to postretirement benefits only extends through the end of 2008. Amount also includes $45 million of estimated cash contributions to its qualified pension plans with no expected contributions in 2008. The Company’s expected qualified pension plan contributions are based on current legislation and current actuarial assumptions. Any change in the legislation or actuarial assumptions will affect the expected contribution amount. See below for further discussion related to the Pension Protection Act of 2006.

(5) Includes contractual obligation payments primarily related to restructuring reserves, asset removal obligations and liability for unrecognized tax benefits. Payment for unrecognized tax benefits is assumed to occur after five years.

(6) Acquisitions include purchase price for eGIX of $18.0 million and $5.2 million of contingent payments, $1.3 million additional payments for the acquisition of GramTel and $4.0 million related to the Lebanon acquisition. See Note 5 to the Consolidated Financial Statements for further discussion.

The contractual obligations table is current as of December 31, 2007. The amount of these obligations can be expected to change over time as new contracts are initiated and existing contracts are completed, terminated, or modified.

The Pension Protection Act of 2006 (“the Act”) was enacted on August 17, 2006. Most of its provisions will become effective in 2008. The Act significantly changes the funding requirements for single-employer defined benefit pension plans. The funding requirements will now largely be based on a plan’s calculated funded status, with faster amortization of any shortfalls or surpluses. The Act directs the U.S. Treasury Department to develop a new yield curve to discount pension obligations for determining the funded status of a plan when calculating the funding requirements.

Other

Labor Contract

On January 31, 2008, the Company and the Communication Workers of America (“CWA”) reached a tentative agreement on a new labor contract. The new agreement, which covers approximately 1,300 members of the CWA locals 4400 and 4401, is subject to ratification by the local CWA membership.

The Company had requested early negotiations with local union leadership in an effort to renew the labor contract for current bargaining employees, which was set to expire on May 10, 2008.

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If ratified by the CWA membership, the new agreement will:

• Retain the current call center work as local Cincinnati jobs, restructure base pay for the call center employees and implement a sales commission plan for eligible call center employees;

• Create a new wage, benefit and working condition agreement for bargaining unit employees hired on or after February 1, 2008;

• Provide a cumulative 4.5 percent wage increase over the three years of the contract;

• Maintain current healthcare plan designs with modest premium increases over the life of the contract, reflective of healthcare inflation;

• Improve dental coverage by increasing the amounts covered under the plan for restorative services;

• Increase pay-related pension credits by 3%; and

• Offer an early retirement option to eligible bargaining unit employees.

The Company expects this contract, if ratified, will result in expense trends that are favorable to the previous labor contract. CWA members vote to approve or reject the contract on February 27, 2008.

Commitments and Contingencies

Commitments

Vendor Concentration

In 1998, the Company entered into a ten-year contract with Convergys Corporation (“Convergys”), a provider of billing, customer service and other services, which, in 2004, was extended to December 31, 2010. The contract states that Convergys will be the primary provider of certain data processing, professional and consulting and technical support services for the Company within CBT’s operating territory. In return, the Company will be the exclusive provider of local telecommunications services to Convergys. The contract extension reduced the Company’s annual commitment in 2004 and 2005 to $35.0 million from $45.0 million. Beginning in 2006, the minimum commitment is reduced 5% annually. The Company paid $32.3 million, $34.3 million and $36.1 million under the contract in 2007, 2006 and 2005, respectively.

Contingencies

In the normal course of business, the Company is subject to various regulatory and tax proceedings, lawsuits, claims, and other matters. The Company believes adequate provision has been made for all such asserted and unasserted claims in accordance with accounting principles generally accepted in the United States. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance.

Indemnifications Related to the Sale of Broadband Assets

The Company indemnified the buyer of the broadband assets against certain potential claims, but all indemnifications have expired except for those related to title and authorization. The title and authorization indemnification was capped at 100% of the purchase price of the broadband assets, approximately $71 million.

In order to determine the fair value of the indemnity obligations, the Company performed a probability-weighted discounted cash flow analysis, utilizing the minimum and maximum potential claims and several scenarios within the range of possibilities. In 2006, the Company decreased the liability related to the indemnity obligations from $4.1 million to $1.2 million and recorded $2.9 million of income as a result of the expiration of certain warranties and guarantees. This income was included in “Gain on sale of broadband assets” in the Consolidated Statement of Operations. In 2007 and 2005, no representations or warranties expired.

Anthem Demutualization Claim

In November 2007, a class action complaint was filed against the Company and Wellpoint Inc., formerly known as Anthem, Inc. The complaint alleges that the Company improperly received stock as a result of the

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demutualization of Anthem and that a class of insured persons should have received the stock instead. In February 2008, the Company filed a response in which it denied all liability and raised a number of defenses. The Company believes that it has meritorious defenses and intends to vigorously defend this action. The Company does not believe this claim will have a material effect on its financial condition.

Other

At December 31, 2006, the Company had certain regulatory tax liabilities totaling $18.0 million, net of expected refunds, related to past filing positions that were being questioned by the applicable regulatory agency. As a result of payments made in 2007, at December 31, 2007, the Company liability has decreased to $2.5 million. The issues have not been fully resolved, and the Company believes it has meritorious defenses related to the payment of these regulatory taxes and intends to defend its position in order to limit the ultimate payment of these regulatory taxes.

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, sales, 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 of the Company, and (d) indemnities involving the representations and warranties in certain contracts. 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 that the Company could be obligated to make. Except for amounts recorded in relation to insured losses, the Company has not recorded a liability for these indemnities, commitments, and other guarantees in the Consolidated Balance Sheets, except as described in “Indemnifications Related to the Sale of Broadband Assets” above.

Warrants

As part of the issuance of the 16% Notes in March 2003, the purchasers of the 16% Notes received 17.5 million common stock warrants, which expire in March 2013, to purchase one share of Cincinnati Bell common stock at $3.00 each. Of the total gross proceeds received for the 16% Notes, $47.5 million was allocated to the fair value of the warrants using the Black-Scholes option-pricing model. This value less applicable issuance costs was recorded to “Additional paid-in capital” in the Consolidated Balance Sheet. There were no exercises of warrants in 2007 or 2006. In 2005, 50,000 warrants were exercised.

Cash Flow

2007 Compared to 2006

For the twelve months ended December 31, 2007, cash provided by operating activities totaled $308.8 million, a decrease of $25.9 million compared to the $334.7 million provided by operating activities during the same period in 2006. The decrease was due to payments of $56.0 million for operating taxes and early pension contributions partially offset by a customer prepayment of $21.5 million for data center services and increased operating cash generated by the Wireless segment due to service revenue growth.

Cash flow utilized for investing activities increased $3.5 million to $263.5 million during 2007 as compared to $260.0 million for 2006. Capital expenditures were $233.8 million, an increase of $82.5 million compared to 2006, which resulted mostly from data center expansion. In addition to the increase in capital expenditures for data centers, the Company purchased a data center business in South Bend, Indiana in December 2007 for a purchase price of $20.3 million (including $0.6 million of accrued transaction costs), of which $19.0 million was paid in cash in 2007. In the first quarter of 2007, the Company purchased a local telecommunication business and paid $4.6 million. Also, in late 2007 the Company deposited $4.4 million with the FCC for the opportunity to

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participate in the auction for the purchase of additional wireless spectrum. Cash flows from investing activities for 2006 includes payments of $86.7 million for the acquisitions of ATI and the 19.9% minority interest in CBW, as well as $37.1 million for the purchase of wireless licenses in an FCC auction. Proceeds were received in 2006 for $4.7 million on sale of broadband fiber assets and for $5.7 million on the sale of an investment.

Cash flow used in financing activities was $98.6 million in 2007 compared to $21.0 million during 2006. The increased use of cash flow for financing activities primarily relates to increased repayments of debt, net of debt issuances, as discussed above.

2006 Compared to 2005

In 2006, cash provided by operating activities totaled $334.7 million, an increase of $12.4 million compared to the $322.3 million provided by operating activities during 2005. The increase was generated by working capital improvements, partially offset by lower operating cash due to access line losses and shareholder claim payments of $6.3 million.

Cash utilized in investing activities in 2006 was $260.0 million, an increase of $117.3 million compared to the $142.7 million utilized in 2005. The increase predominately relates to the acquisitions of ATI and the 19.9% minority interest in CBW for $86.7 million, and the purchase of wireless licenses in the FCC auction for $37.1 million. Capital expenditures increased slightly in 2006 compared to last year. Proceeds were received in 2006 for $4.7 million on the sale of broadband fiber assets and for $5.7 million on the sale of an investment.

Cash flows used in financing activities decreased $157.8 million to a net outflow of $21.0 million in 2006 from an outflow of $178.8 million during 2005. During 2006, the Company funded the acquisitions of the remaining 19.9% membership interest in CBW and ATI and the purchase of the wireless licenses, which decreased the Company’s repayment of debt as compared to 2005. The Company repaid $13.3 million in debt in 2006. During 2005, the Company received $752.1 million of cash proceeds from the issuance of the 7% Notes, additional 8 ³/ 8% Notes and new bank term notes. In addition, during 2005, the Company repaid $903.3 million in borrowings, substantially all of which was the prepayment of borrowings under its term and revolving credit facilities and its 16% Notes, using the net cash proceeds discussed above. In conjunction with the debt issuance and repayments in 2005, the Company incurred debt issuance costs and consent fees of $21.9 million.

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Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses. Additionally, the Company’s senior management has discussed the critical accounting policies and estimates with the Audit and Finance Committee. The Company’s significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements.

The discussion below addresses major judgments used in:

• revenue recognition;

• accounting for allowances for uncollectible accounts receivable;

• reviewing the carrying values of goodwill and indefinite-lived intangible assets;

• reviewing the carrying values of property, plant, and equipment;

• accounting for business combinations;

• accounting for taxes;

• accounting for pension and postretirement expenses; and

• accounting for termination benefits

Revenue Recognition — The Company adheres to sales recognition principles described in Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” issued by the SEC. Under SAB No. 104, sales are recognized when there is persuasive evidence of a sale arrangement, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectibility is reasonably assured.

Service revenue — The Company recognizes service revenue as services are provided. Revenue from local telephone and special access services, which are billed monthly prior to performance of service, and from prepaid wireless service, which is collected in advance, is not recognized upon billing or cash receipt but rather is deferred until the service is provided. Postpaid wireless, long distance, switched access, reciprocal compensation, and data and Internet product services are billed monthly in arrears. The Company bills service revenue in regular monthly cycles, which are spread throughout the days of the month. As the day of each billing cycle rarely coincides with the end of the Company’s reporting period for usage-based services such as postpaid wireless, long distance, and switched access, the Company must estimate service revenues earned but not yet billed. The Company bases its estimates upon historical usage and adjusts these estimates during the period in which the Company can determine actual usage, typically in the following reporting period.

Initial billings for Wireline service connection and activation are deferred and amortized into revenue on a straight-line basis over the average customer life. The associated connection and activation costs, to the extent of the upfront fees, are also deferred and amortized on a straight-line basis over the average customer life.

Data center services are also recognized as service is provided. Agreements with data center customers require certain levels of service or performance. Although the occurrence is rare, if the Company fails to meet these levels, customers may be able to receive service credits for their accounts. The Company records these credits against revenue when an event occurs that gives rise to such credits. In multi-year data center arrangements with increasing or decreasing monthly billings, revenues are recognized on a straight-line basis. Revenue for leased data center assets is also recognized on a straight-line basis over the contract term.

Technology Solutions professional services, including product installations, are recognized as the service is provided. Technology Solutions also provides maintenance services on telephony equipment under one to four year contract terms. This revenue is accounted for under Financial Accounting Standards Board (“FASB”) Technical Bulletin No. 90-1, “Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts,” and is deferred and recognized ratably over the term of the underlying customer contract.

Products — The Company recognizes equipment revenue upon the completion of contractual obligations, such as shipment, delivery, installation, or customer acceptance. Wireless handset revenue and the related activation revenue are recognized when the products are delivered to and accepted by the customer, as this is considered to be a separate earnings process from the sale of wireless services. Wireless equipment costs are also

36

recognized upon handset sale, and are in excess of the related handset and activation revenue. The Company is a reseller of IT and telephony equipment and considers the criteria of Emerging Issues Task Force (“EITF”) 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent,” when recording revenue, such as title transfer, risk of product loss, and collection risk. Based on this guidance, these equipment revenues and associated costs have generally been recorded on a gross basis, rather than recording the revenues net of the associated costs. The Company benefits from vendor rebate plans, particularly rebates on hardware sold by Technology Solutions. The Company recognizes the rebates as an offset to costs of products sold upon sale of the related equipment to the customer.

With respect to arrangements with multiple deliverables, the Company follows the guidance in EITF 00-21, “Revenue Arrangements with Multiple Deliverables,” to determine whether more than one unit of accounting exists in an arrangement. To the extent that the deliverables are separable into multiple units of accounting, total consideration is allocated to the individual units of accounting based on their relative fair value, determined by the price of each deliverable when it is regularly sold on a stand-alone basis. Revenue is recognized for each unit of accounting as delivered or as service is performed depending on the nature of the deliverable comprising the unit of accounting.

The Company is a reseller of IT equipment, such as servers and routers, and often is contracted to install the IT equipment that it sells. The revenue recognition guidance in Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” is applied, which requires vendor specific objective evidence (“VSOE”) in order to recognize the IT equipment separate from the installation. The Company both sells IT equipment without the installation service, and provides installation services without the IT equipment, and as such has VSOE that permits the separation of the IT equipment from the installation services. The Company recognizes the IT equipment upon completion of its contractual obligations, generally upon delivery of the IT equipment to the customer, and recognizes installation service revenue upon completion of the installation.

Pricing of local services is generally subject to oversight by both state and federal regulatory commissions. Such regulation also covers services, competition, and other public policy issues. Various regulatory rulings and interpretations could result in increases or decreases to revenue in future periods.

Accounting for Allowances for Uncollectible Accounts Receivable — The Company established the allowances for uncollectible accounts using percentages of aged accounts receivable balances to reflect the historical average of credit losses as well as specific provisions for certain identifiable, potentially uncollectible balances. The Company believes its allowance for uncollectible accounts is adequate based on these methods, as the Company has not had unfavorable experience with its estimation methods. However, if one or more of the Company’s larger customers were to default on its accounts receivable obligations or if general economic conditions in the Company’s operating area deteriorated, the Company could be exposed to potentially significant losses in excess of the provisions established. Substantially all of the Company’s outstanding accounts receivable balances are with entities located within its geographic operating areas. Regional and national telecommunications companies account for the remainder of the Company’s accounts receivable balances. No one entity or collection of legally affiliated entities represents 10% or more of the outstanding accounts receivable balances.

Reviewing the Carrying Values of Goodwill and Indefinite-Lived Intangible Assets — Pursuant to Statement of Financial Account Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” goodwill and intangible assets not subject to amortization are tested for impairment annually, or when events or changes in circumstances indicate that the asset might be impaired.

With respect to goodwill, the company estimates the fair value of the respective reporting unit based on expected future cash flows generated by the reporting unit discounted at the appropriate weighted average cost of capital. The estimated fair value of the respective reporting units was higher than its carrying values, and as such, there was no indication of impairment in 2007.

Indefinite-lived intangible assets consist of FCC licenses for spectrum and trademarks for the Wireless segment. The Company may renew the wireless licenses in a routine manner every ten years for a nominal fee, provided the Company continues to meet the service and geographic coverage provisions required by the FCC. The fair value of the licenses was determined by using the “Greenfield” method, an income based approach. The fair value of the trademarks were determined by using the relief-from-royalty method, which estimates the

37

present value of royalty expense that could be avoided in the operating business as a result of owning the respective asset or technology. The fair value of the licenses and trademarks were higher than its carrying value, and as such, there was no indication of impairment in 2007.

Reviewing the Carrying Values of Property, Plant and Equipment — The Company’s provision for depreciation of its telephone plant is determined on a straight-line basis using the group depreciation method. Provision for depreciation of other property, other than leasehold improvements, is based on the straight-line method over the estimated economic useful life. Depreciation of leasehold improvements is based on a straight-line method over the lesser of the economic useful life or term of the lease, including option renewal periods if renewal of the lease is reasonably assured. Repairs and maintenance expense items are charged to expense as incurred.

The Company estimates the useful lives of plant and equipment in order to determine the amount of depreciation expense to be recorded during any reporting period. The majority of the Wireline segment plant and equipment is depreciated using the group method, which develops a depreciation rate (annually) based on the average useful life of a specific group of assets rather than for each individual asset as would be utilized under the unit method. The estimated life of the group changes as the composition of the group of assets and their related lives change. Such estimated life of the group is based on historical experience with similar assets, as well as taking into account anticipated technological or other changes. If technological changes were to occur more rapidly than anticipated, or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation expense in future periods. Likewise, if the anticipated technological or other changes occur more slowly than expected, the life of the group could be extended based on the life assigned to new assets added to the group. This could result in a reduction of depreciation expense in future periods. A one-year decrease or increase in the useful life of these assets would increase or decrease annual depreciation expense by approximately $10 million.

The Company reviews the carrying value of long-lived assets, other than goodwill and indefinite-lived intangible assets discussed above, when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In assessing impairments, the Company follows the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” An impairment loss is recognized when the estimated future undiscounted cash flows expected to result from the use of an asset (or group of assets) and its eventual disposition are less than its carrying amount. An impairment loss is measured as the amount by which the asset’s carrying value exceeds its estimated fair value.

To satisfy increasing demand for existing voice minutes of use by customers as well as to provide enhanced data services such as streaming video, the Company is constructing a 3G network and deploying it on the newly purchased AWS spectrum. Due to this implementation, lives of certain GSM assets were shortened and depreciation has been accelerated based on the new useful life. The increase in depreciation due to this acceleration was approximately $1.3 million in the fourth quarter of 2006 and $5.2 million in 2007.

In 2003, the Company shortened the estimated remaining economic useful life of its legacy TDMA wireless network to December 31, 2006 due to the expected migration of its TDMA customer base to its GSM network. In 2005, the Company incurred charges of $42.3 million to write down the recorded value of TDMA assets that were retired in 2005 and TDMA assets that could no longer support their recorded value. These charges were included in “Asset impairments and other charges” in the Consolidated Statement of Operations. The Company wrote down the assets to fair value, which was calculated based on the appraised amount at which the assets could be sold in a current transaction between willing parties.

Also, in 2005, the useful life of certain of the remaining TDMA assets was shortened from the December 31, 2006 date being used, and depreciation was accelerated. The change in depreciation expense due to the change in estimate in the second quarter decreased 2005 operating income by $7.7 million.

If technological changes were to occur more rapidly than expected, it may have the effect of shortening the estimated depreciable life of other network and operating assets that the Company employs. This could have a substantial impact on the consolidated depreciation expense and net income of the Company. Competition from new or more cost effective technologies could affect the Company’s ability to generate cash flow from its

38

network-based services. This competition could ultimately result in an impairment of certain of the Company’s tangible or intangible assets. This could have a substantial impact on the operating results of the consolidated Company.

Accounting for Business Combinations — In accounting for business combinations, the Company applies the accounting requirements of SFAS No. 141, “Business Combinations,” which requires the recording of net assets of acquired businesses at fair value. In developing estimates of fair value of acquired assets and assumed liabilities, the Company analyzes a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, current replacement cost for fixed assets, and market rate assumptions for contractual obligations. Such a valuation requires management to make significant estimates and assumptions, especially with respect to the intangible assets.

Changes to the assumptions the Company used to estimate fair value could impact the recorded amounts for acquired assets and liabilities, including property, plant and equipment, intangible assets and goodwill. Significant changes to these balances could have a material impact on the Company’s future reported results.

Accounting for Taxes

Income Taxes

The income tax provision consists of an amount for taxes currently payable and an amount for tax consequences deferred to future periods. The Company’s previous tax filings are subject to normal reviews by regulatory agencies until the related statute of limitations expires.

As of December 31, 2007, the Company had $596.2 million in net deferred tax assets, which includes approximately $1.4 billion in gross federal tax net operating loss carryforwards, with a deferred tax asset value of approximately $492.3 million. The tax loss carryforwards are available to the Company to offset taxable income in current and future periods. The majority of the remaining tax loss carryforwards will expire between 2017 and 2023 and are not currently limited under U.S. tax laws. The ultimate realization of the deferred income tax assets depends upon the Company’s ability to generate future taxable income during the periods in which basis differences and other deductions become deductible and prior to the expiration of the net operating loss carryforwards. Based on current income levels and anticipated future reversal of existing temporary differences, the Company expects to utilize its federal net operating loss carryforwards within their expiration periods.

In addition to the federal tax net operating loss carryforwards, the Company has state and local net operating loss carryforwards with a deferred tax asset value of approximately $134.6 million, alternative minimum tax credit carryforwards of approximately $9.4 million, and deferred tax temporary differences and other tax attributes of approximately $99.9 million. A valuation allowance of $140.0 million is provided at December 31, 2007 against certain state and local net operating losses and other deferred tax assets due to the uncertainty of the Company’s ability to utilize the assets within the statutory expiration period.

The Company determines the effective tax rate by dividing income tax expense by income before taxes as reported in its Consolidated Statement of Operations. For reporting periods prior to the end of the Company’s fiscal year, the Company records income tax expense based upon an estimated annual effective tax rate. This rate is computed using the statutory tax rate and an estimate of annual net income adjusted for an estimate of non-deductible expenses.

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”) on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $5.1 million increase in the liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 accumulated deficit balance. After recognizing the impact from the adoption of FIN 48, the Company had a $14.7 million liability recorded for unrecognized tax benefits as of January 1, 2007. At December 31, 2007, the Company has a $14.8 million liability recorded for unrecognized tax benefits. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $14.5 million. The Company does not currently anticipate that the amount of unrecognized tax benefits will change significantly over the next year.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and local jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state or local

39

examinations for years before 2004. In the first quarter of 2007, the Internal Revenue Service commenced an examination of the Company’s U.S. federal income tax returns for 2004 to 2006. The IRS has completed its examination of the 2004 and 2005 tax years while 2006 is still under audit.

The Company recognizes accrued penalties related to unrecognized tax benefits in income tax expense. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense. Accrued interest and penalties are insignificant at December 31, 2007 and December 31, 2006.

Refer to Note 13 to the Consolidated Financial Statements for further information regarding the Company’s income taxes.

Operating Taxes

The Company incurs certain operating taxes that are reported as expenses in operating income, such as property, sales, use, and gross receipts taxes. These taxes are not included in income tax expense because the amounts to be paid are not dependent on the level of income generated by the Company. The Company also records expense against operating income for the establishment of liabilities related to certain operating tax audit exposures. These liabilities are established based on the Company’s assessment of the probability of payment. Upon resolution of an audit, any remaining liability not paid is released and increases operating income. The Company recognized income of $2.4 million in 2007, $1.8 million in 2006, and $14.4 million in 2005 upon resolution of operating tax audits, net of new liabilities established.

Regulatory Taxes

The Company incurs federal regulatory taxes on certain revenue producing transactions. The Company is permitted to recover certain of these taxes by billing the customer; however, collections cannot exceed the amount due to the federal regulatory agency. These federal regulatory taxes are presented in sales and cost of services on a gross basis because, while the Company is required to pay the tax, it is not required to collect the tax from customers and in fact, does not collect the tax from customers in certain instances. The amount recorded as revenue for 2007, 2006, and 2005 was $17.3 million, $15.3 million and $15.6 million, respectively. The amount expensed for 2007, 2006 and 2005 was $18.2 million, $20.0 million and $16.0 million, respectively. The Company records all other taxes collected from customers on a net basis.

Accounting for Pension and Postretirement Expenses — The Pension Protection Act of 2006 (the “Act”) was enacted on August 17, 2006. Most of its provisions will become effective in 2008. The Act significantly changes the funding requirements for single-employer defined benefit pension plans. The funding requirements will now largely be based on a plan’s calculated funded status, with faster amortization of any shortfalls or surpluses. The Act directs the U.S. Treasury Department to develop a new yield curve to discount pension obligations for determining the funded status of a plan when calculating the funding requirements. As a result of a $20.0 million early pension contribution in December 2007, the Company does not expect to make any contribution to its qualified pension plans in 2008. Based on current assumptions, the Company believes it will pay an estimated $45 million to fund its qualified pension plans during the period 2009 to 2017.

In October 2006, the FASB issued SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS No. 158 requires the Company to recognize the overfunded or underfunded status for the Company’s benefit plans, with changes in the funded status recognized as a separate component to shareowners’ equity. SFAS No. 158 also requires the Company to measure the funded status of the benefit plans as of the year-end balance sheet date no later than 2008. Effective December 31, 2006, the Company adopted SFAS No. 158. See Note 9 to the Consolidated Financial statements.

The Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees and one supplemental, nonqualified, unfunded plan for certain senior executives. The Company also provides health care and group life insurance benefits for eligible retirees. The Company’s measurement date for its pension and postretirement obligations is as of December 31^st of each year. When changes to the plans occur during interim periods, the Company reviews the changes and determines if a remeasurement is necessary.

40

The assumption for cost sharing with retirees is important in determining the postretirement and other benefits expense. At the beginning of 2005, the Company accounted for its retiree medical benefit obligation as if there were no limits on the Company-funded portion of retiree medical costs. In May 2005, the Company reached an agreement with the union to provide a fixed amount of medical cost reimbursement per retiree and to increase the amount annually over the life of the labor agreement. Similar benefits were provided to non-bargained retirees. Effective June 1, 2005, the Company remeasured its postretirement obligations for the changes to the expected future retiree medical costs, including assumptions regarding cost sharing by retirees.

In August 2007, the Company announced further changes to its pension and postretirement plans that reduce medical benefit payments by fixing the annual Company contribution for each eligible retiree and that reduce life insurance benefits paid from these plans. Based on these changes, the Company determined that a remeasurement of its pension and postretirement obligations was necessary. The Company remeasured its pension and postretirement obligations in August 2007 using revised assumptions, including modified benefit payment assumptions reflecting the changes and a discount rate of 6.25%. These changes reduce the Company’s pension and postretirement obligations by approximately $74 million, reduce deferred tax assets for the related tax effect by $27 million, and increase equity by $47 million. Additionally, the remeasurement caused a reduction to the Company’s pension and postretirement benefit costs by approximately $5 million since August 2007.

The key assumptions used to account for the plans are disclosed in Note 9 to the Consolidated Financial Statements. The actuarial assumptions attempt to anticipate future events and are used in calculating the expenses and liabilities related to these plans. The most significant of these numerous assumptions, which are reviewed annually, include the discount rate, expected long-term rate of return on plan assets and health care cost trend rates.

Discount rate

A discount rate is used to measure the present value of the benefit obligations. The Company determines the discount rate for each plan individually. In determining the selection of a discount rate, the Company estimates the timing and expected future benefit payments, and applies a yield curve developed to reflect yields available on high-quality bonds. Based on the analysis, the discount rate was set at 6.20%, 5.75%, and 5.50% for all of the plans as of December 31, 2007, 2006 and 2005, respectively.

Expected rate of return

The expected long-term rate of return on plan assets, developed using the building block approach, is based on the following: the participant’s benefit horizons; the mix of investments held directly by the plans, which is generally 60% equities and 40% bonds; and the current view of expected future returns, which is influenced by historical averages. The required use of an expected versus actual long-term rate of return on plan assets may result in recognized pension expense or income that is greater or less than the actual returns of those plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns. To the extent the Company changed its estimate of the expected long-term rate of return on plan assets, there would be an impact on pension expense or income and the associated net liability or asset. The Company uses an assumed long-term rate of return of 8.25% for the Company’s pension and postretirement trusts. Actual asset returns for the pension trusts, which represent over 90% of invested assets, were approximately 7% in 2007, 13% in 2006 and 7% in 2005.

In its pension calculations, the Company utilizes the market-related value of plan assets, which is a calculated asset value that recognizes changes in asset fair values in a systematic and rational manner. Differences between actual and expected returns are recognized in the market-related value of plan assets over five years.

Health care cost trend

The Company’s health care cost trend rate is developed on historical cost data, the near-term outlook, and an assessment of likely long-term trends. The health care cost trend rate used to measure the postretirement health benefit obligation at December 31, 2007 was 10.0% and is assumed to decrease gradually to 4.5% by the year 2013.

41

The actuarial assumptions used may differ materially from actual results due to the changing market and economic conditions and other changes. Revisions to and variations from these estimates would impact assets, liabilities, equity, costs of services and products, and selling, general and administrative expenses.

The following table represents the sensitivity of changes in certain assumptions related to the Company’s pension and postretirement plans:

(dollars in millions)

% Point Change

Pension Benefits

Postretirement and Other Benefits

Increase/ (Decrease) in Obligation

Increase/ (Decrease) in Expense

Increase/ (Decrease) in Obligation

Increase/ (Decrease) in Expense

Discount rate

+/-0.5

%

$

19.2/(19.2

)

$

0.1/(0.1

)

$

13.6/(15.3

)

$

1.4/(1.5

)

Expected return on assets

+/-0.5

%

n/a

$

2.2/(2.2

)

n/a

$

0.2/(0.2

)

Health care cost trend rate

+/-1

%

n/a

n/a

$

29.1/(24.8

)

$

2.9/(2.1

)

At December 31, 2007, the Company had unrecognized actuarial net losses of $68.6 million for the pension plans and $79.5 million for the postretirement and other benefit plans. The unrecognized net losses have been primarily generated by changes in previous years related to discount rates, asset return differences and actual health care costs. Because gains and losses reflect refinements in estimates as well as real changes in economic values and because some gains in one period may be offset by losses in another or vice versa, the Company is not required to recognize these gains and losses in the period that they occur. Instead, if the gains and losses exceed a 10% corridor defined in the accounting literature, the Company amortizes the excess over the average remaining service period of active employees expected to receive benefits under the plan.

Accounting for Termination Benefits — The Company has written severance plans covering both its management and union employees and, as such, accrues probable and estimable employee separation liabilities in accordance with SFAS No. 112, “Employers’ Accounting for Postemployment Benefits, an Amendment of FASB Statements No. 5 and 43.” These liabilities are based on the Company’s historical experience of severance, historical costs associated with severance, and management’s expectation of future severance. The Company’s fourth quarter 2007 restructuring plan gave rise to employee separation liabilities totaling $22.9 million as of December 31, 2007. This represents severance costs for employees over the next five years that are primarily related to the Company’s need to downsize its Wireline operations to conform to the decreased access lines being served by the Company.

When employee terminations occur, the Company considers the guidance in SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits.” The Company offered and, by December 31, 2007, 105 management employees accepted special termination benefits totaling $12 million. The Company determined that $8.2 million of these benefits have been earned through December 31, 2007 under SFAS No. 88, and this amount was therefore accrued as of December 31, 2007. Remaining termination benefits are subject to future service requirements as determined by the Company and will be amortized to expense over the future service period. The Company estimates these amounts to be approximately $2.6 million in 2008 and $1.2 million in 2009.

The Company also considers whether employee terminations give rise to a pension and postretirement curtailment charge under SFAS No. 88. The Company’s policy is that terminations in a calendar year involving 10% or more of the plan service years result in a curtailment of the pension or postretirement plan. Terminations from the fourth quarter 2007 restructuring plan resulted in curtailments for the management pension and postretirement plans totaling a charge of $6.4 million.

See Note 3 to the Consolidated Financial Statements for further discussion on the Company’s restructuring plans.

Regulatory Matters and Competitive Trends

Federal — The Telecommunications Act of 1996 was enacted with the goal of establishing a pro-competitive, deregulatory framework to promote competition and investment in advanced telecommunications facilities and services to all Americans. Since 1996, federal regulators have considered a multitude of proceedings ostensibly aimed at fulfilling the goals of the Act and this process is continuing through numerous proceedings currently before the FCC and the federal courts. Although the Act called for a

42

deregulatory framework, the FCC’s approach has been to maintain significant regulatory restraints on the traditional incumbent local exchange carriers while opening up opportunities for new competitive entrants and services with minimal regulation such as cable modem broadband providers and VoIP providers. While Cincinnati Bell has expanded beyond its incumbent local exchange operations by offering wireless, long distance, broadband service, Internet access and out-of-territory competitive local exchange services, the majority of its revenue is still derived from its traditional local exchange services. The financial impact of the various federal proceedings will depend on many factors including the extent of competition in our market and the timing and outcome of the FCC’s decisions and any appeals from those decisions.

Intercarrier Compensation

Current rules specify different means of compensating carriers for the use of their networks depending on the type of traffic and technology used by the carriers. The FCC has opened a proceeding to consider various plans that have been proposed for revising the disparate intercarrier compensation system into a unified regime that treats all traffic in a uniform manner. The outcome of this proceeding could have significant impacts on all carriers and will probably be phased-in over a five to ten year period. This proceeding impacts the switched access and end-user components of CBT’s revenue.

Reciprocal Compensation

Although the topic of reciprocal compensation will ultimately be addressed within the broader intercarrier compensation proceeding mentioned above, the FCC adopted an order which in the short-term directly impacted the rules for the termination of ISP-bound dial-up traffic. The previous rules capped the total number of minutes that could be compensated (“growth cap”) and limited compensation to markets in which the carriers previously exchanged traffic (“new markets rule”). The FCC’s new order eliminated the growth cap and the new markets rule. This decision could increase the amount that CBT must pay to CLECs with which it exchanges such traffic.

VoIP

In 2004 the FCC declared that VoIP services are interstate services and purported to preempt state regulation. Since then, the FCC has considered several petitions asking it to rule on whether and under what circumstances voice services utilizing Internet Protocol (IP) are subject to access charges. It has ruled that peer-to-peer Internet voice services that do not use the public switched telephone network (“PSTN”) are not subject to access charges. Separately, it has ruled that services that originate and terminate on the PSTN but employ “IP” in the middle are subject to access charges. The FCC is still considering other VoIP petitions, including one that seeks to exempt from access charges calls that originate using VoIP, but terminate on the PSTN. In addition, the FCC is considering a broader rulemaking proceeding to determine the regulatory status of IP-enabled services generally. In 2007, the FCC expanded local number portability requirements to VoIP.

Special Access

In early 2005, the FCC opened a proceeding to review the current special access pricing rules. Under the existing rules, CBT’s special access services are subject to price cap regulation with no earnings cap. The new proceeding is examining the entire special access pricing structure, including whether or not to reinstate an earnings cap. In 2007, the FCC invited interested parties to update the record.

Universal Service

The federal Universal Service Fund is currently funded via an assessment on all telecommunications carriers’ interstate end-user revenue. The FCC is currently considering alternatives to this method of funding. Some of the alternatives being considered include expanding the base to include intrastate revenue or switching to an assessment based on connections and telephone numbers. Any such alteration could result in a change in the manner in which carriers recover their contributions from end users.

Unbundled Network Elements

In early 2005, the FCC rewrote its unbundled network element rules in response to the federal court’s remand of the previous rules. The latest rules have no significant impact on CBT. However, the elimination of

43

unbundled circuit switching, and thus the UNE platform (“UNE-P”), required CBET to migrate its UNE-P lines to alternative arrangements by March 11, 2006 and/or to negotiate with the underlying ILEC for continued provision of UNE-P, which CBET did pursuant to a commercial agreement. This did not have a significant adverse impact on CBET since CBET had already planned to migrate the majority of its customers to its own switching facilities.

Broadband Internet Access

In an order adopted in 2005, the FCC provided wireline carriers the option of offering broadband Internet access as a non-regulated information service (comparable treatment to cable modem Internet access) or as a regulated telecommunications service. Each option has associated costs and benefits that must be weighed in light of a carrier’s current mix of existing services and new services the carrier may be contemplating offering in the future. In 2007, the FCC ruled that wireless broadband service is also a non-regulated information service on the same regulatory footing as other broadband services, such as cable modem service and wireline DSL service.

FCC Safeguards to Protect Customer Proprietary Network Information (“CPNI”)

On April 2, 2007, the FCC released an order implementing new CPNI rules designed to prevent pretexting to gain access to customer information. The new rules, which became effective in December 2007, require carriers to implement security protections limiting the manner in which certain customer information may be released and requiring notice to customers regarding certain types of changes to their account and CPNI breaches. Carriers must file an annual certification with the FCC that they are compliant with the rules, including a summary of actions taken in response to customer complaints.

State — Because CBT generates the majority of its revenue from the operation of its public switched telephone network, its financial results follow no particular seasonal pattern. CBT does derive a significant portion of its revenue from pricing plans that are subject to regulatory overview and approval. In both Ohio and Kentucky, CBT operates under alternative regulation plans in which CBT is subject to restrictions on its ability to increase the price of basic local service and related services. In return, CBT is not subject to an earnings cap or recapture in Ohio, as it would if regulated under a traditional regulatory plan based upon a targeted rate of return. CBT has operated under alternative regulation plans since 1994 during which price increases and enhanced flexibility for a limited number of services have partially offset the effect of fixed pricing for basic local service and reduced pricing for other, primarily wholesale services.

In June 2004, CBT adopted a new alternative regulation plan in Ohio, which, although similar to its previous plan, gives CBT the option to remain in the alternative regulation plan indefinitely. Statutory changes enacted by the Ohio General Assembly in August 2005 gave the Public Utilities Commission of Ohio (the “PUCO”) the authority to provide ILECs with pricing flexibility for basic local rates upon a showing that consumers have sufficient competitive alternatives (House Bill 218). In 2006, the Company applied for and received authority from the PUCO to increase its rates for basic local exchange service in certain of its exchanges. CBT implemented rate increases for basic local exchange service in the affected exchanges beginning in January 2007. The Ohio Consumers’ Counsel appealed the PUCO’s decision to the Ohio Supreme Court, which heard arguments on December 12, 2007.

Ohio Cable Franchise

Ohio statewide video service authorization legislation was introduced on March 15, 2007 and signed by the Governor on May 9, 2007. This legislation allows the Company to apply for one statewide video franchise agreement rather than negotiating individual agreements with all local entities in Ohio. The Act holds no build-out requirements for the Company, allows for no ongoing additional fees above the federally authorized 5% and holds PEG requirements to a minimum. On October 31, 2007, CBET applied for statewide video service authorization which was granted in December 2007. CBET is now authorized to provide service in our self-described territory with only 10-day notification to the municipality and other providers. The authorization can be amended to include additional territory with mere notification to the state.

Recently Issued Accounting Standards

SFAS No. 157, “Fair Value Measurements,” was issued in September 2006. The objective of the Statement is to define fair value, establish a framework for measuring fair value and expand disclosures about fair value

44

measurements. As it relates to financial assets and liabilities, SFAS No. 157 will be effective for interim and annual reporting periods beginning after November 15, 2007. Per FASB Staff Position 157-2, “Effective Date of FASB Statement No. 157,” implementation of SFAS No. 157 to non-financial assets and liabilities will be effective for interim and annual reporting periods beginning after November 15, 2008. The Company expects the impact of SFAS No. 157 on financial assets and liabilities will be immaterial to its Consolidated Financial Statements. The Company has not yet assessed the impact of this Statement related to non-financial assets and liabilities on its Consolidated Financial Statements.

SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” was issued in February 2007. The Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 will be effective for the first fiscal year that begins after November 15, 2007. The Company does not expect to implement the alternative treatment afforded by SFAS No.159.

SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51,” was issued in December 2007. SFAS No. 160 clarifies the classification of noncontrolling interests in consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. Under SFAS No. 160, noncontrolling interests are considered equity and should be reported as an element of consolidated equity, net income will encompass the total income of all consolidated subsidiaries, and there will be separate disclosure on the face of the income statement of the attribution of income between the controlling and noncontrolling interests, and increases and decreases in the noncontrolling ownership interest amount will be accounted for as equity transactions. SFAS No. 160 will be effective for the first fiscal year beginning on or after December 15, 2008, and earlier application is prohibited. SFAS No. 160 is required to be adopted prospectively, except for reclassifying noncontrolling interests to equity, separate from the parent’s shareholders’ equity, in the consolidated statement of financial position and recasting consolidated net income (loss) to include net income (loss) attributable to both the controlling and noncontrolling interests, both of which are required to be adopted retrospectively. The Company has not yet assessed the impact of this Statement on the Company’s financial statements.

SFAS No. 141(R), “Business Combinations,” was issued in December 2007. SFAS No. 141(R) requires that upon initially obtaining control, an acquirer will recognize 100% of the fair values of acquired assets, including goodwill, and assumed liabilities, with only limited exceptions, even if the acquirer has not acquired 100% of its target. Additionally, contingent consideration arrangements will be presented at fair value at the acquisition date and included on that basis in the purchase price consideration, and transaction costs will be expensed as incurred. SFAS No. 141(R) also modifies the recognition for preacquisition contingencies, such as environmental or legal issues, restructuring plans and acquired research and development value in purchase accounting. SFAS No. 141(R) amends SFAS No. 109, “Accounting for Income Taxes,” to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. SFAS No. 141(R) is effective for the first fiscal year beginning after December 15, 2008. The Company has not yet assessed the impact of this statement on the Company’s financial statements.

Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement

This Form 10-K contains “forward-looking” statements, as defined in federal securities laws including the Private Securities Litigation Reform Act of 1995, which are based on Cincinnati Bell Inc.’s current expectations, estimates and projections. Statements that are not historical facts, including statements about the beliefs, expectations and future plans and strategies of the Company, are forward-looking statements. These include any statements regarding:

• future revenue, operating income, profit percentages, income tax refunds, realization of deferred tax assets, earnings per share or other results of operations;

• the continuation of historical trends;

45

• the sufficiency of cash balances and cash generated from operating and financing activities for future liquidity and capital resource needs;

• the effect of legal and regulatory developments; and

• the economy in general or the future of the communications services industries.

Actual results may differ materially from those expressed or implied in forward-looking statements. The following important factors could cause or contribute to actual results being materially different from those described or implied by such forward-looking statements include, but are not limited to:

• changing market conditions and growth rates within the telecommunications industry or generally within the overall economy;

• changes in competition in markets in which the Company operates;

• pressures on the pricing of the Company’s products and services;

• advances in telecommunications technology;

• the ability to generate sufficient cash flow to fund the Company’s business plan and maintain its networks;

• the ability to refinance the Company’s indebtedness when required on commercially reasonable terms;

• changes in the telecommunications regulatory environment;

• changes in the demand for the services and products of the Company;

• the demand for particular products and services within the overall mix of products sold, as the Company’s products and services have varying profit margins;

• the Company’s ability to introduce new service and product offerings in a timely and cost effective basis;

• work stoppages caused by labor disputes;

• restrictions imposed under various credit facilities and debt instruments;

• the Company’s ability to attract and retain highly qualified employees; and

• the Company’s ability to access capital markets and the successful execution of restructuring initiatives.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk Management

The Company’s objective in managing its exposure to interest rate changes is to limit the impact of interest rate changes on earnings, cash flows, and the fair market value of certain assets and liabilities, while maintaining low overall borrowing costs.

Because the Company is exposed to the impact of interest rate fluctuations, primarily in the form of variable rate borrowings from its credit facility and changes in current rates compared to that of its fixed rate debt, the Company sometimes employs derivative financial instruments to manage its exposure to these fluctuations and its total interest expense over time. The Company does not hold or issue derivative financial instruments for trading purposes or enter into transactions for speculative purposes.

Interest rate swap agreements, a particular type of derivative financial instrument, involve the exchange of fixed and variable rate interest payments between the Company and its counterparties in the transactions and do not represent an actual exchange of the notional amounts between the parties. Because the notional amounts are not exchanged, the notional amounts of these agreements are not indicative of the Company’s exposure resulting from these derivatives. The amounts to be exchanged between the parties are primarily the net result of the fixed and variable rate percentages to be charged on the swap’s notional amount.

46

The Company has entered into a series of fixed-to-variable interest rate swaps with total notional amounts of $450 million that qualify for fair value hedge accounting. Fair value hedges offset changes in the fair value of underlying assets and liabilities. The Company’s interest rate swaps at December 31, 2007 and 2006 are recorded at their fair value, and the carrying values of the underlying liabilities hedged (the 7% Notes and 8 ³/8% Notes) are adjusted by the same corresponding value in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The fair value of the interest rate swap contracts was an asset of $2.9 million and a liability of $13.5 million at December 31, 2007 and 2006, respectively. A hypothetical 10% change in market interest rates at December 31, 2007 and 2006 would change the fair value of the interest rate swap contracts by approximately $12 million and $13 million, respectively.

The following table sets forth the face amounts, maturity dates, and average interest rates for the fixed and variable-rate debt, excluding capital leases, net unamortized premiums, and the fair value of the interest rate swaps held by the Company at December 31, 2007:

(dollars in millions)	2008			2009			2010			2011			2012			Thereafter			Total			Fair Value
Fixed-rate debt:	$	0.2		$	0.1			—			—			—		$	1,635.5		$	1,635.8		$	1,583.8
Average interest rate on     fixed-rate debt		4.3	%		4.3	%		—			—			—			7.6	%		7.6	%		—
Variable-rate debt:	$	4.0		$	4.0		$	59.0		$	97.0		$	177.0			—		$	341.0		$	335.1
Average interest rate on     variable-rate debt (1)		6.8	%		6.8	%		7.3	%		6.8	%		6.4	%		—			6.7	%		—

(1) Based on the average rate in effect during 2007.

At December 31, 2006, the carrying value and fair value of fixed-rate debt was $1,667.7 million and $1,708.6 million, respectively. At December 31, 2006, both the carrying value and fair value of variable-rate debt were $395.0 million. Including the impact of the $450 million notional amounts of interest rate swap agreements, approximately 60% of the Company’s indebtedness was based on fixed interest rates at December 31, 2007 and 2006, respectively.

47

Item 8. Financial Statements and Supplementary Schedules

Index to Consolidated Financial Statements	Page
Consolidated Financial Statements:
Management’s Report on Internal Control over Financial Reporting	49
Reports of Independent Registered Public Accounting Firm	50
Consolidated Statements of Operations	52
Consolidated Balance Sheets	53
Consolidated Statements of Cash Flows	54
Consolidated Statements of Shareowners’ Equity (Deficit) and Comprehensive Income (Loss)	55
Notes to Consolidated Financial Statements	56
Financial Statement Schedule:
For each of the three years in the period ended December 31, 2007:
II — Valuation and Qualifying Accounts	107

Financial statement schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not required or applicable.

48

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Cincinnati Bell Inc. and its subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a — 15(f) under the Securities Exchange Act of 1934. The Company’s internal control system is designed to produce reliable financial statements in conformity with accounting principles generally accepted in the United States.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this assessment, management has concluded that, as of December 31, 2007, the Company’s internal control over financial reporting is effective based on those criteria.

The effectiveness of the Company’s internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report included herein.

February 26, 2008

/s/ John F. Cassidy

John F. Cassidy

President and Chief Executive Officer

/s/ Brian A. Ross

Brian A. Ross

Chief Financial Officer

49

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareowners of Cincinnati Bell Inc.

We have audited the internal control over financial reporting of Cincinnati Bell Inc. and subsidiaries (the “Company”) as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2007 of the Company and our report dated February 26, 2008 expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph relating to the Company’s adoption of Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, elected application effective January 1, 2006, FASB Statement No. 123(R), Share-Based Payment, effective January 1, 2006, FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R), effective December 31, 2006, and the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, effective January 1, 2007.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio

February 26, 2008

50

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareowners of Cincinnati Bell Inc.

We have audited the accompanying consolidated balance sheets of Cincinnati Bell Inc. and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareowners’ equity (deficit) and comprehensive income (loss) and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedule (Schedule II). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Cincinnati Bell Inc. at December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 12 to the consolidated financial statements, effective January 1, 2006, the Company elected application of Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. As discussed in Note 1 to the consolidated financial statements, effective January 1, 2006, the Company adopted the provisions of FASB Statement No. 123(R), Share-Based Payment. As discussed in Note 9 to the consolidated financial statements, the Company adopted the provisions of FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R), effective December 31, 2006. As discussed in Note 13 to the consolidated financial statements, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, effective January 1, 2007.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2008 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio

February 26, 2008

51

Cincinnati Bell Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Millions of Dollars, Except Per Share Amounts)

	Year Ended December 31,
	2007			2006			2005
Revenue
Services	$	1,155.4		$	1,100.2		$	1,076.9
Products		193.2			169.9			132.7
Total revenue		1,348.6			1,270.1			1,209.6
Costs and expenses
Cost of services		408.5			384.8			363.5
Cost of products sold		201.2			183.5			148.8
Selling, general and administrative		265.9			244.2			221.0
Depreciation		147.1			138.6			174.7
Amortization		3.7			4.4			—
Shareholder claim settlement		—			6.3			—
Restructuring charges		39.8			3.4			1.1
Asset impairments and other charges		—			—			41.7
Gain on sale of broadband assets		—			(7.6	)		—
Total operating costs and expenses		1,066.2			957.6			950.8
Operating income		282.4			312.5			258.8
Minority interest income		—			(0.5	)		(11.0	)
Interest expense		154.9			162.1			184.4
Loss on extinguishment of debt		0.7			0.1			99.8
Other income, net		(3.1	)		(3.8	)		(4.2	)
Income (loss) before income taxes		129.9			154.6			(10.2	)
Income tax expense		56.7			68.3			54.3
Net income (loss)		73.2			86.3			(64.5	)
Preferred stock dividends		10.4			10.4			10.4
Net income (loss) applicable to common shareowners	$	62.8		$	75.9		$	(74.9	)
Basic earnings (loss) per common share	$	0.25		$	0.31		$	(0.30	)
Diluted earnings (loss) per common share	$	0.24		$	0.30		$	(0.30	)
Weighted average common shares outstanding (millions)
Basic		247.4			246.8			245.9
Diluted		256.8			253.3			245.9

The accompanying notes are an integral part of the consolidated financial statements.

52

Cincinnati Bell Inc.

CONSOLIDATED BALANCE SHEETS

(Millions of Dollars, Except Share Amounts)

	As of December 31,
	2007			2006
Assets
Current assets
Cash and cash equivalents	$	26.1		$	79.4
Receivables, less allowances of $17.1 and $15.2		176.5			161.9
Inventory, materials and supplies		31.2			24.9
Deferred income tax benefits, net		72.8			63.3
Prepaid expenses and other current assets		11.1			17.9
Total current assets		317.7			347.4
Property, plant and equipment, net		933.7			818.8
Goodwill		62.4			53.3
Intangible assets, net		121.2			112.9
Deferred income tax benefits, net		523.4			631.4
Other noncurrent assets		61.2			50.0
Total assets	$	2,019.6		$	2,013.8
Liabilities and Shareowners’ Deficit
Current liabilities
Current portion of long-term debt	$	7.8		$	7.3
Accounts payable		105.5			74.1
Current portion of unearned revenue and customer deposits		47.4			42.9
Accrued taxes		15.2			52.8
Accrued interest		49.4			52.1
Accrued payroll and benefits		44.8			43.8
Other current liabilities		47.5			45.9
Total current liabilities		317.6			318.9
Long-term debt, less current portion		2,001.9			2,065.9
Accrued pension and postretirement benefits		291.7			359.6
Other noncurrent liabilities		76.0			61.0
Total liabilities		2,687.2			2,805.4
Commitments and contingencies
Shareowners’ deficit
Preferred Stock 2,357,299 shares authorized; 155,250 (3,105,000 depositary shares) of 6 3/4% Cumulative Convertible Preferred Stock issued and outstanding at December 31, 2007 and 2006; liquidation preference $1,000 per share ( $50 per depositary share)		129.4			129.4
Common shares, $.01 par value; 480,000,000 shares authorized; 256,652,787 and 255,669,983 shares issued; 248,357,332 and 247,471,538 outstanding at December 31, 2007 and 2006		2.6			2.6
Additional paid-in capital		2,922.7			2,924.9
Accumulated deficit		(3,459.1	)		(3,527.2	)
Accumulated other comprehensive loss		(115.9	)		(174.5	)
Common shares in treasury, at cost:
8,295,455 and 8,198,445 shares at December 31, 2007 and 2006		(147.3	)		(146.8	)
Total shareowners’ deficit		(667.6	)		(791.6	)
Total liabilities and shareowners’ deficit	$	2,019.6		$	2,013.8

The accompanying notes are an integral part of the consolidated financial statements.

53

Cincinnati Bell Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Millions of Dollars)

	Year Ended December 31,
	2007			2006			2005
Cash flows from operating activities
Net income (loss)	$	73.2		$	86.3		$	(64.5	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation		147.1			138.6			174.7
Amortization		3.7			4.4			—
Gain on sale of broadband assets		—			(7.6	)		—
Asset impairments and other charges		—			—			41.7
Loss on extinguishment of debt		0.7			0.1			99.8
Provision for loss on receivables		15.2			14.0			14.3
Noncash interest expense		5.0			4.9			22.4
Minority interest income		—			(0.5	)		(11.0	)
Deferred income tax expense, including valuation allowance change		51.7			62.4			52.5
Pension and other postretirement expense in excess of payments		19.2			28.1			32.3
Other, net		4.0			(2.1	)		(0.1	)
Changes in operating assets and liabilities, net of effect of acquisitions
Increase in receivables		(27.8	)		(15.0	)		(33.5	)
Increase in inventory, materials, supplies, prepaids and other current assets		(7.3	)		(6.2	)		(2.1	)
Increase in accounts payable		19.8			4.1			10.9
Increase (decrease) in accrued and other current liabilities		(28.7	)		23.3			(13.4	)
Decrease (increase) in other long-term assets		(0.7	)		0.5			(3.2	)
Increase (decrease) in other long-term liabilities		33.7			(0.6	)		1.5
Net cash provided by operating activities		308.8			334.7			322.3
Cash flows from investing activities
Capital expenditures		(233.8	)		(151.3	)		(143.0	)
Acquisitions of businesses and remaining minority interest in CBW		(23.6	)		(86.7	)		—
Purchase and deposit — wireless licenses		(4.4	)		(37.1	)		—
Proceeds from sale of investment		—			5.7			—
Proceeds from sale of broadband assets		—			4.7			—
Other, net		(1.7	)		4.7			0.3
Net cash used in investing activities		(263.5	)		(260.0	)		(142.7	)
Cash flows from financing activities
Issuance of long-term debt		75.6			—			752.1
Increase in corporate credit facility, net		55.0			—			—
Repayment of debt		(219.1	)		(13.3	)		(903.3	)
Debt issuance costs and consent fees		(1.3	)		—			(21.9	)
Issuance of common shares — exercise of stock options		2.5			1.9			2.5
Preferred stock dividends		(10.4	)		(10.4	)		(10.4	)
Other		(0.9	)		0.8			2.2
Net cash used in financing activities		(98.6	)		(21.0	)		(178.8	)
Net increase (decrease) in cash and cash equivalents		(53.3	)		53.7			0.8
Cash and cash equivalents at beginning of year		79.4			25.7			24.9
Cash and cash equivalents at end of year	$	26.1		$	79.4		$	25.7

The accompanying notes are an integral part of the consolidated financial statements.

54

Cincinnati Bell Inc.

CONSOLIDATED STATEMENTS OF SHAREOWNERS’ EQUITY (DEFICIT) AND

COMPREHENSIVE INCOME (LOSS)

(in Millions)

	6 3/4% Cumulative Convertible Preferred Shares			Common Shares			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Treasury Shares					Total
	Shares	Amount		Shares	Amount											Shares		Amount
Balance at December 31, 2004	3.1	$	129.4	253.3	$	2.5	$	2,934.5		$	(3,540.0	)	$	(5.5	)	(7.9	)	$	(145.4	)	$	(624.5	)
Net loss	—		—	—		—		—			(64.5	)		—		—			—			(64.5	)
Additional minimum pension liability adjustment, net of taxes of $24.6	—		—	—		—		—			—			(44.1	)	—			—			(44.1	)
Comprehensive loss																						(108.6	)
Shares issued under employee plans and other	—		—	1.7		0.1		4.0			—			—		—			(0.1	)		4.0
Stock-based compensation	—		—	—		—		1.8			—			—		—			—			1.8
Dividends on 6 3/4% preferred stock	—		—	—		—		(10.4	)		—			—		—			—			(10.4	)
Balance at December 31, 2005	3.1		129.4	255.0		2.6		2,929.9			(3,604.5	)		(49.6	)	(7.9	)		(145.5	)		(737.7	)
Adjustment to opening accumulated deficit, net of taxes of $5.2	—		—	—		—		—			(9.0	)		—		—			—			(9.0	)
Net income	—		—	—		—		—			86.3			—		—			—			86.3
Additional minimum pension liability adjustment, net of taxes of $(1.4)	—		—	—		—		—			—			2.2		—			—			2.2
Comprehensive income																						88.5
Shares issued (purchased) under employee plans and other	—		—	0.7		—		2.1			—			—		(0.3	)		(1.3	)		0.8
Stock-based compensation	—		—	—		—		2.5			—			—		—			—			2.5
Dividends on 6 3/4% preferred stock	—		—	—		—		(10.4	)		—			—		—			—			(10.4	)
Adjustment to initially apply SFAS No. 158, net of taxes of $73.3	—		—	—		—		—			—			(127.1	)	—			—			(127.1	)
Other	—		—	—		—		0.8			—			—		—			—			0.8
Balance at December 31, 2006	3.1		129.4	255.7		2.6		2,924.9			(3,527.2	)		(174.5	)	(8.2	)		(146.8	)		(791.6	)
Adjustment to opening accumulated deficit	—		—	—		—		—			(5.1	)		—		—			—			(5.1	)
Net income	—		—	—		—		—			73.2			—		—			—			73.2
Amortization of pension and postretirement costs, net of taxes of ($7.0)	—		—	—		—		—			—			12.2		—			—			12.2
Remeasurement of pension and postretirement liabilities and other, net of taxes of ($27.1)	—		—	—		—		—			—			46.4		—			—			46.4
Comprehensive income																						131.8
Shares issued (purchased) under employee plans and other	—		—	1.0		—		2.1			—			—		(0.1	)		(0.5	)		1.6
Stock-based compensation	—		—	—		—		6.1			—			—		—			—			6.1
Dividends on 6 3/4% preferred stock	—		—	—		—		(10.4	)		—			—		—			—			(10.4	)
Balance at December 31, 2007	3.1	$	129.4	256.7	$	2.6	$	2,922.7		$	(3,459.1	)	$	(115.9	)	(8.3	)	$	(147.3	)	$	(667.6	)

The accompanying notes are an integral part of the consolidated financial statements.

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Notes to Consolidated Financial Statements

1. Description of Business and Significant Accounting Policies

Description of Business — Cincinnati Bell Inc. and its consolidated subsidiaries (the “Company”) provides diversified telecommunications services through businesses in three segments: Wireline, Wireless and Technology Solutions. See Note 15 for information on changes to the Company’s reportable segments.

The Company generates substantially all of its revenue by serving customers in the Greater Cincinnati and Dayton, Ohio areas. An economic downturn or natural disaster occurring in this limited operating territory could have a disproportionate effect on the Company’s business, financial condition, results of operations and cash flows compared to similar companies of a national scope and similar companies operating in different geographic areas.

Additionally, because approximately 40% of the Company’s workforce is party to collective bargaining agreements, which expire in May 2008, a dispute or failed renegotiation of the collective bargaining agreements could have a material adverse effect on the business. On January 31, 2008, the Company and the Communication Workers of America (“CWA”) reached a tentative agreement on a new labor contract. The new agreement is subject to ratification by the local CWA membership.

Basis of Presentation — The consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) in accordance with accounting principles generally accepted in the United States of America. Certain prior year amounts have been reclassified to conform to the current year classifications.

Basis of Consolidation — The consolidated financial statements include the consolidated accounts of Cincinnati Bell Inc. and its majority-owned subsidiaries over which it exercises control. Intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Use of Estimates — Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.

Cash Equivalents — Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less.

Accounts Receivables — Accounts receivables consist principally of trade receivables from customers and are generally unsecured and due within 30 days. Unbilled receivables arise from services rendered but not yet billed. As of December 31, 2007 and 2006, unbilled receivables totaled $28.9 million and $25.3 million, respectively. Expected credit losses related to trade receivables are recorded as an allowance for uncollectible accounts in the Consolidated Balance Sheets. The Company establishes the allowances for uncollectible accounts using percentages of aged accounts receivable balances to reflect the historical average of credit losses as well as specific provisions for certain identifiable, potentially uncollectible balances. When internal collection efforts on accounts have been exhausted, the accounts are written off by reducing the allowance for uncollectible accounts.

Inventory, Materials, and Supplies — Inventory, materials, and supplies consists of wireless handsets, wireline network components, various telephony and IT equipment to be sold to customers, maintenance inventories, and other materials and supplies, which are carried at the lower of average cost or market.

Property, Plant and Equipment — Property, plant and equipment is stated at original cost and presented net of accumulated depreciation and impairment charges. Most of the Wireline network property, plant and equipment used to generate its voice and data revenue is depreciated using the group method, which develops a depreciation rate (annually) based on the average useful life of a specific group of assets rather than for each individual asset as would be utilized under the unit method. The estimated life of the group changes as the composition of the group of assets and their related lives change. Provision for depreciation of other property, plant and equipment, other than leasehold improvements, is based on the straight-line method over the estimated economic useful life. Depreciation of leasehold improvements is based on a straight-line method over the lesser of the economic useful life or term of the lease, including option renewal periods if renewal of the lease is reasonably assured.

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Additions and improvements, including interest and certain labor costs incurred during a construction period, are capitalized, while expenditures that do not enhance the asset or extend its useful life are charged to operating expenses as incurred. Capitalized interest for 2007, 2006, and 2005 was $3.6 million, $1.0 million, and $0.6 million, respectively. The increase in 2007 relates to capitalized interest during the construction of the Company’s third generation (“3G”) wireless network and new data center facilities.

The Company records the fair value of a legal liability for an asset retirement obligation in the period it is incurred. The removal cost is initially capitalized and depreciated over the remaining life of the underlying asset. The associated liability is accreted to its present value each period. Once the obligation is ultimately settled, any difference between the final cost and the recorded liability is recognized as income or loss on disposition.

Goodwill and Indefinite-Lived Intangible Assets — Goodwill represents the excess of the purchase price consideration over the fair value of assets acquired recorded in connection with purchase business combinations. Indefinite-lived intangible assets consist of Federal Communications Commission (“FCC”) licenses for wireless spectrum and trademarks of the Wireless segment. The Company may renew the wireless licenses in a routine manner every ten years for a nominal fee, provided the Company continues to meet the service and geographic coverage provisions required by the FCC.

Goodwill and intangible assets not subject to amortization are tested for impairment annually, or when events or changes in circumstances indicate that the asset might be impaired. The impairment test for goodwill involves comparing the estimated fair value of the reporting unit based on discounted future cash flows to the unit’s carrying value. The impairment test for indefinite-lived intangibles consists of comparing the estimated fair value of the intangible asset to its carrying value. For each intangible tested, the carrying values were lower than the estimated fair values, and no impairment charges were recorded in 2007, 2006, and 2005.

Long-Lived Assets, Other than Goodwill and Indefinite-Lived Intangibles — The Company reviews the carrying value of long-lived assets, other than goodwill and indefinite-lived intangible assets discussed above, when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the estimated future undiscounted cash flows expected to result from the use of an asset (or group of assets) and its eventual disposition are less than the carrying amount. An impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value.

From 2003 through June 2006, the Company transitioned its wireless customers from its legacy Time Division Multiple Access (“TDMA”) network to its Global System for Mobile Communications (“GSM”) network. Although the Company had shortened the useful lives of the TDMA equipment to December 31, 2006, the Company incurred charges of $42.3 million to write down the recorded value of TDMA assets that were retired in 2005 and TDMA assets that could no longer support their recorded value. These charges were included in “Asset impairments and other charges” in the Consolidated Statement of Operations. The Company wrote down the assets to fair value, which was calculated based on the appraised amount at which the assets could be sold in a current transaction between willing parties.

Investments — The Company has certain investments that do not have readily determinable fair market values. Investments over which the Company exercises significant influence are recorded under the equity method. The Company had no equity method investments at December 31, 2007, and had equity method investments with a carrying value of $0.6 million at December 31, 2006. Investments in which the Company owns less than 20% and cannot exercise significant influence over the investee operations are recorded at cost. The carrying value of these investments was approximately $2.3 million and $1.8 million as of December 31, 2007 and 2006, respectively. Investments are reviewed annually for impairment. If the carrying value of the investment exceeds its estimated fair value and the decline in value is determined to be other-than-temporary, an impairment loss is recognized for the difference. The Company estimates fair value using external information and discounted cash flow analyses. In 2007, the Company received a one-time dividend of $1.9 million from a cost investment. During 2006, the Company sold a cost investment and recorded a gain of $3.2 million. These gains are included in “Other income, net” in the Consolidated Statements of Operations.

Revenue Recognition — The Company adheres to sales recognition principles described in Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” issued by the SEC. Under SAB No. 104, sales are recognized when there is persuasive evidence of a sale arrangement, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectibility is reasonably assured.

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Service revenue — The Company recognizes service revenue as services are provided. Revenue from local telephone and special access services, which are billed monthly prior to performance of service, and from prepaid wireless service, which is collected in advance, is not recognized upon billing or cash receipt but rather is deferred until the service is provided. Postpaid wireless, long distance, switched access, reciprocal compensation, and data and Internet product services are billed monthly in arrears. The Company bills service revenue in regular monthly cycles, which are spread throughout the days of the month. As the day of each billing cycle rarely coincides with the end of the Company’s reporting period for usage-based services such as postpaid wireless, long distance, and switched access, the Company must estimate service revenues earned but not yet billed. The Company bases its estimates upon historical usage and adjusts these estimates during the period in which the Company can determine actual usage, typically in the following reporting period.

Initial billings for Wireline service connection and activation are deferred and amortized into revenue on a straight-line basis over the average customer life. The associated connection and activation costs, to the extent of the upfront fees, are also deferred and amortized on a straight-line basis over the average customer life.

Data center services are also recognized as service is provided. Agreements with data center customers require certain levels of service or performance. Although the occurrence is rare, if the Company fails to meet these levels, customers may be able to receive service credits for their accounts. The Company records these credits against revenue when an event occurs that gives rise to such credits. In multi-year data center arrangements with increasing or decreasing monthly billings, revenues are recognized on a straight-line basis. Revenue for leased data center assets is also recognized on a straight-line basis over the contract term.

Technology Solutions professional services, including product installations, are recognized as the service is provided. Technology Solutions also provides maintenance services on telephony equipment under one to four year contract terms. This revenue is accounted for under Financial Accounting Standards Board (“FASB”) Technical Bulletin No. 90-1, “Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts,” and is deferred and recognized ratably over the term of the underlying customer contract.

Products — The Company recognizes equipment revenue upon the completion of contractual obligations, such as shipment, delivery, installation, or customer acceptance. Wireless handset revenue and the related activation revenue are recognized when the products are delivered to and accepted by the customer, as this is considered to be a separate earnings process from the sale of wireless services. Wireless equipment costs are also recognized upon handset sale, and are in excess of the related handset and activation revenue. The Company is a reseller of IT and telephony equipment and considers the criteria of Emerging Issues Task Force (“EITF”) 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent,” when recording revenue, such as title transfer, risk of product loss, and collection risk. Based on this guidance, these equipment revenues and associated costs have generally been recorded on a gross basis, rather than recording the revenues net of the associated costs. The Company benefits from vendor rebate plans, particularly rebates on hardware sold by Technology Solutions. The Company recognizes the rebates as an offset to costs of products sold upon sale of the related equipment to the customer.

With respect to arrangements with multiple deliverables, the Company follows the guidance in EITF 00-21, “Revenue Arrangements with Multiple Deliverables,” to determine whether more than one unit of accounting exists in an arrangement. To the extent that the deliverables are separable into multiple units of accounting, total consideration is allocated to the individual units of accounting based on their relative fair value, determined by the price of each deliverable when it is regularly sold on a stand-alone basis. Revenue is recognized for each unit of accounting as delivered or as service is performed depending on the nature of the deliverable comprising the unit of accounting.

The Company is a reseller of IT equipment, such as servers and routers, and often is contracted to install the IT equipment that it sells. The revenue recognition guidance in Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” is applied, which requires vendor specific objective evidence (“VSOE”) in order to recognize the IT equipment separate from the installation. The Company both sells IT equipment without the installation service, and provides installation services without the IT equipment, and as such, has VSOE that permits the separation of the IT equipment from the installation services. The Company recognizes the IT equipment upon completion of its contractual obligations, generally upon delivery of the IT equipment to the customer, and recognizes installation service revenue upon completion of the installation.

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Pricing of local services is generally subject to oversight by both state and federal regulatory commissions. Such regulation also covers services, competition, and other public policy issues. Various regulatory rulings and interpretations could result in increases or decreases to revenue in future periods.

Advertising — Costs related to advertising are expensed as incurred and amounted to $26.4 million, $25.9 million, and $26.2 million in 2007, 2006, and 2005, respectively.

Legal Expenses — Legal costs incurred in connection with loss contingencies are expensed as incurred.

Income and Operating Taxes — The income tax provision consists of an amount for taxes currently payable and an amount for tax consequences deferred to future periods. Deferred investment tax credits are being amortized as a reduction of the provision for income taxes over the estimated useful lives of the related property, plant and equipment. At December 31, 2007, the Company has $596.2 million of deferred tax assets. The ultimate realization of the deferred income tax assets depends upon the Company’s ability to generate future taxable income during the periods in which basis differences and other deductions become deductible and prior to the expiration of the net operating loss carryforwards. The Company’s previous tax filings are subject to normal reviews by regulatory agencies until the related statute of limitations expires.

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”) on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $5.1 million increase in the liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 accumulated deficit balance. After recognizing the impact from the adoption of FIN 48, the Company had a $14.7 million liability recorded for unrecognized tax benefits as of January 1, 2007. At December 31, 2007, the Company has a $14.8 million liability recorded for unrecognized tax benefits. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $14.5 million. The Company does not currently anticipate that the amount of unrecognized tax benefits will change significantly over the next year. Refer to Note 13 of the Consolidated Financial Statements for further discussion related to income taxes.

The Company incurs certain operating taxes that are reported as expenses in operating income, such as property, sales, use, and gross receipts taxes. These taxes are not included in income tax expense because the amounts to be paid are not dependent on the level of income generated by the Company. The Company also records expense against operating income for the establishment of liabilities related to certain operating tax audit exposures. These liabilities are established based on the Company’s assessment of the probability of payment. Upon resolution of audit, any remaining liability not paid is released and increases operating income.

The Company also incurs federal regulatory taxes on certain revenue producing transactions. The Company is permitted to recover certain of these taxes by billing the customer; however, collections cannot exceed the amount due to the federal regulatory agency. These federal regulatory taxes are presented in sales and cost of services on a gross basis because, while the Company is required to pay the tax, it is not required to collect the tax from customers and in fact, does not collect the tax from customers in certain instances. The amount recorded as revenue for 2007, 2006, and 2005 was $17.3 million, $15.3 million and $15.6 million, respectively. The amount expensed for 2007, 2006 and 2005 was $18.2 million, $20.0 million and $16.0 million, respectively. The Company records all other taxes collected from customers on a net basis.

Stock-Based Compensation — In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” the Company values all share-based payments to employees, including grants of employee stock options, at fair value on the date of grant and expenses this amount over the applicable vesting period. The Company adopted SFAS No. 123(R) on January 1, 2006 using the modified prospective application method, therefore prior periods were not restated. Under this method, SFAS No. 123(R) applies to new awards, awards modified, repurchased, or cancelled after January 1, 2006 and any unvested awards at that date. All outstanding stock option awards as of December 31, 2005 were fully vested and had no impact on the Company’s results of operations for 2006 or 2007. Prior to 2006, the Company recorded stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”).

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The fair value of stock options is determined using the Black-Scholes option-pricing model using assumptions such as volatility, risk-free interest rate, holding period and dividends. The fair value of stock awards is based on the Company’s share price on the date of grant. For all share-based payments, an assumption is also made for the estimated forfeiture rate based on the historical behavior of employees. The forfeiture rate reduces the total fair value of the awards to be recognized as compensation expense. The Company’s policy for graded vesting awards is to recognize compensation expense on a straight-line basis over the vesting period. Refer to Note 14 of the Consolidated Financial Statements for further discussion related to stock-based compensation.

The following table illustrates the effect on net loss and basic and diluted loss per share if the Company had applied the provisions of SFAS No. 123(R) to stock-based compensation in 2005.

(dollars in millions except per share amounts)		Year Ended December 31, 2005
Net loss as reported		$	(64.5	)
Add: Stock-based compensation expense included in reported net loss, net of related tax benefits			1.1
Deduct: Stock-based compensation expense determined under fair value method, net of related tax benefits			(7.6	)
Pro forma net loss		$	(71.0	)
Basic loss per share:	As reported	$	(0.30	)
	Pro forma		(0.33	)
Diluted loss per share:	As reported		(0.30	)
	Pro forma		(0.33	)

Accounting for Termination Benefits — The Company has written severance plans covering both its management and union employees and, as such, accrues probable and estimable employee separation liabilities in accordance with SFAS No. 112, “Employers’ Accounting for Postemployment Benefits, an Amendment of FASB Statements No. 5 and 43.” These liabilities are based on the Company’s historical experience of severance, historical costs associated with severance, and management’s expectation of future severance.

The Company accrues for special termination benefits upon acceptance by an employee of any voluntary termination offer in accordance with SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits.” Also, the Company considers whether employee terminations give rise to a pension and postretirement curtailment charge under SFAS No. 88. The Company’s policy is that terminations in a calendar year involving 10% or more of the plan service years result in a curtailment of the pension or postretirement plan.

See Note 3 of the Consolidated Financial Statements for further discussion of the Company’s restructuring plans.

Derivative Financial Instruments — The Company is exposed to the impact of interest rate fluctuations on its indebtedness. The Company employs derivative financial instruments to manage its balance of fixed rate and variable rate indebtedness. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. Interest rate swap agreements, a particular type of derivative financial instrument, involve the exchange of fixed and variable rate interest payments and do not represent an actual exchange of the notional amounts between the parties. The Company has entered into a series of interest rate swaps with total notional amounts of $450 million that qualify as fair value hedges. Fair value hedges offset changes in the fair value of underlying assets and liabilities. The interest rate swaps are recorded at their fair values and the carrying value of the underlying hedged indebtedness is adjusted by the same corresponding value in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

Recently Issued Accounting Standards

SFAS No. 157, “Fair Value Measurements,” was issued in September 2006. The objective of the Statement is to define fair value, establish a framework for measuring fair value and expand disclosures about fair value measurements. As it relates to financial assets and liabilities, SFAS No. 157 will be effective for interim and

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annual reporting periods beginning after November 15, 2007. Per FASB Staff Position 157-2, “Effective Date of FASB Statement No. 157,” implementation of SFAS No. 157 to non-financial assets and liabilities will be effective for interim and annual reporting periods beginning after November 15, 2008. The Company expects the impact of SFAS No. 157 on financial assets and liabilities will be immaterial to its Consolidated Financial Statements. The Company has not yet assessed the impact of this Statement related to non-financial assets and liabilities on its Consolidated Financial Statements.

SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” was issued in February 2007. The Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 will be effective for the first fiscal year that begins after November 15, 2007. The Company does not expect to implement the alternative treatment afforded by SFAS No. 159.

SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51,” was issued in December 2007. SFAS No. 160 clarifies the classification of noncontrolling interests in consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. Under SFAS No. 160, noncontrolling interests are considered equity and should be reported as an element of consolidated equity, net income will encompass the total income of all consolidated subsidiaries, and there will be separate disclosure on the face of the income statement of the attribution of income between the controlling and noncontrolling interests, and increases and decreases in the noncontrolling ownership interest amount will be accounted for as equity transactions. SFAS No. 160 will be effective for the first fiscal year beginning on or after December 15, 2008, and earlier application is prohibited. SFAS No. 160 is required to be adopted prospectively, except for reclassifying noncontrolling interests to equity, separate from the parent’s shareholders’ equity, in the consolidated statement of financial position and recasting consolidated net income (loss) to include net income (loss) attributable to both the controlling and noncontrolling interests, both of which are required to be adopted retrospectively. The Company has not yet assessed the impact of this Statement on the Company’s financial statements.

SFAS No. 141(R), “Business Combinations,” was issued in December 2007. SFAS No. 141(R) requires that upon initially obtaining control, an acquirer will recognize 100% of the fair values of acquired assets, including goodwill, and assumed liabilities, with only limited exceptions, even if the acquirer has not acquired 100% of its target. Additionally, contingent consideration arrangements will be presented at fair value at the acquisition date and included on that basis in the purchase price consideration and transaction costs will be expensed as incurred. SFAS No. 141(R) also modifies the recognition for preacquisition contingencies, such as environmental or legal issues, restructuring plans and acquired research and development value in purchase accounting. SFAS No. 141(R) amends SFAS No. 109, “Accounting for Income Taxes,” to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. SFAS No. 141(R) is effective for the first fiscal year beginning after December 15, 2008. The Company has not yet assessed the impact of this statement on the Company’s financial statements.

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2. Earnings (Loss) Per Common Share

Basic earnings (loss) per common share (“EPS”) is based upon the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur if common stock equivalents were exercised, but only to the extent that they are considered dilutive to the Company’s diluted EPS. The following table is a reconciliation of the numerators and denominators of the basic and diluted EPS computations:

	Year Ended December 31,
(in millions, except per share amounts)	2007		2006		2005
Numerator:
Net income (loss)	$	73.2	$	86.3	$	(64.5	)
Preferred stock dividends		10.4		10.4		10.4
Numerator for basic and diluted EPS	$	62.8	$	75.9	$	(74.9	)
Denominator:
Denominator for basic EPS — weighted average common shares outstanding		247.4		246.8		245.9
Warrants		7.1		5.1		—
Stock-based compensation arrangements		2.3		1.4		—
Denominator for diluted EPS		256.8		253.3		245.9
Basic earnings (loss) per common share	$	0.25	$	0.31	$	(0.30	)
Diluted earnings (loss) per common share	$	0.24	$	0.30	$	(0.30	)
Potentially issuable common shares excluded from denominator for diluted EPS due to anti-dilutive effect		36.5		37.7		45.0

3. Restructuring Charges

2007 Restructurings

In the fourth quarter of 2007, the Company announced a restructuring plan to reduce costs and increase operational efficiencies. As a result, the Company incurred a restructuring charge of $37.5 million, composed of the following:

• Special termination pension and postretirement benefit of $8.2 million — The Company offered and, by December 31, 2007, 105 management employees accepted special termination benefits totaling $12 million. The Company determined that $8.2 million of these benefits have been earned through December 31, 2007 under SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” and this amount was therefore accrued as of December 31, 2007. Remaining termination benefits are subject to future service requirements as determined by the Company and will be amortized to expense over the future service period. The Company estimates these amounts to be approximately $2.6 million in 2008 and $1.2 million in 2009. See Note 9 to the Consolidated Financial Statements for further discussion of the special termination benefits.

• Employee separation costs of $22.9 million — This represents severance costs for employees over the next five years that are primarily related to the Company’s need to downsize its Wireline operations to conform to the decreased access lines being served by the Company. These costs were recorded in accordance with SFAS No. 112, “Employers’ Accounting for Postemployment Benefits, an Amendment of FASB Statements No. 5 and 43,” as the Company has probable and estimable liabilities under its written severance plans.

• Pension and postretirement curtailment charge of $6.4 million — Management terminations contemplated above represent approximately 10% of the plan service years for the management pension plan and 15% of the plan service years for the management postretirement benefits plan, resulting in a pension and postretirement plans curtailment charge of $6.4 million. See Note 9 to the Consolidated Financial Statements for further discussion relating to the curtailment charge.

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The restructuring expense was associated with the Wireline segment for $34.0 million, Wireless for $2.1 million, Technology Solutions for $1.0 million, and Corporate for $0.4 million. At December 31, 2007, $4.5 million of the reserve related to employee separation was included in “Other current liabilities,” and $18.4 million was included in “Other noncurrent liabilities” in the Consolidated Balance Sheet. The special termination benefits and curtailment charges are included in “Accrued pension and postretirement benefits” in the Consolidated Balance Sheet at December 31, 2007.

In the first quarter of 2007, the Company incurred employee separation expense of $2.4 million related to the outsourcing of certain accounting functions and the reduction in workforce of various other administrative functions. All of the expense was associated with the Wireline segment and significantly all of it will be paid by the end of 2008. At December 31, 2007, $0.4 million of the reserve was included in “Other current liabilities,” and $0.1 million was included in “Other noncurrent liabilities” in the Consolidated Balance Sheet. The following table illustrates the activity in this reserve for 2007:

Type of costs (dollars in millions)	Initial Charge		Utilizations			Balance December 31, 2007
Employee separation obligations	$	2.4	$	(1.9	)	$	0.5

2006 Restructuring

In September 2006, the Company incurred employee separation expense of $3.0 million related to the outsourcing of certain supply chain functions to improve operating efficiencies. Substantially all of the expense was associated with the Wireline segment and will be fully paid by the end of 2008. At December 31, 2007, the reserve balance of $0.4 million was included in “Other current liabilities” in the Consolidated Balance Sheet. At December 31, 2006, $1.5 million of the reserve balance was included in “Other current liabilities” and $0.4 million was included in “Other noncurrent liabilities” in the Consolidated Balance Sheet.

The following table illustrates the activity in this reserve through December 31, 2007:

Type of costs (dollars in millions)	Initial Charge		Utilizations			Balance December 31, 2006		Income			Utilizations			Balance December 31, 2007
Employee separation obligations	$	3.0	$	(1.1	)	$	1.9	$	(0.3	)	$	(1.2	)	$	0.4

2005 Restructuring

In late 2005, the Company incurred employee separation expense of $1.6 million related to the outsourcing of its directory assistance services. Substantially all of the expense was associated with the Wireline segment. The restructuring reserve balance of $0.1 million was included in “Other current liabilities” in the Consolidated Balance Sheet at December 31, 2006.

The following table illustrates the activity in this reserve through December 31, 2007:

Type of costs (dollars in millions)	Initial Charge		Utilizations			Balance December 31, 2005		Income			Utilizations			Balance December 31, 2006		Utilizations			Balance December 31, 2007
Employee separation obligations	$	1.6	$	(0.1	)	$	1.5	$	(0.2	)	$	(1.2	)	$	0.1	$	(0.1	)	$	—

2001 Restructuring

In 2001, the Company adopted a restructuring plan which included initiatives to consolidate data centers, reduce the Company’s expense structure, exit the network construction business, eliminate other non-strategic operations and merge the digital subscriber line (“DSL”) and certain dial-up Internet operations into the Company’s other operations. Impairment charges of $148.1 million and restructuring costs of $84.2 million were recorded in 2001 related to these initiatives. The cumulative restructuring charges incurred through December 31, 2007 for this plan total $95.0 million, composed of $72.2 million related to lease and other contract terminations, $22.4 million for employee separations, and $0.4 million for other exit costs. The Company completed the plan prior to 2003, except for certain lease obligations, which are expected to continue through 2015. Including amounts incurred to date, lease and other contract termination amounts are expected to total approximately $73.2 million.

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The following table illustrates the activity in this reserve from December 31, 2004 through December 31, 2007:

Type of costs (dollars in millions)	Balance December 31, 2004		Income			Utilizations			Balance December 31, 2005		Expense		Utilizations			Balance December 31, 2006
Terminate contractual obligations	$	10.1	$	(0.5	)	$	(1.4	)	$	8.2	$	0.6	$	(1.6	)	$	7.2

Type of costs (dollars in millions)	Balance December 31, 2006		Expense		Utilizations			Balance December 31, 2007
Terminate contractual obligations	$	7.2	$	0.3	$	(1.3	)	$	6.2

At December 31, 2007 and 2006, $1.3 million and $1.4 million, respectively, of the restructuring reserve balance was included in “Other current liabilities” in the Consolidated Balance Sheets. At December 31, 2007 and 2006, $4.9 million and $5.8 million, respectively, of the restructuring reserve balance was included in “Other noncurrent liabilities” in the Consolidated Balance Sheets.

4. Property, Plant and Equipment

Property, plant and equipment is comprised of the following:

(dollars in millions)	December 31,						Depreciable Lives (Years)
	2007			2006
Land and rights-of-way	$	5.8		$	5.7		20-Indefinite
Buildings and leasehold improvements		272.2			220.0		2-40
Telephone plant		2,245.9			2,148.8		2-50
Computer and telecommunications equipment		64.4			56.8		3-15
Furniture, fixtures, vehicles, and other		141.7			130.2		3-10
Construction in process		78.5			25.0		n/a
Gross value		2,808.5			2,586.5
Accumulated depreciation		(1,874.8	)		(1,767.7	)
	$	933.7		$	818.8

Gross property, plant and equipment includes $38.3 million and $32.3 million of assets accounted for as capital leases as of December 31, 2007 and 2006, respectively. These assets are included in the captions “Building and leasehold improvements,” “Computer and telecommunications equipment,” and “Furniture, fixtures, vehicles, and other.” Amortization of capital leases is included in “Depreciation” in the Consolidated Statements of Operations. Approximately 82%, 83%, and 90% of “Depreciation,” as presented in the Consolidated Statements of Operations in 2007, 2006 and 2005, respectively, was associated with the cost of providing services and products.

To satisfy increasing demand for existing voice minutes of use by customers as well as to provide enhanced data services such as streaming video, the Company is building a 3G network to deploy on the AWS spectrum purchased in 2006. As a result, lives of certain GSM assets were shortened in the fourth quarter of 2006 and depreciation was accelerated based on the new useful life. The increase in depreciation due to this acceleration was approximately $1.3 million in the fourth quarter of 2006 and $5.2 million in 2007.

In 2003, the Company shortened the estimated remaining economic useful life of its legacy TDMA wireless network to December 31, 2006 due to the expected migration of its TDMA customer base to its GSM network. In 2005, the Company incurred charges of $42.3 million to write down the recorded value of TDMA assets that were retired in 2005 and TDMA assets that could no longer support their recorded value. These charges were included in “Asset impairments and other charges” in the Consolidated Statement of Operations. The Company wrote down the assets to fair value, which was calculated based on the appraised amount at which the assets could be sold in a current transaction between willing parties.

Also, in 2005, the useful life of certain of the remaining TDMA assets was shortened from the December 31, 2006 date being used, and depreciation was accelerated. The increase in depreciation expense due to the shortened life in 2005 was $7.7 million.

Subsequent event

In February 2008, the Company purchased a building for $16.3 million, which it intends to convert into a data center facility.

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5. Acquisitions of Businesses and Wireless Licenses

GramTel USA, Inc.

On December 31, 2007, the Company purchased GramTel USA, Inc. (“GramTel”), a data center business in South Bend, Indiana, for a purchase price of $20.3 million (including $0.6 million of accrued transaction costs), of which $19.0 million was paid in cash in 2007. The Company funded the purchase with its Corporate credit facility. The purchase price was primarily allocated to property, plant and equipment for $4.3 million, customer relationship intangible assets for $9.0 million, and goodwill for $7.0 million. The preliminary purchase price allocation for this transaction may be adjusted upon completion of the Company’s valuation of the assets and liabilities of the business. The Company anticipates both the goodwill and intangible assets to be fully deductible for tax purposes. The financial results will be included in the Technology Solutions segment.

Local Telecommunication Business

In March 2007, the Company purchased a local telecommunication business (“Lebanon”), which offers voice, data and cable TV services, in Lebanon, Ohio for a purchase price of $7.0 million, of which $4.6 million was paid in March 2007. The Company funded the purchase with its available cash. The purchase price was primarily allocated to property, plant and equipment for $4.4 million, customer relationship intangible assets for $1.5 million and goodwill for $2.1 million. The financial results have been included in the Wireline segment and were immaterial to the Company’s financial statements for the year ended December 31, 2007.

Acquisition of Remaining Interest in Cincinnati Bell Wireless LLC

In February 2006, the Company purchased the remaining 19.9% membership interest in Cincinnati Bell Wireless LLC (“CBW”). As a result, the Company paid purchase consideration of $83.0 million in cash and incurred transaction expenses of $0.2 million. CBW is now a wholly-owned subsidiary of the Company. The Company funded the purchase with its Corporate credit facility and available cash.

The transaction was accounted for as a step acquisition using the purchase method of accounting in accordance with SFAS No. 141, “Business Combinations.” The Company applied the purchase price against the minority interest and then allocated the remainder to identifiable tangible and intangible assets and liabilities acquired as follows:

(dollars in millions)
Minority interest	$	27.8
Intangible assets		42.1
Goodwill		10.2
Other		3.1
Total purchase price	$	83.2

The purchase price allocation was based upon the estimated fair values as of February 2006 of the tangible and intangible assets and liabilities. Estimated fair value was compared to the book value already recorded, and 19.9% of the excess of estimated fair value over book value was allocated to the respective tangible and intangible assets and liabilities. The excess purchase price over the minority interest and fair value ascribed to the tangible and intangible assets and liabilities was recorded as goodwill. The Company anticipates both the goodwill and intangible assets to be fully deductible for tax purposes.

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The following table presents detail of the purchase price allocated to intangible assets of CBW as of the date of acquisition:

(dollars in millions)	Fair Value		Weighted Average Amortization Period in Years
Intangible assets subject to amortization:
Customer relationships — subscribers	$	11.6	7
Customer relationships — collocation towers		2.6	10
Contractual right — license		0.7	1
		14.9	7
Intangible assets not subject to amortization:
FCC Licenses		21.0	n/a
Trademarks		6.2	n/a
Total intangible assets	$	42.1

The intangible asset for the relationship CBW has with its subscribers is being amortized using the sum-of-the-months digits method. Amortization of the customer relationship intangible asset associated with tower collocations utilizes a straight-line method. Tower collocation revenue is received from other wireless carriers for the placement of their radios on CBW towers. These amortization methods best reflect the estimated patterns in which the economic benefits will be consumed. For further discussion on amortization expense, refer to Note 6 of the Consolidated Financial Statements.

This acquisition has no effect on the Company’s operating income, which historically has included 100% of CBW’s operating income. However, for periods after the acquisition date, the 19.9% minority interest in the net income (loss) of CBW was eliminated.

The financial information in the table below summarizes the results of operations of the Company, on a pro forma basis, as though the acquisition had occurred as of the beginning of the periods presented:

	Year Ended December 31,
(dollars in millions, except per share amounts)	2006		2005
Revenue	$	1,270.1	$	1,209.6
Net income (loss)		85.8		(77.2	)
Basic earnings (loss) per share		0.31		(0.36	)
Diluted earnings (loss) per share		0.30		(0.36	)

Automated Telecom Inc.

In May 2006, the Company purchased Automated Telecom Inc. (“ATI”), based in Louisville, Kentucky, for a purchase price of $3.5 million to expand its geographical presence in order to better serve its customers located outside of the greater Cincinnati area. ATI is a reseller of, and maintenance provider for, telephony equipment. The purchase price was primarily allocated to customer relationship intangible assets, deferred tax liabilities and goodwill. The financial results of ATI are included in the Technology Solutions segment and were immaterial to the Company’s financial statements for the years ended December 31, 2007 and 2006.

Wireless Licenses

In 2007, the Company deposited $4.4 million with the FCC for the opportunity to participate in the auction, which began in January 2008, for the purchase of additional wireless spectrum. If the Company is not a winning bidder and does not purchase spectrum, the FCC will return the deposit in full to the Company. Such deposit is included in “Other noncurrent assets” in the Consolidated Balance Sheet.

In 2006, the Company purchased 20 MHz of advanced wireless spectrum for the Cincinnati and Dayton, Ohio regions and 10 MHz for the Indianapolis, Indiana region in the FCC Advanced Wireless Services spectrum auction for $37.1 million, which is included in “Intangible assets, net” in the Consolidated Balance Sheets. To

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satisfy increasing demand for existing voice minutes of use by customers as well as to provide enhanced data services such as streaming video, the Company is building a 3G network in its Cincinnati and Dayton regions to deploy on the newly purchased AWS spectrum. The Company expects the 3G network to be operational in 2008. The Company is considering its options with respect to the Indianapolis spectrum, which include expansion of its wireless operations into this area or lease of the spectrum to another wireless provider.

Subsequent Event

In November 2007, the Company signed a definitive purchase agreement to purchase the assets of eGIX, Inc. (“eGIX”) for approximately $18.0 million and contingent consideration up to $5.2 million. eGIX is located in Carmel, Indiana and provides advanced data and voice services to businesses throughout the Midwest. The transaction was completed in February 2008.

6. Goodwill and Intangible Assets

Goodwill

As of December 31, 2007 and 2006, goodwill totaled $62.4 million and $53.3 million, respectively. The changes in the carrying amount of goodwill for the year ended December 31, 2007, are as follows:

(dollars in millions)	Wireless		Wireline		Technology Solutions		Total
Balance as of December 31, 2006	$	50.3	$	0.8	$	2.2	$	53.3
Acquired during the year		—		2.1		7.0		9.1
Balance as of December 31, 2007	$	50.3	$	2.9	$	9.2	$	62.4

Intangible Assets

Summarized below are the carrying values for the major classes of intangible assets:

		December 31, 2007					December 31, 2006
(dollars in millions)	Weighted Average Life in Years	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Intangible assets subject to amortization:
Customer relationships
Wireline	8	$	1.5	$	(0.3	)	$	—	$	—
Wireless	8		14.2		(6.4	)		14.2		(3.4	)
Technology Solutions	7		11.0		(0.7	)		2.0		(0.3	)
		$	26.7	$	(7.4	)	$	16.2	$	(3.7	)
Wireless — Contractual right — license	1	$	0.7	$	(0.7	)	$	0.7	$	(0.7	)
Intangible assets not subject to amortization:
Wireless — FCC licenses	n/a	$	95.7	$	—		$	94.2	$	—
Wireless — Trademarks	n/a		6.2		—			6.2		—

The increase in customer relationships for the year ended December 31, 2007 compared to December 31, 2006 was attributable to the acquisitions of GramTel and Lebanon during 2007. See Note 5 of the Consolidated Financial Statements for further discussion. The increase in FCC licenses was due to the capitalization of interest during the construction of the 3G wireless network.

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Amortization expense for intangible assets subject to amortization was $3.7 million in 2007, $4.4 million for 2006 and none in 2005. The following table presents estimated amortization expense for 2008 through 2012, subject to adjustment for finalization of the GramTel purchase price allocation and future acquisitions:

(dollars in millions)
2008	$	3.9
2009		3.2
2010		2.9
2011		2.3
2012		2.1

7. Debt

Debt is comprised of the following:

	December 31,
(dollars in millions)	2007		2006
Current portion of long-term debt:
Credit facility, Tranche B Term Loan	$	4.0	$	4.0
Capital lease obligations and other debt		3.8		3.3
Current portion of long-term debt		7.8		7.3
Long-term debt, less current portion:
Credit facility, revolver		55.0		—
Credit facility, Tranche B Term Loan		207.0		391.0
7 1/4% Senior Notes due 2013		470.5		496.9
83/8% Senior Subordinated Notes due 2014*		637.4		631.5
7% Senior Notes due 2015*		250.6		245.0
7 1/4% Senior Notes due 2023		50.0		50.0
Accounts Receivable Securitization Facility		75.0		—
Various Cincinnati Bell Telephone notes		230.0		230.0
Capital lease obligations and other debt		25.8		20.7
		2,001.3		2,065.1
Net unamortized premiums		0.6		0.8
Long-term debt, less current portion		2,001.9		2,065.9
Total debt	$	2,009.7	$	2,073.2

* The face amount of these notes has been adjusted for the fair value of interest rate swaps classified as fair value derivatives at December 31, 2007 and 2006.

Accounts Receivable Securitization Facility

In March 2007, the Company and certain subsidiaries entered into an accounts receivable securitization facility (“receivables facility”), which permits borrowings of up to $80 million, depending on the level of eligible receivables and other factors. The receivables facility has a term of five years, expiring in March 2012. Under the receivables facility, Cincinnati Bell Telephone Company LLC (“CBT”), Cincinnati Bell Extended Territories LLC (“CBET”), CBW, Cincinnati Bell Any Distance Inc., and Cincinnati Bell Complete Protection Inc. sell their respective trade receivables on a continuous basis to Cincinnati Bell Funding LLC (“CBF”), a wholly-owned limited liability company. In turn, CBF grants, without recourse, a senior undivided interest in the pooled receivables to commercial paper conduits in exchange for cash while maintaining a subordinated undivided interest, in the form of over-collateralization, in the pooled receivables. The Company has agreed to continue servicing the receivables for CBF at market rates; accordingly, no servicing asset or liability has been recorded.

Although CBF is a wholly-owned consolidated subsidiary of the Company, CBF is legally separate from the Company and each of the Company’s other subsidiaries. Upon and after the sale or contribution of the accounts receivable to CBF, such accounts receivable are legally assets of CBF, and as such are not available to creditors of other subsidiaries or the parent company.

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For the purposes of consolidated financial reporting, the receivables facility is accounted for as a secured financing. Because CBF has the ability to prepay the receivables facility at any time by making a cash payment and effectively repurchasing the receivables transferred pursuant to the facility, the transfers do not qualify for “sale” treatment on a consolidated basis under SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities — a replacement of FASB Statement 125.” Based on eligible receivables at December 31, 2007, the Company’s borrowing limit under the receivables facility was $80 million, of which the Company had borrowed $75.0 million. Interest on the receivables facility is based on the federal funds rate plus one-half percent and was $3.4 million for 2007. The average interest rate on the receivables facility was 5.9% in 2007.

Corporate Credit Facilities

Cincinnati Bell Inc. (“CBI”), the parent company, entered into a new corporate credit facility (“Corporate credit facility”) in February 2005. The $250.0 million revolving line of credit under the Corporate credit facility terminates in February 2010. Borrowings under the revolving credit facility bear interest, at the Company’s election, at a rate per annum equal to (i) LIBOR plus the applicable margin or (ii) the base rate plus the applicable margin. The applicable margin is based on certain Company financial ratios and ranges between 1.25% and 2.25% for LIBOR rate advances, and 0.25% and 1.25% for base rate advances. Base rate is the higher of the bank prime rate or the federal funds rate plus one-half percent.

In August 2005, the Company amended the Corporate credit facility to include a $400 million term loan (“Tranche B Term Loan”). The proceeds from the Tranche B Term Loan and additional borrowings under the Corporate credit facility were used to retire 16% Senior Subordinated Discount Notes due 2009 (“16% Notes”) for $447.8 million. The Company recorded a loss on debt extinguishment totaling $91.9 million in 2005 on the paydown of the 16% Notes, composed of $55.1 million for the premium paid, $27.7 million for the write-off of the unamortized discount, and $9.1 million for the write-off of the unamortized deferred financing fees. The Tranche B Term Loan bears interest at a per annum rate equal to, at the Company’s option, LIBOR plus 1.50% or the base rate plus 0.50%. The original maturity schedule for the Tranche B Term Loan was quarterly principal payments of $1.0 million beginning December 31, 2005 through September 30, 2011, and then in four quarterly installments of $94.0 million ending on August 31, 2012. In 2007, the Company repaid $184.0 million of the Tranche B Term Loan, using proceeds of $75.0 million from borrowings under the receivables facility and the remainder from available cash. The Company recorded a loss on extinguishment of debt of $0.4 million in 2007 for the repayment of the Tranche B Term Loan. The balance on the Tranche B Term Loan was $211.0 million at December 31, 2007.

As of December 31, 2007, the Company had $55.0 million outstanding borrowings under its revolving credit facility, and had outstanding letters of credit totaling $27.1 million, leaving $167.9 million in additional borrowing availability under its Corporate credit facility. Outstanding letters of credit at December 31, 2007 include one issued for $23.0 million in December 2007 for the benefit of a data center customer. This permits the customer to draw on the letter of credit if the Company is not able to perform its data center contractual obligations due to bankruptcy. The Company agreed to issue the letter of credit because the customer prepaid $21.5 million for data center services.

Voluntary prepayments of the Corporate credit facility and voluntary reductions of the unutilized portion of the revolving line of credit are permitted at any time at no cost to the Company. The average interest rate charged on borrowings under the Corporate credit facility was 6.9%, 6.6% and 5.6% in 2007, 2006 and 2005, respectively. The Company recorded interest expense of $18.8 million, $27.9 million and $9.5 million in 2007, 2006, and 2005, respectively.

Under the Corporate credit facility, the Company pays commitment fees to the lenders on a quarterly basis related to the Corporate credit facility at an annual rate equal to 0.50% of the unused amount of borrowings on the revolving line of credit. Additionally, the Company pays letter of credit fees on outstanding letters of credit based on certain Company financial ratios and ranges between 1.25% and 2.25%. These commitment fees were $1.3 million, $1.2 million and $1.4 million in 2007, 2006 and 2005, respectively.

The Company and all its future or existing subsidiaries (other than CBT, CBET, CBF and certain immaterial subsidiaries) guarantee borrowings of Cincinnati Bell Inc. under the Corporate credit facility. Each of the Company’s current subsidiaries that is a guarantor of the Corporate credit facility is also a guarantor of the 7%

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Senior Notes, 7 ¹/4% Notes due 2013, and 8 ³/8% Notes, with certain immaterial exceptions. Refer to Note 18 for supplemental guarantor information. The Company’s obligations under the Corporate credit facility are also collateralized by perfected first priority pledges and security interests in the following:

• substantially all of the equity interests of the Company’s subsidiaries (other than subsidiaries of CBT, CBF and certain immaterial subsidiaries); and

• certain personal property and intellectual property of the Company and its subsidiaries (other than that of CBT, CBET, CBF and certain immaterial subsidiaries).

The guarantee and security reflect the addition of CBW as a guarantor and certain of its assets as collateral due to its status as a wholly-owned subsidiary effective February 14, 2006 due to the Company’s purchase of the remaining minority ownership interest in CBW on that date.

The Corporate credit facility financial covenants require that the Company maintain certain leverage, interest coverage and fixed charge ratios. The facilities also contain certain covenants which, among other things, restrict the Company’s ability to incur additional debt or liens, pay dividends, repurchase Company common stock, sell, transfer, lease, or dispose of assets and make investments or merge with another company. If the Company were to violate any of its covenants and was unable to obtain a waiver, it would be considered a default. If the Company were in default under the Corporate credit facility, no additional borrowings under this facility would be available until the default was waived or cured. The credit facilities provide for customary events of default, including a cross-default provision for failure to make any payment when due or permitted acceleration due to a default, both in respect to any other existing debt instrument having an aggregate principal amount that exceeds $35 million. The Company is in compliance with its Corporate credit facility covenants.

The Company has a right to request, but no lender is committed to provide, an increase in the aggregate amount of the Corporate credit facility, up to $500.0 million in incremental borrowings, which may be structured at the Company’s option as term debt or revolving debt.

Various issuances of the Company’s public debt, which include the 7 ¹/4% Senior Notes due 2013, the 8 ³/8% Senior Subordinated Notes due 2014, and the 7% Senior Notes due 2015, contain covenants that, among other things, limit the Company’s ability to incur additional debt or liens, pay dividends or make other restricted payments, sell, transfer, lease, or dispose of assets and make investments or merge with another company. Restricted payments include common stock dividends, repurchase of common stock, and certain public debt repayments. The Company believes it has sufficient ability under its public debt indentures to make its intended restricted payments in 2008. The Company is in compliance with its public debt indentures as of the date of this filing.

7 ¹/4% Senior Notes due 2013

In July 2003, the Company issued $500 million of 7 ¹/4% Senior Notes due 2013 (“7 ¹/4% Notes due 2013”). Net proceeds, after deducting fees and expenses, totaled $488.8 million and were used to prepay term credit facilities and permanently reduce commitments under the Company’s then-existing revolving credit facility. Interest on the 7 ¹/4% Notes due 2013 is payable in cash semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2004. The 7 ¹/4% Notes due 2013 are unsecured senior obligations and rank equally with all of the Company’s existing and future senior debt and rank senior to all existing and future subordinated debt. Each of the Company’s current and future subsidiaries that is a guarantor under the Corporate credit facility is also a guarantor of the 7 ¹/4% Notes due 2013 on an unsecured basis with certain immaterial exceptions. The indenture governing the 7 ¹/4% Notes due 2013 contains covenants including but not limited to the following: limitations on dividends to shareowners and other restricted payments; dividend and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are not permitted to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenture governing 7 ¹/4% Notes due 2013 provides for customary events of default, including a cross-default provision for failure for both non-payment at final maturity or acceleration due to a default of any other existing debt instrument that exceeds $20 million. The Company may redeem the 7 ¹/4% Notes due 2013 for a redemption price of 103.625%,

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102.417%, 101.208%, and 100.000% after July 15, 2008, 2009, 2010, and 2011, respectively. The Company recorded interest expense of $35.3 million in 2007 and $36.2 million in 2006 and 2005 related to these senior notes. In January 2005, the Company paid $9.7 million in consent fees to permit the Company to refinance its 16% Notes with new debt that would be pari passu to the 7 ¹/4% Notes due 2013.

In 2007 and 2006, the Company purchased and extinguished $26.4 million and $3.1 million, respectively, of 7 ¹/4% Notes due 2013 and recognized a loss on extinguishment of debt of $0.4 million and $0.1 million, respectively.

8 ³/8% Senior Subordinated Notes due 2014

In November 2003, the Company issued $540 million of 8 ³/8% Senior Subordinated Notes due 2014 (“8 ³/8% Notes”). The net proceeds, after deducting fees and expenses, totaled $528.2 million and were used to purchase all of the Company’s then outstanding Convertible Subordinated Notes due 2009, which bore interest at a rate of 9%, at a discounted price equal to 97% of their accreted value.

In February 2005, the Company issued an additional $100 million of debt securities pursuant to the existing indenture. Net proceeds from this issuance together with those of the 7% Notes and amounts under the Corporate credit facility were used to repay and terminate the prior credit facility and pay consent fees associated with an amendment to the indenture for the 7 ¹/4% Notes due 2013. A loss on debt extinguishment of $7.9 million was recognized on the prior credit facility for the write-off of deferred financing fees. All of the 8 ³/8% Notes constitute a single class of security with the same terms and are fixed rate bonds to maturity.

Interest on the 8 ³/8% Notes is payable in cash semi-annually in arrears on January 15 and July 15, commencing on July 15, 2004. The 8 ³/8% Notes are unsecured senior subordinated obligations, ranking junior to all existing and future senior indebtedness of the Company. The 8 ³/8% Notes rank equally with all of the Company’s existing and future senior subordinated debt and rank senior to all future subordinated debt. The 8 ³/8% Notes are guaranteed on an unsecured senior subordinated basis by each of the Company’s current subsidiaries that is a guarantor under the Corporate credit facility, with certain immaterial exceptions. The indenture governing the 8 ³/8% Notes contains covenants including but not limited to the following: limitations on dividends to shareowners and other restricted payments; dividend and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are not permitted to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenture governing the 8 ³/8% Notes provides for customary events of default, including a cross-default provision for both nonpayment at final maturity or acceleration due to a default of any other existing debt instrument that exceeds $20 million. The Company may redeem the 8 ³/8% Notes for a redemption price of 104.188%, 102.792%, 101.396%, and 100.000% after January 15, 2009, 2010, 2011, and 2012, respectively. The Company incurred $53.6 million of interest expense in 2007 and 2006 and $52.5 million of interest expense in 2005 related to these notes.

In late 2007, the Company purchased and extinguished $5.0 million of 8 ³/8% Notes and recognized a gain on extinguishment of debt of $0.1 million.

7% Senior Notes due 2015

In February 2005, the Company sold $250 million of 7% Senior Notes due 2015 (“7% Notes”). Net proceeds from this issuance together with those of other concurrently issued bonds and amounts under the Corporate credit facility were used to repay and terminate the prior credit facility and pay consent fees associated with an amendment to the indenture for the 7 ¹/4% Notes due 2013. The 7% Notes are fixed rate bonds to maturity.

Interest on the 7% Notes is payable semi-annually in cash in arrears on February 15 and August 15 of each year, commencing August 15, 2005. The 7% Notes are unsecured senior obligations ranking equally with all existing and future senior debt and ranking senior to all existing senior subordinated indebtedness, including senior subordinated notes, and subordinated indebtedness. Each of the Company’s current and future subsidiaries that is a guarantor under the Corporate credit facility is also a guarantor of the 7% Notes on an unsecured senior basis, with certain immaterial exceptions. The indenture governing the 7% Notes contains covenants including but not limited to the following: limitations on dividends to shareowners and other restricted payments; dividend

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and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are not permitted to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenture governing the 7% Notes provides for customary events of default, including a cross-default provision for both nonpayment at final maturity or acceleration due to a default of any other existing debt instrument that exceeds $20 million.

The Company may redeem the 7% Notes for a redemption price of 103.500%, 102.333%, 101.167%, and 100.000% after February 15, 2010, 2011, 2012 and 2013, respectively. At any time prior to February 15, 2010, the Company may redeem all or part of the 7% Notes at a redemption price equal to the sum of 1) 100% of the principal, plus 2) the greater of (a) 1% of the face value of the 7% Notes to be redeemed, or (b) the excess over the principal amount of the sum of the present values of (i) 103.5% of the face value of the 7% Notes, and (ii) interest payments due from the date of redemption through February 15, 2010, in each case discounted to the redemption date on a semi-annual basis at the applicable U.S. Treasury rates plus one-half percent, plus 3) accrued and unpaid interest, if any, to the date of redemption. The Company incurred interest expense related to these notes of $17.5 million in 2007 and 2006 and $15.3 million in 2005.

7 ¹/4% Senior Notes due 2023

In July 1993, the Company issued $50 million of 7 ¹/4% Senior Notes due 2023. The indenture related to these 7 ¹/4% Senior Notes due 2023 does not subject the Company to restrictive financial covenants, but it does contain a covenant providing that if the Company incurs certain liens on its property or assets, the Company must secure the outstanding 7 ¹/4% Senior Notes due 2023 equally and ratably with the indebtedness or obligations secured by such liens. The 7 ¹/4% Senior Notes due 2023 are collateralized on a basis consistent with the Corporate credit facility. Interest on the 7 ¹/4% Senior Notes due 2023 is payable semi-annually on June 15 and December 15. The Company may not redeem the 7 ¹/4% Senior Notes due 2023 prior to maturity. The indenture governing the 7 ¹/ 4% Senior Notes due 2023 provides for customary events of default, including a cross-default provision for failure to make any payment when due or permitted acceleration due to a default of any other existing debt instrument that exceeds $20 million. The Company recorded $3.6 million of interest expense related to these notes in each of 2007, 2006, and 2005.

Cincinnati Bell Telephone Notes

CBT issued $80 million in unsecured notes that are guaranteed on a subordinated basis by Cincinnati Bell Inc. but not the subsidiaries of Cincinnati Bell Inc. These notes have original maturities of up to 30 years with a final maturity date occurring in 2023. Interest rates on this indebtedness range from 7.18% to 7.27%. CBT also issued $150 million in aggregate principal amount of 6.30% unsecured senior notes due 2028, which is guaranteed on a subordinated basis by the Company. All of these notes may be redeemed at any time, subject to proper notice and redemption price.

The indenture governing these notes provides for customary events of default, including a cross-default provision for failure to make any payment when due or permitted acceleration due to a default of any other existing debt instrument of Cincinnati Bell Inc. or Cincinnati Bell Telephone that exceeds $20 million. The Company incurred interest expense related to these notes of $15.2 million in 2007 and 2006 and $16.5 million in 2005.

Capital Lease Obligations

The Company leases facilities and equipment used in its operations, some of which are required to be capitalized in accordance with SFAS No. 13, “Accounting for Leases.” SFAS No. 13 requires the capitalization of leases meeting certain criteria, with the related asset being recorded in property, plant and equipment and an offsetting amount recorded as a liability discounted to the present value. The Company had $29.4 million in total indebtedness relating to capitalized leases as of December 31, 2007 of which, $25.8 million was considered long-term. The underlying leased assets generally secure the capital lease obligations. For 2007, 2006 and 2005, the Company recorded $2.0 million, $1.3 million and $1.3 million, respectively, of interest expense related to capital lease obligations.

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Debt Maturity Schedule

As of December 31, 2007, the following table summarizes the Company’s annual principal maturities of debt and capital leases for the five years subsequent to December 31, 2007, and thereafter:

(dollars in millions)	Debt		Capital Leases		Total Debt
Year ended December 31,
2008	$	4.2	$	3.6	$	7.8
2009		4.1		3.6		7.7
2010		59.0		8.0		67.0
2011		97.0		9.9		106.9
2012		177.0		1.6		178.6
Thereafter		1,635.5		2.7		1,638.2
		1,976.8		29.4		2,006.2
Interest rate swaps		2.9		—		2.9
Net unamortized premiums		0.6		—		0.6
Total debt	$	1,980.3	$	29.4	$	2,009.7

For capital leases, total lease payments including interest are $5.7 million for 2008, $5.4 million for 2009, $9.6 million for 2010, $10.9 million for 2011, $2.0 million for 2012, and $3.1 million thereafter.

Deferred Financing Costs

Deferred financing costs are costs incurred in connection with obtaining long-term financing. These costs are amortized as interest expense over the terms of the related debt agreements. As of December 31, 2007 and 2006, deferred financing costs totaled $28.9 million and $34.0 million, respectively. The related expense, included in “Interest expense” in the Consolidated Statements of Operations amounted to $5.2 million, $5.1 million, and $7.1 million during 2007, 2006 and 2005, respectively. In 2007, the Company wrote-off deferred financing costs of $1.2 million related to the repayment of the Tranche B Term Loan, the purchase and retirement of the 7 ¹/4% Notes due 2013 and the 8 ³/8% Notes due 2014. The Company also paid $1.3 million of financing costs in 2007 related to the new receivables facility. In 2006, the Company wrote-off deferred financing costs of $0.1 million related to the $3.1 million purchase and retirement of the 7 ¹/4% Notes due 2013. In 2005, the Company wrote-off deferred financing costs of $7.9 million and $9.1 million related to the extinguishment of the previous credit facility and the 16% Notes, respectively. The write-offs of deferred financing costs were included in the Consolidated Statements of Operations under the caption “Loss on extinguishment of debt.”

Fair Value

The carrying amounts of debt, excluding capital leases and net unamortized premiums, at December 31, 2007 and 2006 were $1,979.7 million and $2,049.2 million, respectively. The estimated fair values at December 31, 2007 and 2006 were $1,919 million and $2,104 million, respectively. These fair values were estimated based on the year-end closing market prices of the Company’s debt and of similar liabilities.

8. Financial Instruments

The Company is exposed to the impact of interest rate fluctuations on its indebtedness. The Company attempts to maintain an optimal balance of fixed rate and variable rate indebtedness in order to attain low overall borrowing costs while mitigating exposure to interest rate fluctuations. The Company employs derivative financial instruments to manage its balance of fixed rate and variable rate indebtedness. In particular, the Company currently has outstanding interest rate swap agreements in which the Company exchanges fixed rate interest payments for variable rate interest payments on $450 million notional amounts. Including the impact of the interest rate swap agreements, approximately 60% of the Company’s indebtedness was based on fixed interest rates at December 31, 2007 and 2006, respectively. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.

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The Company has entered into a series of fixed-to-variable interest rate swaps with total notional amounts of $450 million that qualify for fair value hedge accounting. Fair value hedges offset changes in the fair value of underlying assets and liabilities. The Company’s interest rate swaps at December 31, 2007 and 2006 are recorded at their fair value, and the carrying values of the underlying liabilities hedged (the 7% Notes and 8 ³/8% Notes) are adjusted by the same corresponding value in accordance with SFAS No. 133. The fair value of these instruments is based on estimates using available market information and appropriate valuation methodologies. As of December 31, 2007, the fair value of interest rate swap contracts was an asset of $2.9 million at December 31, 2007 and a liability of $13.5 million at December 31, 2006.

Realized gains and losses from the interest rate swaps are recognized as an adjustment to interest expense in each period. The Company incurred realized losses of $2.8 million and $1.3 million in 2007 and 2006, respectively, and a gain of $5.4 million in 2005.

The Company is exposed to credit risk on its interest rate swaps in the event of non-performance by counterparties. However, because its hedging activities are transacted with highly rated institutions, the Company does not anticipate non-performance by any of these counterparties. Additionally, the Company has entered into agreements that limit its credit exposure to the fair value of the interest rate swap agreements. The Company does not require collateral from its counterparties.

9. Employee Benefit Plans and Postretirement Benefits

Savings Plans

The Company sponsors several defined contribution plans covering substantially all employees. The Company’s contributions to the plans are based on matching a portion of the employee contributions. Company and employee contributions are invested in various investment funds at the direction of the employee. Company contributions to the defined contribution plans were $5.4 million, $4.8 million and $4.5 million for 2007, 2006, and 2005, respectively.

Pension Plans

The Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees and one supplemental, nonqualified, unfunded plan for certain senior executives.

The management pension plan is a cash balance plan in which the pension benefit is determined by a combination of compensation-based credits and annual guaranteed interest credits. The non-management pension plan is also a cash balance plan in which the combination of service and job-classification-based credits and annual interest credits determine the pension benefit. Benefits for the supplemental plan are based on eligible pay, adjusted for age and service upon retirement. The Company funds both the management and non-management plans in an irrevocable trust through contributions, which are determined using the aggregate cost method. The Company uses the traditional unit credit cost method for determining pension cost for financial reporting purposes.

Postretirement Health and Life Insurance Plans

The Company also provides health care and group life insurance benefits for eligible retirees. The Company funds certain group life insurance benefits through Retirement Funding Accounts and funds health care benefits and other group life insurance benefits using Voluntary Employee Benefit Association (“VEBA”) trusts. It is the Company’s practice to fund amounts as deemed appropriate from time to time. Contributions are subject to IRS limitations developed using the aggregate cost method.

The actuarial expense calculation for the Company’s postretirement health plan is based on numerous assumptions, estimates, and judgments including health care cost trend rates and cost sharing with retirees.

Significant Events

The assumption for cost sharing with retirees is important in determining the postretirement and other benefits expense. At the beginning of 2005, the Company accounted for its retiree medical benefit obligation as if

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there were no limits on the Company-funded portion of retiree medical costs. In May 2005, the Company reached an agreement with the union to provide a fixed amount of medical cost reimbursement per retiree and to increase the amount annually over the life of the labor agreement. Similar benefits were provided to non-bargained retirees. Effective June 1, 2005, the Company remeasured its postretirement obligations for the changes to the expected future retiree medical costs, including assumptions regarding cost sharing by retirees.

In August 2007, the Company announced further changes to its pension and postretirement plans that reduce medical benefit payments by fixing the annual Company contribution for each eligible retiree and that reduce life insurance benefits paid from these plans. Based on these changes, the Company determined that a remeasurement of its pension and postretirement obligations was necessary. The Company remeasured its pension and postretirement obligations in August 2007 using revised assumptions, including modified benefit payment assumptions reflecting the changes and a discount rate of 6.25%. These changes reduce the Company’s pension and postretirement obligations by approximately $74 million, reduce deferred tax assets for the related tax effect by $27 million, and increase equity by $47 million. Additionally, the remeasurement caused a reduction to the Company’s pension and postretirement benefit costs by approximately $5 million since August 2007.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 expands Medicare to include outpatient prescription drug benefits and introduces a federal non-taxable subsidy beginning in 2006, that provides a benefit that is at least actuarially equivalent to Medicare Part D, to sponsors of retiree health care benefit plans. The Company received a subsidy of $0.6 million and $0.8 million in 2007 and 2006, respectively.

Components of Net Periodic Cost

The following information relates to all Company noncontributory defined benefit pension plans, postretirement health care, and life insurance benefit plans. Approximately 9% in 2007 and 2005 and 10% in 2006 of these costs were capitalized to property, plant and equipment related to network construction in the Wireline segment. Pension and postretirement benefit costs for these plans were comprised of:

	Pension Benefits									Postretirement and Other Benefits
(dollars in millions)	2007			2006			2005			2007			2006			2005
Service cost	$	8.3		$	8.8		$	8.0		$	3.4		$	3.5		$	4.3
Interest cost on projected benefit obligation		28.0			27.7			27.2			20.1			19.9			20.5
Expected return on plan assets		(34.6	)		(34.9	)		(38.2	)		(3.6	)		(4.8	)		(5.6	)
Amortization of:
Transition (asset)/obligation		—			—			(1.1	)		4.1			4.2			4.2
Prior service cost		2.2			3.4			3.3			5.4			7.7			10.3
Actuarial loss		3.6			3.9			2.2			3.7			4.8			2.2
Special termination benefit		8.1			—			—			0.1			—			—
Curtailment charge		0.9			—			—			5.5			—			—
Benefit costs	$	16.5		$	8.9		$	1.4		$	38.7		$	35.3		$	35.9

As a result of the restructuring plan announced in the fourth quarter of 2007, the Company determined a curtailment charge was required due to the decrease in the expected future service years. The curtailment charge for the pension and postretirement plans consisted of an increase in the benefit obligation of $1.9 million and $4.3 million and the acceleration of unrecognized prior service cost and transition obligation of $(1.0) million and $1.2 million, respectively. See Note 3 for further discussion.

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Funded Status

Reconciliation of the beginning and ending balances of the plans’ funded status follows:

	Pension Benefits						Postretirement and Other Benefits
(dollars in millions)	2007			2006			2007			2006
Change in benefit obligation:
Benefit obligation at January 1,	$	501.9		$	500.1		$	359.0		$	356.7
Service cost		8.3			8.8			3.4			3.5
Interest cost		28.0			27.7			20.1			19.9
Amendments		(21.0	)		—			(53.4	)		—
Actuarial loss (gain)		(7.8	)		17.6			2.6			4.3
Benefits paid		(44.2	)		(52.3	)		(26.7	)		(28.2	)
Special termination benefit		8.1			—			0.1			—
Curtailment		1.9			—			4.3			—
Retiree drug subsidy received		—			—			0.6			0.8
Other		—			—			1.7			2.0
Benefit obligation at December 31,	$	475.2		$	501.9		$	311.7		$	359.0
Change in plan assets:
Fair value of plan assets at January 1,	$	443.7		$	440.4		$	46.4		$	58.4
Actual return on plan assets		29.2			53.1			2.9			4.6
Employer contribution		26.5			2.5			10.9			10.8
Retiree drug subsidy received		—			—			0.6			0.8
Benefits paid		(44.2	)		(52.3	)		(26.7	)		(28.2	)
Fair value of plan assets at December 31,	$	455.2		$	443.7		$	34.1		$	46.4
Unfunded status	$	(20.0	)	$	(58.2	)	$	(277.6	)	$	(312.6	)

The amounts recognized in the Consolidated Balance Sheets consist of:

	Pension Benefits						Postretirement and Other Benefits
	December 31,						December 31,
(dollars in millions)	2007			2006			2007			2006
Other noncurrent assets	$	2.9		$	—		$	—		$	—
Accrued payroll and benefits (current liability)		(1.9	)		(6.1	)		(11.0	)		(9.3	)
Accrued pension and postretirement benefits (non-current liability)		(21.0	)		(52.1	)		(266.6	)		(303.3	)

As of December 31, 2007 and 2006, the Company’s accumulated benefit obligation (“ABO”) related to its pension plans was $475.2 million and $501.9 million, respectively.

Amounts recognized in “Accumulated other comprehensive loss” on the Consolidated Balance Sheets consisted of the following:

	Pension Benefits						Postretirement and Other Benefits
	December 31,						December 31,
(dollars in millions)	2007			2006			2007			2006
Transition obligation	$	—		$	—		$	(18.1	)	$	(25.3	)
Prior service cost		—			(22.2	)		(16.2	)		(73.1	)
Actuarial loss		(68.6	)		(74.7	)		(79.5	)		(79.8	)
		(68.6	)		(96.9	)		(113.8	)		(178.2	)
Income tax effect		25.0			35.4			41.5			65.2
	$	(43.6	)	$	(61.5	)	$	(72.3	)	$	(113.0	)

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Amounts recognized in “Accumulated other comprehensive loss” on the Consolidated Statements of Shareowners Equity (Deficit) and Comprehensive Income (Loss) for the year ended December 31, 2007, are shown below:

(dollars in millions)	Pension Benefits		Postretirement and Other Benefits
Transition obligation:
Reclassification adjustments	$	—	$	5.3
Actuarial gain arising during the period		—		1.9
Prior service cost recognized:
Reclassification adjustments		1.1		5.4
Actuarial gain arising during the period		21.0		51.5
Actuarial loss recognized:
Reclassification adjustments		3.7		3.7
Actuarial gain (loss) arising during the period		2.4		(3.3	)

The following amounts currently included in “Accumulated other comprehensive loss” are expected to be recognized in 2008 as a component of net periodic pension and postretirement cost:

(dollars in millions)	Pension Benefits		Postretirement and Other Benefits
Transition obligation	$	—	$	3.6
Prior service cost		1.8		1.9
Actuarial loss		2.4		3.7

In October 2006, the FASB issued SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS No. 158 requires the Company to recognize the overfunded or underfunded status for the Company’s benefit plans, with changes in the funded status recognized as a separate component to shareowners’ equity. SFAS No. 158 also requires the Company to measure the funded status of the benefit plans as of the year-end balance sheet date no later than 2008. The Company’s measurement date for all of its employee benefit plans was the year-end balance sheet date. Effective December 31, 2006, the Company adopted SFAS No. 158 and its incremental effect on individual line items in the Consolidated Balance Sheet as of December 31, 2006 was as follows:

(dollars in millions)	Before Application of SFAS No. 158			Additional Minimum Pension Liabilities			SFAS No. 158 Adjustments			After Application of SFAS No. 158
Accrued pension and postretirement benefits	$	(199.5	)	$	6.9		$	(178.2	)	$	(370.8	)
Deferred income tax benefit, net		622.8			(1.4	)		73.3			694.7
Pension intangible assets		25.5			(3.3	)		(22.2	)		—
Total liabilities		(2,634.1	)		6.9			(178.2	)		(2,805.4	)
Accumulated other comprehensive loss		(49.6	)		2.2			(127.1	)		(174.5	)
Total shareowners’ deficit		(666.7	)		2.2			(127.1	)		(791.6	)

Plan Assets and Investment Policies and Strategies

The primary investment objective for the trusts holding the assets of the pension and postretirement plans is preservation of capital with a reasonable amount of long-term growth and income without undue exposure to risk. This is provided by a balanced strategy using fixed income and equity securities.

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The pension plans’ assets consist of the following:

	Target Allocation 2008		Percentage of Plan Assets at December 31,
			2007		2006
Plan assets:
Fixed income securities	20 - 38	%	30.2	%	30.0	%
Equity securities *	55 - 65	%	59.0	%	59.9	%
Real estate	8 - 12	%	10.8	%	10.1	%
Total			100.0	%	100.0	%

*    At December 31, 2007, no pension plan assets were invested in Company common stock.

      At December 31, 2006, pension plan assets included $6.4 million in Company common stock.

The postretirement and other plans’ assets consist of the following:

	Health Care						Group Life Insurance
	Target Allocation 2008		Percentage of Plan Assets at December 31,				Target Allocation 2008		Percentage of Plan Assets at December 31,
			2007		2006				2007		2006
Plan assets:
Fixed income securities	35 - 45	%	39.9	%	36.3	%	35 - 45	%	39.5	%	41.0	%
Equity securities	55 - 65	%	60.1	%	63.7	%	55 - 65	%	60.5	%	59.0	%
Total			100.0	%	100.0	%			100.0	%	100.0	%

Company contributions to its qualified pension plans were $24.1 million in 2007. No contributions were required in 2006 or 2005. Company contributions to its non-qualified pension plan were $2.4 million, $2.5 million and $2.6 million for 2007, 2006 and 2005, respectively.

The Company expects to make cash payments of approximately $11 million related to its postretirement health plans in 2008. Due to the early pension contribution of $20.0 million made in December 2007, the Company does not expect to make any contributions to its qualified pension plan in 2008. Contributions to non-qualified pension plans in 2008 are expected to be approximately $2 million.

The Pension Protection Act of 2006 (“the Act”) was enacted on August 17, 2006. Most of its provisions will become effective in 2008. The Act significantly changes the funding requirements for single-employer defined benefit pension plans. The funding requirements will now largely be based on a plan’s calculated funded status, with faster amortization of any shortfalls or surpluses. The Act directs the U.S. Treasury Department to develop a new yield curve to discount pension obligations for determining the funded status of a plan when calculating the funding requirements. Based on current assumptions, the Company believes it will pay an estimated $45 million to fund its qualified pension plans during the period 2009 to 2017.

Additional Minimum Liability

An additional minimum pension liability adjustment was required in 2006 as the accumulated benefit obligation exceeded the fair value of pension plan assets for each of those plans as of the measurement date. The additional minimum pension liability recorded (before the effect of income taxes) was $6.9 million. Upon the adoption of SFAS No. 158, the Company is no longer required to record an additional minimum pension liability as the unfunded status was recorded at December 31, 2006.

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Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years from the Company and the assets of the Company’s pension plans and postretirement health plans:

(dollars in millions)	Pension Benefits		Postretirement and Other Benefits		Medicare Subsidy Receipts
2008	$	40.9	$	27.6	$	0.9
2009		42.0		28.6		0.9
2010		41.9		29.6		0.9
2011		41.3		29.6		0.9
2012		43.0		28.6		0.9
Years 2013-2017		216.1		127.7		4.4

Assumptions

The following are the weighted average assumptions used in accounting for the pension and postretirement benefit cost:

	Pension Benefits						Postretirement and Other Benefits
	2007		2006		2005		2007		2006		2005
Discount rate	5.95	%	5.50	%	5.50	%	5.95	%	5.50	%	5.46	%
Expected long-term rate of return on pension and health and life plan assets	8.25	%	8.25	%	8.25	%	8.25	%	8.25	%	8.25	%
Future compensation growth rate	4.10	%	4.10	%	4.10	%	4.10	%	4.10	%	4.10	%

The following are the weighted average assumptions used in accounting for and measuring the pension and postretirement benefit obligation:

	Pension Benefits				Postretirement and Other Benefits
	December 31,				December 31,
	2007		2006		2007		2006
Discount rate	6.20	%	5.75	%	6.20	%	5.75	%
Future compensation growth rate	4.10	%	4.10	%	4.10	%	4.10	%

The expected long-term rate of return on plan assets, developed using the building block approach, is based on the participants’ benefit horizons, the mix of investments held directly by the plans, and the current view of expected future returns, which is influenced by historical averages.

Changes in actual asset return experience and discount rate assumptions can impact the Company’s operating results, financial position and cash flows. Actual asset return experience results in an increase or decrease in the asset base and this effect, in conjunction with a decrease in the pension discount rate, may result in a plan’s assets being less than a plan’s benefit obligation.

The assumed health care cost trend rate used to measure the postretirement health benefit obligation at December 31, 2007, was 10.0% and is assumed to decrease gradually to 4.5% by the year 2013. In addition, a one-percentage point change in assumed health care cost trend rates would have the following effect on the postretirement benefit costs and obligation:

(dollars in millions)	1% Increase		1% Decrease
2007 service and interest costs	$	2.9	$	(2.1	)
Postretirement benefit obligation at December 31, 2007		29.1		(24.8	)

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10. Minority Interest

For the periods presented in these Consolidated Financial Statements through February 14, 2006, a minority holder maintained a 19.9% ownership in CBW. The minority interest balance was adjusted as a function of the minority holder’s 19.9% share of the net income (or loss) of CBW, with an offsetting amount being reflected in the Consolidated Statements of Operations under the caption “Minority interest income.” On February 14, 2006, the Company purchased the remaining 19.9% membership interest in CBW for $83.2 million. As a result, CBW is now a wholly-owned subsidiary of the Company and for periods after the acquisition date, no further CBW minority interest was recorded. Refer to Note 5 for discussion of the transaction.

11. Shareowners’ Deficit

Common Shares

The par value of the Company’s common shares is $0.01 per share. At December 31, 2007 and 2006, common shares outstanding were 248.4 million and 247.5 million, respectively. The Company’s common shares outstanding are net of approximately 8.3 million and 8.2 million shares at December 31, 2007 and 2006, respectively, that were repurchased by the Company under its 1999 share repurchase program and certain management deferred compensation arrangements for a total cost of $147.3 million and $146.8 million at December 31, 2007 and 2006, respectively.

In February 2008, the Company’s Board of Directors approved the repurchase of the Company’s outstanding common stock in an amount up to $150.0 million for the period 2008 through 2009.

Preferred Shares

The Company is authorized to issue 1,357,299 voting preferred shares without par value and 1,000,000 nonvoting preferred shares without par value.

The Company issued 155,250 voting shares of 6 ³/4% cumulative convertible preferred stock at stated value. These shares were subsequently deposited into a trust in which the underlying 155,250 shares are equivalent to 3,105,000 depositary shares. Shares of this preferred stock can be converted at any time at the option of the holder into common stock of the Company at a conversion rate of 1.44 shares of Company common stock per depositary share of 6 ³/4% convertible preferred stock. Annual dividends of $10.4 million on the outstanding 6 ³/4% convertible preferred stock are payable quarterly in arrears in cash, or in common stock in certain circumstances if cash payment is not legally permitted. The liquidation preference on the 6 ³/4% preferred stock is $1,000 per share (or $50 per depositary share). The Company paid $10.4 million in dividends in 2007, 2006, and 2005.

Preferred Share Purchase Rights Plan

In 1997, the Company’s Board of Directors adopted a Share Purchase Rights Plan by granting a dividend of one preferred share purchase right for each outstanding common share to shareowners of record at the close of business on May 2, 1997. Under certain conditions, each right entitled the holder to purchase one-thousandth of a Series A Preferred Share. All of the rights expired unused on May 2, 2007.

Warrants

As part of the issuance of the 16% Notes in March 2003, the purchasers of the 16% Notes received 17.5 million common stock warrants, which expire in March 2013, to purchase one share of Cincinnati Bell common stock at $3.00 each. Of the total gross proceeds received for the 16% Notes, $47.5 million was allocated to the fair value of the warrants using the Black-Scholes option-pricing model. This value less applicable issuance costs was recorded to “Additional paid-in capital” in the Consolidated Balance Sheets. There were no exercises of warrants in 2007 or 2006. In 2005, 50,000 warrants were exercised.

Accumulated Other Comprehensive Loss

The Company’s shareowners’ deficit includes an accumulated other comprehensive loss and is comprised of pension and postretirement unrecognized prior service cost, transition obligation and actuarial losses, net of taxes, of $115.9 million and $174.5 million at December 31, 2007 and 2006, respectively. Refer to Note 9 for further discussion.

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12. Commitments and Contingencies

Commitments

Operating Leases

The Company leases certain circuits, facilities, and equipment used in its operations. Operating lease expense was $21.1 million, $22.9 million, and $21.2 million in 2007, 2006, and 2005, respectively. Operating leases include tower site leases that provide for renewal options with fixed rent escalations beyond the initial lease term. Also, for three data center facilities that are leased, the Company has the option to extend the initial lease term and, for two of the leased facilities, has the option to purchase the buildings.

At December 31, 2007, future minimum lease payments required under operating leases, excluding certain leases which are recorded as a restructuring liability (refer to Note 3), having initial or remaining non-cancelable lease terms in excess of one year are as follows:

(dollars in millions)
2008	$	17.2
2009		15.5
2010		14.3
2011		13.6
2012		12.2
Thereafter		39.5
Total	$	112.3

As of December 31, 2007, the Company is lessor on building lease contracts and collocation tower rentals on which it will receive rental income of approximately $7 million in both 2008 and 2009, $6 million in 2010, $5 million in 2011, $3 million in 2012 and $7 million thereafter. These amounts exclude certain subleases which are recorded as an offset against data center lease restructuring liabilities (refer to Note 3).

Vendor Concentration

In 1998, the Company entered into a ten-year contract with Convergys Corporation (“Convergys”), a provider of billing, customer service and other services, which, in 2004, was extended to December 31, 2010. The contract states that Convergys will be the primary provider of certain data processing, professional and consulting and technical support services for the Company within CBT’s operating territory. In return, the Company will be the exclusive provider of local telecommunications services to Convergys. The contract extension reduced the Company’s annual commitment in 2004 and 2005 to $35.0 million from $45.0 million. Beginning in 2006, the minimum commitment is reduced 5% annually. The Company paid $32.3 million, $34.3 million and $36.1 million under the contract in 2007, 2006 and 2005, respectively.

Contingencies

In the normal course of business, the Company is subject to various regulatory and tax proceedings, lawsuits, claims, and other matters. The Company believes adequate provision has been made for all such asserted and unasserted claims in accordance with accounting principles generally accepted in the United States. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance.

Indemnifications Related to the Sale of Broadband Assets

The Company indemnified the buyer of the broadband assets against certain potential claims, but all indemnifications have expired except for those related to title and authorization. The title and authorization indemnification was capped at 100% of the purchase price of the broadband assets, approximately $71 million.

In order to determine the fair value of the indemnity obligations, the Company performed a probability-weighted discounted cash flow analysis, utilizing the minimum and maximum potential claims and several scenarios within the range of possibilities. In 2006, the Company decreased the liability related to the indemnity obligations from $4.1 million to $1.2 million and recorded $2.9 million of income as a result of the expiration of certain warranties and guarantees. This income was included in “Gain on sale of broadband assets” in the Consolidated Statement of Operations. In 2007 and 2005, no representations or warranties expired.

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Anthem Demutualization Claim

In November 2007, a class action complaint was filed against the Company and Wellpoint Inc., formerly known as Anthem, Inc. The complaint alleges that the Company improperly received stock as a result of the demutualization of Anthem and that a class of insured persons should have received the stock instead. In February 2008, the Company filed a response in which it denied all liability and raised a number of defenses. The Company believes that it has meritorious defenses and intends to vigorously defend this action. The Company does not believe this claim will have a material effect on its financial condition.

Other

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements,” which provides interpretive guidance on how registrants should quantify financial statement misstatements. Under SAB No. 108, registrants are required to consider both a “rollover” method, which analyzes the impact of the misstatement on the financial statements based on the amount of the error originating in the income statement being analyzed, and the “iron curtain” method, which analyzes the impact of the misstatement on the financial statements based on the cumulative effect of the error on the income statement being analyzed. The transition provisions of SAB No. 108 permit a registrant to adjust retained earnings for the cumulative effect of immaterial errors relating to prior years. The Company was required to adopt SAB No. 108 in 2006.

The Company recorded a net adjustment of $9.0 million to the 2006 opening accumulated deficit balance, comprised of $14.2 million in regulatory tax liabilities, net of expected refunds, offset by the income tax effects of $5.2 million. The Company has determined that its past filing positions should have resulted in an accrual of a contingent liability in prior years. Historically, the Company has evaluated uncorrected differences utilizing the rollover approach. The Company believes the impact of not recording the regulatory taxes was not material to prior fiscal years under the rollover method. However, under SAB No. 108, the Company must assess materiality using both the rollover method and the iron-curtain method, which resulted in the $9.0 million adjustment to the 2006 opening accumulated deficit balance.

At December 31, 2006, regulatory tax liabilities, net of expected refunds, related to the past filing positions being questioned totaled $18.0 million. As a result of payments made in 2007, at December 31, 2007, the Company’s liability has decreased to $2.5 million. The issues have not been resolved, and the Company believes it has meritorious defenses related to the payment of these regulatory taxes and intends to defend its position in order to limit the ultimate payment of the fees.

The cumulative error expense arose from the following periods:

(dollars in millions)	2005		2004		Prior to 2004
Expense adjustment before income taxes	$	5.3	$	3.1	$	5.8
Expense adjustment after income taxes	$	3.3	$	2.0	$	3.7

13. Income Taxes

Income tax provision (benefit) consists of the following:

	Year Ended December 31,
(dollars in millions)	2007			2006			2005
Current:
Federal	$	3.0		$	2.6		$	1.0
State and local		2.4			3.7			1.2
Total current		5.4			6.3			2.2
Investment tax credits		(0.4	)		(0.4	)		(0.5	)
Deferred:
Federal		48.7			50.1			(21.2	)
State and local		13.7			45.5			34.1
Total deferred		62.4			95.6			12.9
Valuation allowance		(10.7	)		(33.2	)		39.7
Total	$	56.7		$	68.3		$	54.3

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The following is a reconciliation of the statutory federal income tax rate with the effective tax rate for each year:

	Year Ended December 31,
	2007		2006		2005
U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal income tax	4.5		11.6		(101.2	)
Change in valuation allowance, net of federal income tax	(5.3	)	(14.0	)	(253.6	)
State law changes	—		8.7		(120.7	)
Nondeductible interest expense	6.5		5.4		(72.7	)
Other differences, net	3.0		(2.5	)	(19.2	)
Effective rate	43.7	%	44.2	%	(532.4	)%

Income tax recognized by the Company in the income statement, other comprehensive income, and retained earnings consists of the following:

	Year Ended December 31,
(dollars in millions)	2007		2006			2005
Income tax provision (benefit) related to:
Continuing operations	$	56.7	$	68.3		$	54.3
Other comprehensive income (loss)		34.1		(71.9	)		(24.6	)
Effect of SAB 108		—		(5.2	)		—
Implementation of FIN 48		5.1		—			—
	$	95.9	$	(8.8	)	$	29.7

The Company generated an income tax benefit from the exercise of certain stock options in 2007, 2006, and 2005 of $0.5 million, $0.7 million, and $0.1 million, respectively. This benefit resulted in a decrease in current income taxes payable and an increase in additional paid-in capital.

The components of the Company’s deferred tax assets and liabilities are as follows:

	December 31,
(dollars in millions)	2007			2006
Deferred tax assets:
Net operating loss carryforwards	$	626.9		$	714.7
Pension and postretirement benefits		119.7			147.0
Other		63.3			48.0
Total deferred tax assets		809.9			909.7
Valuation allowance		(140.0	)		(150.7	)
Total deferred income tax assets, net of valuation allowance		669.9			759.0
Deferred tax liabilities:
Property, plant and equipment		65.9			55.4
Federal deferred liability on state deferred tax assets		7.0			8.3
Other		0.8			0.6
Total deferred tax liabilities		73.7			64.3
Net deferred tax assets	$	596.2		$	694.7

As of December 31, 2007, the Company had approximately $1.4 billion of federal operating loss tax carryforwards, with a deferred tax asset value of approximately $492.3 million, and approximately $134.6 million in deferred tax assets related to state and local operating loss tax carryforwards. The majority of the remaining tax loss carryforwards will generally expire between 2017 and 2023. U.S. tax laws limit the annual utilization of tax loss carryforwards of acquired entities. These limitations should not materially impact the utilization of the tax carryforwards.

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The ultimate realization of the deferred income tax assets depends upon the Company’s ability to generate future taxable income during the periods in which basis differences and other deductions become deductible, and prior to the expiration of the net operating loss carryforwards. The Company concluded, due to the sale of the broadband business and the historical and future projected earnings of the remaining businesses, that the Company will utilize future deductions and available net operating loss carryforwards prior to their expiration. The Company also concluded that it was more likely than not that certain state tax loss carryforwards would not be realized based upon the analysis described above and therefore provided a valuation allowance.

The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $5.1 million increase in the liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 accumulated deficit balance. After recognizing the impact from the adoption of FIN 48, the Company had a $14.7 million liability recorded for unrecognized tax benefits as of January 1, 2007. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $14.5 million at both January 1, 2007 and December 31, 2007. The Company does not currently anticipate that the amount of unrecognized tax benefits will change significantly over the next year. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(dollars in millions)
Unrecognized tax benefits balance at January 1, 2007	$	14.7
Changes for tax positions for prior years		0.1
Unrecognized tax benefits balance at December 31, 2007	$	14.8

As of December 31, 2007, the Company has $0.2 million of unrecognized tax benefits for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred income tax accounting, the disallowance would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and local jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state or local examinations for years before 2004. In the first quarter of 2007, the Internal Revenue Service commenced an examination of the Company’s U.S. federal income tax returns for 2004 to 2006. The IRS has completed its examination of the 2004 and 2005 tax years while 2006 is still under audit.

The Company recognizes accrued penalties related to unrecognized tax benefits in income tax expense. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense. Accrued interest and penalties are insignificant at December 31, 2007 and December 31, 2006.

14. Stock-Based Compensation Plans

The Company generally grants performance-based awards, time-based restricted shares, and stock options. The Company’s practice has been to make its annual grant of stock options and time-based restricted awards in December and annual performance-based awards in the first quarter. In addition, the Company also has historically granted a smaller number of stock-based awards at various times during the year for new employees, promotions and performance achievements. The numbers of shares authorized and available for grant under these plans were 30.8 million and 6.7 million, respectively, at December 31, 2007.

In May 2007, the Company’s shareholders approved both The Cincinnati Bell Inc. 2007 Long Term Incentive Plan (the “2007 Long Term Plan”) and The Cincinnati Bell Inc. 2007 Stock Option Plan For Non-Employee Directors (the “2007 Directors Plan”), which replaced the Cincinnati Bell Inc. 1997 Long Term Incentive Plan and the Cincinnati Bell Inc. 1997 Stock Option Plan, respectively. The 2007 Long Term Plan provides for awards in the form of stock options, including incentive stock options (“ISOs”), stock appreciation rights and other awards (e.g., restricted stock, performance shares, share-based performance units, non-share based performance units and non-restricted stock) to eligible employees of the Company. The 2007 Long Term Plan authorizes the issuance of up to 8,000,000 common shares of which the maximum number of common shares that can be issued as ISOs and other awards is 2,000,000 and 2,400,000 common shares, respectively. The 2007 Directors Plan provides for grants of stock options or restricted stock awards to members of the Board who are not employees of the Company. The 2007 Directors Plan authorizes the issuance of up to 1,000,000 common shares for grants of stock-based awards, of which a maximum of 1,000,000 common shares may be issued as stock options and a maximum of 300,000 common shares may be issued as restricted stock awards.

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Performance-Based Awards

Awards granted generally vest over three years and upon the achievement of certain cash flow objectives. Prior to January 1, 2006, performance-based awards were accounted for under APB 25. Upon the adoption of SFAS No. 123(R), performance-based awards are now expensed based on its grant date fair value if it is probable that the performance conditions will be achieved.

The following table provides a summary of the Company’s outstanding performance-based awards:

	2007					2006					2005
(in thousands)	Shares			Weighted- Average Grant Date Fair Value Per Share		Shares			Weighted- Average Grant Date Fair Value Per Share		Shares			Weighted- Average Grant Date Fair Value Per Share
Non-vested as of January 1,		1,668		$	4.30		1,214		$	4.30		—		$	—
Granted*		1,896			5.01		820			4.29		1,214			4.30
Vested		(444	)		4.29		(360	)		4.30		—			—
Forfeited		(188	)		4.52		(6	)		4.30		—			—
Non-vested at December 31,		2,932		$	4.75		1,668		$	4.30		1,214		$	4.30
(in millions)
Compensation expense for the year	$	4.5				$	2.2				$	1.4
Tax benefit related to compensation expense	$	(1.7	)			$	(0.9	)			$	(0.6	)
Fair value of shares vested	$	1.9				$	1.5				$	—

* Assumes the maximum number of awards that can be earned if the performance conditions are achieved.

As of December 31, 2007, unrecognized compensation expense related to performance-based awards was $7.0 million, which is expected to be recognized over a weighted average period of two years.

Time-Based Restricted Shares

Time-based restricted shares generally vest in one-third increments over a period of three years. The following table provides a summary of the Company’s outstanding time-based restricted shares:

	2007					2006					2005
(in thousands)	Shares			Weighted- Average Grant Date Fair Value Per Share		Shares			Weighted- Average Grant Date Fair Value Per Share		Shares			Weighted- Average Grant Date Fair Value Per Share
Non-vested as of January 1,		253		$	4.74		157		$	5.29		140		$	5.43
Granted		280			4.94		253			4.74		27			4.60
Vested		(144	)		4.78		(153	)		5.30		—			—
Forfeited		(14	)		4.74		(4	)		4.60		(10	)		5.43
Non-vested at December 31,		375		$	4.87		253		$	4.74		157		$	5.29
(in millions)
Compensation expense for the year	$	0.7				$	0.1				$	0.4
Tax benefit related to compensation expense	$	(0.3	)			$	—				$	(0.2	)
Fair value of shares vested	$	0.7				$	0.8				$	—

As of December 31, 2007, unrecognized compensation expense related to these shares was $1.2 million, which is expected to be recognized over the next three years.

Stock Option Awards

Generally, stock options have ten-year terms and vesting terms of three years. On December 30, 2005, the Company accelerated the vesting of all “out-of-the-money” options, defined as those options for which the option

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exercise price was greater than the closing market price on December 30, 2005 of the Company’s common stock. The Company also immediately vested 1,673,700 options that were granted in December 2005. Restrictions were placed on the December 2005 option grant, such that the recipient’s right to sell any shares obtained upon exercise of the options was limited to 28% upon the first anniversary of the grant, and an additional 3% per month in each of the 24 months thereafter. These selling restrictions do not represent a substantive service period, and the restrictions lapse in the event that the option holder’s employment with the Company terminates. As a result of the vesting of all out-of-the-money options and the December 2005 grant, the Company estimated that the impact on pro forma expense was $3.4 million, net of tax, in 2005. This amount was included in the pro forma stock based compensation expense as disclosed in Note 1.

The decision to accelerate the vesting of the out-of-the-money options and to fully vest the December 2005 option grant was made primarily to reduce compensation expense that otherwise would have been recorded in future periods following the Company’s adoption in 2006 of SFAS No. 123(R). The Company believes this action further enhanced management’s focus on shareholder return and was in the best interest of the Company’s shareholders.

The following table provides a summary of the Company’s outstanding stock option awards:

	2007					2006					2005
(in thousands)	Shares			Weighted- Average Exercise Prices Per Share		Shares			Weighted- Average Exercise Prices Per Share		Shares			Weighted- Average Exercise Prices Per Share
Options outstanding at January 1,		21,153		$	10.89		22,828		$	11.28		24,364		$	12.06
Granted		1,135			4.92		1,260			4.61		2,163			4.06
Exercised		(632	)		3.96		(535	)		3.56		(722	)		3.48
Forfeited		(178	)		4.50		(4	)		4.00		(206	)		4.48
Expired		(853	)		12.74		(2,396	)		12.96		(2,771	)		15.12
Options outstanding at December 31,		20,625		$	10.76		21,153		$	10.89		22,828		$	11.28
Options exercisable at December 31,		18,881		$	11.31		19,974		$	11.26		22,828		$	11.28
(in millions)
Compensation expense for the year	$	0.9				$	0.2				$	—
Tax benefit related to compensation expense	$	(0.4	)			$	(0.1	)			$	—
Intrinsic value of options exercised	$	1.0				$	0.5				$	0.7
Fair value of options vested	$	0.7				$	0.1				$	13.1

The following table summarizes the Company’s outstanding and exercisable stock options at December 31, 2007 (shares in thousands):

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted-Average Remaining Contractual Life in Years	Weighted-Average Exercise Prices Per Share		Shares	Weighted-Average Exercise Prices Per Share
$1.88 to $4.00	4,879	6.4	$	3.71	4,840	$	3.71
$4.01 to $5.66	6,218	6.9		5.25	4,513		5.41
$5.67 to $16.75	5,811	2.0		13.70	5,811		13.70
$16.76 to $38.19	3,717	2.3		24.61	3,717		24.61
Total	20,625	4.6	$	10.76	18,881	$	11.31

As of December 31, 2007, the aggregate intrinsic value for both stock options outstanding and exercisable was approximately $5 million. The weighted-average remaining contractual life for exercisable stock options is approximately four years. As of December 31, 2007, there was $2.5 million of unrecognized stock compensation expense related to stock options, which is expected to be recognized over a weighted-average period of approximately two years.

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The fair values at the date of grant were estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	2007			2006			2005
Expected volatility		29.6	%		29.7	%		32.0	%
Risk-free interest rate		3.6	%		4.5	%		4.3	%
Expected holding period — years		5			5			4
Expected dividends		0.0	%		0.0	%		0.0	%
Weighted-average grant date fair value	$	1.61		$	1.57		$	1.37

The expected volatility assumption used in the Black-Scholes pricing model was based on historical volatility. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected holding period was estimated using the historical exercise behavior of employees and adjusted for abnormal activity. The increase in the holding period is primarily attributed to the change in the demographics of the employees who received the awards. Expected dividends are based on the Company’s history of paying dividends, as well as restrictions in place under the Company’s debt covenants.

15. Business Segment Information

Beginning in the second quarter of 2007, the Company realigned its reportable business segments to be consistent with changes to its management structure and reporting. The Company now operates in three segments: Wireline, Wireless and Technology Solutions, as described below. The Wireline segment combines the operations of Cincinnati Bell Telephone Company LLC and Cincinnati Bell Extended Territories LLC, which were formerly included in the Local segment, and the operations of Cincinnati Bell Any Distance Inc., Cincinnati Bell Complete Protection Inc., the Company’s payphone business and Cincinnati Bell Entertainment Inc., which were formerly included in the Other segment. The Broadband segment, which does not have any substantive on-going operations, has been eliminated. The remaining liabilities associated with the former broadband operations are now included in Corporate activities. The Wireless and Technology Solutions segments were not impacted by the segment realignment. Prior year amounts have been reclassified to conform to the current segment reporting.

The Wireline segment provides local voice, data, long-distance and other services. Local voice services include local service, switched access, information services, and value-added services, such as caller identification, voicemail, call waiting, and call return. Data services include: DSL, dial-up Internet access, dedicated network access, and Gigabit Ethernet (“Gig-E”) and Asynchronous Transfer Mode (“ATM”) based data transport. Long distance services include long distance, audio conferencing and VoIP services. Other services mainly consist of security monitoring services and surveillance hardware, public payphones, cable television and inside wire installation for business enterprises. These services are primarily provided to customers in southwestern Ohio, northern Kentucky, and southeastern Indiana. In March 2007, a local telecommunication business that offers voice, data, and cable TV services in Lebanon, Ohio was purchased for $7.0 million. Wireline operating income includes restructuring charges of $36.1 million in 2007, $2.8 million in 2006, and $1.5 million in 2005, as described in Note 3.

The Wireless segment provides advanced, digital voice and data communications services and sales of related communications equipment to customers in the Greater Cincinnati and Dayton, Ohio operating areas. This segment consists of the operations of the CBW subsidiary, a venture in which the Company historically owned 80.1% and a minority holder owned the remaining 19.9%. After February 14, 2006, CBW is a wholly-owned subsidiary as the Company purchased the remaining 19.9% membership interest in CBW for $83.2 million. See Note 5 for further discussion. In 2005, “Asset impairments and other charges” in the Consolidated Statements of Operations of $41.7 million is mainly related to the Wireless TDMA asset impairment charge. Wireless 2007 operating income includes $2.1 million for restructuring charges, as described in Note 3.

Technology Solutions provides a range of fully managed and outsourced IT and telecommunications services and offers solutions that combine data center collocation services along with the sale, installation, and maintenance of major branded IT and telephony equipment. In May 2006, this segment purchased ATI for a purchase price of $3.5 million. ATI is based in Louisville, Kentucky and is a reseller of, and maintenance provider for, telephony equipment. On December 31, 2007, GramTel, which provides data center services to small and medium-size companies and is based in South Bend, Indiana, was purchased for $20.3 million. Technology Solutions 2007 operating income includes $1.0 million for restructuring charges, as described in Note 3.

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Corporate operating income for 2005 included $11.2 million of income due to the reversal of certain operating tax reserves. Corporate operating income in 2006 included a charge of $6.3 million related to the settlement of the Company’s shareholder litigation, income from the sale of a bankruptcy claim receivable for $3.6 million, a $4.7 million gain on sale of broadband fiber assets, and $2.9 million of income from the expiration of certain warranties and guarantees. The gains associated with the sale of broadband assets and the expiration of warranties and guarantees are included in “Gain on sale of broadband assets” in the Consolidated Statements of Operations. Corporate 2007 operating income includes $0.4 million for restructuring charges, as described in Note 3.

Certain corporate administrative expenses have been allocated to segments based upon the nature of the expense and the relative size of the segment. The Company’s business segment information is as follows:

	Year Ended December 31,
(dollars in millions)	2007			2006			2005
Revenue
Wireline	$	821.7		$	810.4		$	817.7
Wireless		294.5			262.0			237.5
Technology Solutions		258.3			216.6			172.7
Intersegment		(25.9	)		(18.9	)		(18.3	)
Total revenue	$	1,348.6		$	1,270.1		$	1,209.6
Intersegment revenue
Wireline	$	21.8		$	14.2		$	13.0
Wireless		2.6			2.8			2.7
Technology Solutions		1.5			1.9			2.6
Total intersegment revenue	$	25.9		$	18.9		$	18.3
Operating income
Wireline	$	252.5		$	291.8		$	302.7
Wireless		34.3			20.2			(51.7	)
Technology Solutions		18.1			15.8			13.4
Corporate		(22.5	)		(15.3	)		(5.6	)
Total operating income	$	282.4		$	312.5		$	258.8
Expenditures for long-lived assets
Wireline	$	100.9		$	92.5		$	96.7
Wireless		50.1			167.7			39.1
Technology Solutions		110.8			14.7			7.2
Corporate		—			0.2			—
Total expenditure for long-lived assets	$	261.8		$	275.1		$	143.0
Depreciation and amortization
Wireline	$	105.5		$	106.2		$	110.1
Wireless		37.8			33.1			61.5
Technology Solutions		7.4			3.7			2.3
Corporate		0.1			—			0.8
Total depreciation and amortization	$	150.8		$	143.0		$	174.7
Assets (at December 31, 2007 and 2006)
Wireline	$	684.5		$	788.1
Wireless		369.3			382.1
Technology Solutions		243.2			112.5
Corporate and eliminations		722.6			731.1
Total assets	$	2,019.6		$	2,013.8

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Details of the Company’s service and product revenues are as follows:

	Year Ended December 31,
(dollars in millions)	2007		2006		2005
Service revenue
Wireline	$	782.6	$	785.1	$	793.9
Wireless		265.1		233.1		212.4
Managed and data center services		67.6		47.4		37.1
Telephony installation and maintenance		26.2		23.7		20.1
Other		13.9		10.9		13.4
Total service revenue	$	1,155.4	$	1,100.2	$	1,076.9
Product revenue
Handsets and accessories	$	26.8	$	26.1	$	22.4
IT and computer-related equipment		124.8		111.5		80.2
Telephony and other equipment		41.6		32.3		30.1
Total product revenue	$	193.2	$	169.9	$	132.7

The reconciliation of the Consolidated Statement of Cash Flows to expenditures for long-lived assets is as follows:

	Year Ended December 31,
(dollars in millions)	2007		2006		2005
Per Consolidated Statement of Cash Flows:
Capital expenditures	$	233.8	$	151.3	$	143.0
Acquisitions of businesses and remaining minority interest in CBW		23.6		86.7		—
Purchase and deposit — wireless licenses		4.4		37.1		—
Total expenditure for long-lived assets	$	261.8	$	275.1	$	143.0

16. Supplemental Cash Flow Information

	Year ended December 31,
(dollars in millions)	2007		2006		2005
Capitalized interest expense	$	3.6	$	1.0	$	0.6
Cash paid for:
Interest		156.5		153.7		155.1
Income taxes (net of refunds)		6.6		6.6		2.1
Noncash investing and financing activities:
Increase in assets and liabilities due to capital lease transactions		9.0		5.2		11.4
Noncash operating and investing activities:
Increase in assets and liabilities related to capital expenditures not yet paid		9.7		0.3		0.2

89

17. Supplemental Guarantor Information — Cincinnati Bell Telephone Notes

CBT, a wholly-owned subsidiary of CBI, the parent company, has $230 million in notes outstanding that are guaranteed by CBI and no other subsidiaries of CBI. The guarantee is full and unconditional. CBI’s subsidiaries generate substantially all of its income and cash flow and generally distribute or advance the funds necessary to meet CBI’s debt service obligations. Separately, in connection with a fifteen year contract for 25,000 square feet of data center space between CBTS, a non-guarantor subsidiary of CBI, and a data center customer, CBI has guaranteed the performance obligations of CBTS in relation to providing the data center space and managed services under that long-term contract.

The following information sets forth the Condensed Consolidating Balance Sheets of the Company as of December 31, 2007 and 2006 and the Condensed Consolidating Statements of Operations and Cash Flows for the years ended December 31, 2007, 2006, and 2005 of (1) CBI, the parent company, as the guarantor, (2) CBT, as the issuer, and (3) the non-guarantor subsidiaries on a combined basis:

Condensed Consolidating Statements of Operations

	Year Ended December 31, 2007
(dollars in millions)	Parent (Guarantor)			CBT		Other (Non-guarantors)			Eliminations			Total
Revenue	$	—		$	752.6	$	638.8		$	(42.8	)	$	1,348.6
Operating costs and expenses		23.7			526.3		559.0			(42.8	)		1,066.2
Operating income (loss)		(23.7	)		226.3		79.8			—			282.4
Interest expense		137.8			14.9		30.0			(27.8	)		154.9
Other expense (income)		(31.7	)		5.8		(4.3	)		27.8			(2.4	)
Income (loss) before equity in earnings of subsidiaries and income taxes		(129.8	)		205.6		54.1			—			129.9
Income tax expense (benefit)		(37.2	)		73.2		20.7			—			56.7
Equity in earnings of subsidiaries, net of tax		165.8			—		—			(165.8	)		—
Net income		73.2			132.4		33.4			(165.8	)		73.2
Preferred stock dividends		10.4			—		—			—			10.4
Net income applicable to common shareowners	$	62.8		$	132.4	$	33.4		$	(165.8	)	$	62.8

90

	Year Ended December 31, 2006
(dollars in millions)	Parent (Guarantor)			CBT			Other (Non-guarantors)			Eliminations			Total
Revenue	$	—		$	747.3		$	557.6		$	(34.8	)	$	1,270.1
Operating costs and expenses		22.0			481.3			489.1			(34.8	)		957.6
Operating income (loss)		(22.0	)		266.0			68.5			—			312.5
Interest expense		146.1			15.1			32.6			(31.7	)		162.1
Other expense (income)		(32.5	)		0.3			(3.7	)		31.7			(4.2	)
Income (loss) before equity in earnings of subsidiaries and income taxes		(135.6	)		250.6			39.6			—			154.6
Income tax expense (benefit)		(35.8	)		89.8			14.3			—			68.3
Equity in earnings of subsidiaries, net of tax		186.1			—			—			(186.1	)		—
Net income		86.3			160.8			25.3			(186.1	)		86.3
Preferred stock dividends		10.4			—			—			—			10.4
Net income applicable to common shareowners	$	75.9		$	160.8		$	25.3		$	(186.1	)	$	75.9
	Year Ended December 31, 2005
	Parent (Guarantor)			CBT			Other (Non-guarantors)			Eliminations			Total
Revenue	$	—		$	755.6		$	487.9		$	(33.9	)	$	1,209.6
Operating costs and expenses		17.9			479.5			487.3			(33.9	)		950.8
Operating income (loss)		(17.9	)		276.1			0.6			—			258.8
Interest expense		168.0			16.9			37.2			(37.7	)		184.4
Loss on extinguishment of debt		99.8			—			—			—			99.8
Other income		(25.2	)		(5.9	)		(21.8	)		37.7			(15.2	)
Income (loss) before equity in earnings of subsidiaries and income taxes		(260.5	)		265.1			(14.8	)		—			(10.2	)
Income tax expense (benefit)		(82.2	)		99.8			36.7			—			54.3
Equity in earnings of subsidiaries, net of tax		113.8			—			—			(113.8	)		—
Net income (loss)		(64.5	)		165.3			(51.5	)		(113.8	)		(64.5	)
Preferred stock dividends		10.4			—			—			—			10.4
Net income (loss) applicable to common shareowners	$	(74.9	)	$	165.3		$	(51.5	)	$	(113.8	)	$	(74.9	)

91

Condensed Consolidating Balance Sheets

	As of December 31, 2007
(dollars in millions)	Parent (Guarantor)			CBT		Other (Non-guarantors)		Eliminations			Total
Cash and cash equivalents	$	23.6		$	1.9	$	0.6	$	—		$	26.1
Receivables, net		0.1			—		176.4		—			176.5
Other current assets		14.9			28.5		90.0		(18.3	)		115.1
Total current assets		38.6			30.4		267.0		(18.3	)		317.7
Property, plant and equipment, net		0.3			590.1		343.3		—			933.7
Goodwill and other intangibles, net		—			3.4		180.2		—			183.6
Investments in and advances to subsidiaries		1,036.4			—		—		(1,036.4	)		—
Other noncurrent assets		319.8			16.0		279.9		(31.1	)		584.6
Total assets	$	1,395.1		$	639.9	$	1,070.4	$	(1,085.8	)	$	2,019.6
Current portion of long-term debt	$	4.0		$	0.6	$	3.2	$	—		$	7.8
Accounts payable		—			40.7		64.8		—			105.5
Other current liabilities		90.8			65.1		48.4		—			204.3
Total current liabilities		94.8			106.4		116.4		—			317.6
Long-term debt, less current portion		1,671.4			235.6		94.9		—			2,001.9
Other noncurrent liabilities		296.5			61.2		59.4		(49.4	)		367.7
Intercompany payables		—			14.2		472.0		(486.2	)		—
Total liabilities		2,062.7			417.4		742.7		(535.6	)		2,687.2
Shareowners’ equity (deficit)		(667.6	)		222.5		327.7		(550.2	)		(667.6	)
Total liabilities and shareowners’ equity (deficit)	$	1,395.1		$	639.9	$	1,070.4	$	(1,085.8	)	$	2,019.6
	As of December 31, 2006
	Parent (Guarantor)			CBT		Other (Non-guarantors)		Eliminations			Total
Cash and cash equivalents	$	75.9		$	1.5	$	2.0	$	—		$	79.4
Receivables, net		0.3			71.0		90.6		—			161.9
Other current assets		13.9			36.2		73.2		(17.2	)		106.1
Total current assets		90.1			108.7		165.8		(17.2	)		347.4
Property, plant and equipment, net		0.1			589.7		229.0		—			818.8
Goodwill and other intangibles, net		—			—		166.2		—			166.2
Investments in and advances to subsidiaries		1,047.7			—		—		(1,047.7	)		—
Other noncurrent assets		365.1			12.0		349.8		(45.5	)		681.4
Total assets	$	1,503.0		$	710.4	$	910.8	$	(1,110.4	)	$	2,013.8
Current portion of long-term debt	$	4.0		$	0.9	$	2.4	$	—		$	7.3
Accounts payable		0.5			32.7		40.9		—			74.1
Other current liabilities		96.7			92.1		49.0		(0.3	)		237.5
Total current liabilities		101.2			125.7		92.3		(0.3	)		318.9
Long-term debt, less current portion		1,815.6			236.2		14.1		—			2,065.9
Other noncurrent liabilities		377.8			65.0		40.2		(62.4	)		420.6
Intercompany payables		—			37.3		432.5		(469.8	)		—
Total liabilities		2,294.6			464.2		579.1		(532.5	)		2,805.4
Shareowners’ equity (deficit)		(791.6	)		246.2		331.7		(577.9	)		(791.6	)
Total liabilities and shareowners’ equity (deficit)	$	1,503.0		$	710.4	$	910.8	$	(1,110.4	)	$	2,013.8

92

Condensed Consolidating Statements of Cash Flows

	Year Ended December 31, 2007
(dollars in millions)	Parent (Guarantor)			CBT			Other (Non-guarantors)			Eliminations		Total
Cash flows provided by (used in) operating activities	$	(58.4	)	$	279.0		$	88.2		$	—	$	308.8
Capital expenditures		—			(94.3	)		(139.5	)		—		(233.8	)
Acquisition of businesses and deposit for wireless licenses		—			(4.6	)		(23.4	)		—		(28.0	)
Other investing activities		(1.2	)		1.0			(1.5	)		—		(1.7	)
Cash flows used in investing activities		(1.2	)		(97.9	)		(164.4	)		—		(263.5	)
Funding between Parent and subsidiaries, net		176.0			(179.8	)		3.8			—		—
Issuance of long-term debt		—			—			75.6			—		75.6
Increase in Corporate credit facility, net		55.0			—			—			—		55.0
Repayment of debt		(214.9	)		(0.9	)		(3.3	)		—		(219.1	)
Other financing activities		(8.8	)		—			(1.3	)		—		(10.1	)
Cash flows provided by (used in) financing activities		7.3			(180.7	)		74.8			—		(98.6	)
Increase (decrease) in cash and cash equivalents		(52.3	)		0.4			(1.4	)		—		(53.3	)
Beginning cash and cash equivalents		75.9			1.5			2.0			—		79.4
Ending cash and cash equivalents	$	23.6		$	1.9		$	0.6		$	—	$	26.1
	Year Ended December 31, 2006
	Parent (Guarantor)			CBT			Other (Non-guarantors)			Eliminations		Total
Cash flows provided by (used in) operating activities	$	(59.6	)	$	254.3		$	140.0		$	—	$	334.7
Capital expenditures		—			(89.0	)		(62.3	)		—		(151.3	)
Acquisition of businesses and wireless licenses		—			—			(123.8	)		—		(123.8	)
Other investing activities		—			2.0			13.1			—		15.1
Cash flows used in investing activities		—			(87.0	)		(173.0	)		—		(260.0	)
Funding between Parent and subsidiaries, net		127.6			(165.7	)		38.1			—		—
Repayment of debt		(7.2	)		(2.5	)		(3.6	)		—		(13.3	)
Other financing activities		(8.8	)		1.1			—			—		(7.7	)
Cash flows provided by (used in) financing activities		111.6			(167.1	)		34.5			—		(21.0	)
Increase in cash and cash equivalents		52.0			0.2			1.5			—		53.7
Beginning cash and cash equivalents		23.9			1.3			0.5			—		25.7
Ending cash and cash equivalents	$	75.9		$	1.5		$	2.0		$	—	$	79.4

93

	Year Ended December 31, 2005
(dollars in millions)	Parent (Guarantor)			CBT			Other (Non-guarantors)			Eliminations		Total
Cash flows provided by (used in) operating activities	$	(22.4	)	$	258.4		$	86.3		$	—	$	322.3
Capital expenditures		—			(94.3	)		(48.7	)		—		(143.0	)
Other investing activities		(1.1	)		1.5			(0.1	)		—		0.3
Cash flows used in investing activities		(1.1	)		(92.8	)		(48.8	)		—		(142.7	)
Funding between Parent and subsidiaries, net		181.3			(143.4	)		(37.9	)		—		—
Issuance of long-term debt		752.0			—			0.1			—		752.1
Repayment of debt		(879.1	)		(24.2	)		—			—		(903.3	)
Other financing activities		(29.5	)		1.9			—			—		(27.6	)
Cash flows provided by (used in) financing activities		24.7			(165.7	)		(37.8	)		—		(178.8	)
Increase (decrease) in cash and cash equivalents		1.2			(0.1	)		(0.3	)		—		0.8
Beginning cash and cash equivalents		22.7			1.4			0.8			—		24.9
Ending cash and cash equivalents	$	23.9		$	1.3		$	0.5		$	—	$	25.7

18. Supplemental Guarantor Information — 7 ¹/4% Senior Notes Due 2013, 7% Senior Notes Due 2015, and 8 ³/8% Senior Subordinated Notes Due 2014

The Company’s 7 ¹/4% Senior Notes due 2013, 7% Senior Notes due 2015, and 8 ³/8% Senior Subordinated Notes due 2014 are guaranteed by the following subsidiaries: Cincinnati Bell Entertainment Inc. (f/k/a ZoomTown.com Inc.), Cincinnati Bell Complete Protection Inc., Cincinnati Bell Any Distance Inc., Cincinnati Bell Telecommunication Services LLC, Cincinnati Bell Wireless Company, Cincinnati Bell Wireless LLC, GramTel Inc. (f/k/a BCSIVA Inc.), BRCOM Inc., Cincinnati Bell Technology Solutions Inc. (“CBTS”), and IXC Internet Services Inc. CBI owns directly or indirectly 100% of each guarantor and each guarantee is full and unconditional and joint and several. CBI’s subsidiaries generate substantially all of its income and cash flow and generally distribute or advance the funds necessary to meet CBI’s debt service obligations. Separately, in connection with a fifteen year contract for 25,000 square feet of data center space between CBTS, a guarantor subsidiary of these CBI notes, and a data center customer, CBI has guaranteed the performance obligations of CBTS in relation to providing the data center space and managed services under that long-term contract.

The following information sets forth the Condensed Consolidating Balance Sheets of the Company as of December 31, 2007 and 2006 and the Condensed Consolidating Statements of Operations and Cash Flows for the three years ended December 31, 2007, 2006, and 2005 of (1) CBI, the parent company, as the issuer (2) the guarantor subsidiaries on a combined basis, and (3) the non-guarantor subsidiaries on a combined basis:

Condensed Consolidating Statements of Operations

	Year Ended December 31, 2007
(dollars in millions)	Parent (Issuer)			Guarantors		Non-guarantors		Eliminations			Total
Revenue	$	—		$	700.4	$	691.0	$	(42.8	)	$	1,348.6
Operating costs and expenses		23.7			632.6		452.7		(42.8	)		1,066.2
Operating income (loss)		(23.7	)		67.8		238.3		—			282.4
Interest expense		137.8			25.3		19.6		(27.8	)		154.9
Other expense (income)		(31.7	)		1.3		0.2		27.8			(2.4	)
Income (loss) before equity in earnings of subsidiaries and income taxes		(129.8	)		41.2		218.5		—			129.9
Income tax expense (benefit)		(37.2	)		16.2		77.7		—			56.7
Equity in earnings of subsidiaries, net of tax		165.8			—		—		(165.8	)		—
Net income		73.2			25.0		140.8		(165.8	)		73.2
Preferred stock dividends		10.4			—		—		—			10.4
Net income applicable to common shareowners	$	62.8		$	25.0	$	140.8	$	(165.8	)	$	62.8

94

	Year Ended December 31, 2006
(dollars in millions)	Parent (Issuer)			Guarantors			Non-guarantors			Eliminations			Total
Revenue	$	—		$	607.9		$	697.0		$	(34.8	)	$	1,270.1
Operating costs and expenses		22.0			541.5			428.9			(34.8	)		957.6
Operating income (loss)		(22.0	)		66.4			268.1			—			312.5
Interest expense		146.1			32.9			14.8			(31.7	)		162.1
Other income		(32.5	)		(3.1	)		(0.3	)		31.7			(4.2	)
Income (loss) before equity in earnings of subsidiaries and income taxes		(135.6	)		36.6			253.6			—			154.6
Income tax expense (benefit)		(35.8	)		15.0			89.1			—			68.3
Equity in earnings of subsidiaries, net of tax		186.1			—			—			(186.1	)		—
Net income		86.3			21.6			164.5			(186.1	)		86.3
Preferred stock dividends		10.4			—			—			—			10.4
Net income applicable to common shareowners	$	75.9		$	21.6		$	164.5		$	(186.1	)	$	75.9
	Year Ended December 31, 2005
	Parent (Issuer)			Guarantors			Non-guarantors			Eliminations			Total
Revenue	$	—		$	540.3		$	703.2		$	(33.9	)	$	1,209.6
Operating costs and expenses		17.9			543.5			423.3			(33.9	)		950.8
Operating income (loss)		(17.9	)		(3.2	)		279.9			—			258.8
Interest expense		168.0			37.6			16.5			(37.7	)		184.4
Loss on extinguishment of debt		99.8			—			—			—			99.8
Other income		(25.2	)		(22.6	)		(5.1	)		37.7			(15.2	)
Income (loss) before equity in earnings of subsidiaries and income taxes		(260.5	)		(18.2	)		268.5			—			(10.2	)
Income tax expense (benefit)		(82.2	)		37.0			99.5			—			54.3
Equity in earnings of subsidiaries, net of tax		113.8			—			—			(113.8	)		—
Net income (loss)		(64.5	)		(55.2	)		169.0			(113.8	)		(64.5	)
Preferred stock dividends		10.4			—			—			—			10.4
Net income (loss) applicable to common shareowners	$	(74.9	)	$	(55.2	)	$	169.0		$	(113.8	)	$	(74.9	)

95

Condensed Consolidating Balance Sheets

	As of December 31, 2007
(dollars in millions)	Parent (Issuer)			Guarantors		Non-guarantors		Eliminations			Total
Cash and cash equivalents	$	23.6		$	0.8	$	1.7	$	—		$	26.1
Receivables, net		0.1			61.3		115.1		—			176.5
Other current assets		14.9			87.1		31.4		(18.3	)		115.1
Total current assets		38.6			149.2		148.2		(18.3	)		317.7
Property, plant and equipment, net		0.3			345.2		588.2		—			933.7
Goodwill and other intangibles, net		—			180.2		3.4		—			183.6
Investments in and advances to subsidiaries		1,036.4			26.8		—		(1,063.2	)		—
Other noncurrent assets		319.8			278.8		17.1		(31.1	)		584.6
Total assets	$	1,395.1		$	980.2	$	756.9	$	(1,112.6	)	$	2,019.6
Current portion of long-term debt	$	4.0		$	3.2	$	0.6	$	—		$	7.8
Accounts payable		—			98.7		6.8		—			105.5
Other current liabilities		90.8			51.2		62.3		—			204.3
Total current liabilities		94.8			153.1		69.7		—			317.6
Long-term debt, less current portion		1,671.4			19.9		310.6		—			2,001.9
Other noncurrent liabilities		296.5			66.6		54.0		(49.4	)		367.7
Intercompany payables		—			430.2		82.8		(513.0	)		—
Total liabilities		2,062.7			669.8		517.1		(562.4	)		2,687.2
Shareowners’ equity (deficit)		(667.6	)		310.4		239.8		(550.2	)		(667.6	)
Total liabilities and shareowners’ equity (deficit)	$	1,395.1		$	980.2	$	756.9	$	(1,112.6	)	$	2,019.6
	As of December 31, 2006
	Parent (Issuer)			Guarantors		Non-guarantors		Eliminations			Total
Cash and cash equivalents	$	75.9		$	2.0	$	1.5	$	—		$	79.4
Receivables, net		0.3			104.5		57.1		—			161.9
Other current assets		13.9			73.6		35.8		(17.2	)		106.1
Total current assets		90.1			180.1		94.4		(17.2	)		347.4
Property, plant and equipment, net		0.1			230.6		588.1		—			818.8
Goodwill and other intangibles, net		—			166.2		—		—			166.2
Investments in and advances to subsidiaries		1,047.7			9.9		—		(1,057.6	)		—
Other noncurrent assets		365.1			349.8		12.0		(45.5	)		681.4
Total assets	$	1,503.0		$	936.6	$	694.5	$	(1,120.3	)	$	2,013.8
Current portion of long-term debt	$	4.0		$	2.4	$	0.9	$	—		$	7.3
Accounts payable		0.5			59.0		14.6		—			74.1
Other current liabilities		96.7			51.2		89.9		(0.3	)		237.5
Total current liabilities		101.2			112.6		105.4		(0.3	)		318.9
Long-term debt, less current portion		1,815.6			14.0		236.3		—			2,065.9
Other noncurrent liabilities		377.8			50.2		55.0		(62.4	)		420.6
Intercompany payables		—			432.5		47.2		(479.7	)		—
Total liabilities		2,294.6			609.3		443.9		(542.4	)		2,805.4
Shareowners’ equity (deficit)		(791.6	)		327.3		250.6		(577.9	)		(791.6	)
Total liabilities and shareowners’ equity (deficit)	$	1,503.0		$	936.6	$	694.5	$	(1,120.3	)	$	2,013.8

96

Condensed Consolidating Statements of Cash Flows

	Year Ended December 31, 2007
(dollars in millions)	Parent (Issuer)			Guarantors			Non-guarantors			Eliminations		Total
Cash flows provided by (used in) operating activities	$	(58.4	)	$	224.3		$	142.9		$	—	$	308.8
Capital expenditures		—			(143.0	)		(90.8	)		—		(233.8	)
Acquisition of businesses and deposit for wireless licenses		—			(23.4	)		(4.6	)		—		(28.0	)
Other investing activities		(1.2	)		(1.5	)		1.0			—		(1.7	)
Cash flows used in investing activities		(1.2	)		(167.9	)		(94.4	)		—		(263.5	)
Funding between Parent and subsidiaries, net		176.0			(54.9	)		(121.1	)		—		—
Issuance of long-term debt		—			0.6			75.0			—		75.6
Increase in Corporate credit facility, net		55.0			—			—			—		55.0
Repayment of debt		(214.9	)		(3.3	)		(0.9	)		—		(219.1	)
Other financing activities		(8.8	)		—			(1.3	)		—		(10.1	)
Cash flows used in financing activities		7.3			(57.6	)		(48.3	)		—		(98.6	)
Increase (decrease) in cash and cash equivalents		(52.3	)		(1.2	)		0.2			—		(53.3	)
Beginning cash and cash equivalents		75.9			2.0			1.5			—		79.4
Ending cash and cash equivalents	$	23.6		$	0.8		$	1.7		$	—	$	26.1
	Year Ended December 31, 2006
	Parent (Issuer)			Guarantors			Non-guarantors			Eliminations		Total
Cash flows provided by (used in) operating activities	$	(59.6	)	$	158.0		$	236.3		$	—	$	334.7
Capital expenditures		—			(63.5	)		(87.8	)		—		(151.3	)
Acquisition of businesses and wireless licenses		—			(123.8	)		—			—		(123.8	)
Other investing activities		—			11.9			3.2			—		15.1
Cash flows used in investing activities		—			(175.4	)		(84.6	)		—		(260.0	)
Funding between Parent and subsidiaries, net		127.6			22.5			(150.1	)		—		—
Repayment of debt		(7.2	)		(3.6	)		(2.5	)		—		(13.3	)
Other financing activities		(8.8	)		—			1.1			—		(7.7	)
Cash flows provided by (used in) financing activities		111.6			18.9			(151.5	)		—		(21.0	)
Increase in cash and cash equivalents		52.0			1.5			0.2			—		53.7
Beginning cash and cash equivalents		23.9			0.5			1.3			—		25.7
Ending cash and cash equivalents	$	75.9		$	2.0		$	1.5		$	—	$	79.4

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	Year Ended December 31, 2005
(dollars in millions)	Parent (Issuer)			Guarantors			Non-guarantors			Eliminations		Total
Cash flows provided by (used in) operating activities	$	(22.4	)	$	77.8		$	266.9		$	—	$	322.3
Capital expenditures		—			(51.6	)		(91.4	)		—		(143.0	)
Other investing activities		(1.1	)		1.4			—			—		0.3
Cash flows used in investing activities		(1.1	)		(50.2	)		(91.4	)		—		(142.7	)
Funding between Parent and subsidiaries, net		181.3			(29.9	)		(151.4	)		—		—
Issuance of long-term debt		752.0			0.1			—			—		752.1
Repayment of debt		(879.1	)		—			(24.2	)		—		(903.3	)
Other financing activities		(29.5	)		1.9			—			—		(27.6	)
Cash flows provided by (used in) financing activities		24.7			(27.9	)		(175.6	)		—		(178.8	)
Increase (decrease) in cash and cash equivalents		1.2			(0.3	)		(0.1	)		—		0.8
Beginning cash and cash equivalents		22.7			0.8			1.4			—		24.9
Ending cash and cash equivalents	$	23.9		$	0.5		$	1.3		$	—	$	25.7

19. Quarterly Financial Information (Unaudited)

(dollars in millions except per common share amounts)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter			Total
2007
Revenue	$	315.3	$	329.1	$	344.3	$	359.9		$	1,348.6
Operating income		77.9		81.1		82.6		40.8			282.4
Net income		22.6		24.2		25.7		0.7			73.2
Basic earnings (loss) per common share		0.08		0.09		0.09		(0.01	)		0.25
Diluted earnings (loss) per common share		0.08		0.08		0.09		(0.01	)		0.24
(dollars in millions except per common share amounts)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter			Total
2006
Revenue	$	298.2	$	323.3	$	320.1	$	328.5		$	1,270.1
Operating income		71.1		83.2		83.5		74.7			312.5
Net income		14.1		24.3		25.1		22.8			86.3
Basic earnings per common share		0.05		0.09		0.09		0.08			0.31
Diluted earnings per common share		0.05		0.09		0.09		0.08			0.30

The effects of assumed conversions are determined independently for each respective quarter and year and may not be dilutive during every period due to variations in operating results. Therefore, the sum of quarterly per share results will not necessarily equal the per share results for the full year.

98

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

No reportable information under this item.

Item 9A. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Cincinnati Bell Inc.’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2007 (the “Evaluation Date”). Based on that evaluation, Cincinnati Bell Inc.’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such controls and procedures were effective to ensure that information the Company is required to disclose in reports that are filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Management’s annual report on internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are set forth in Part II, Item 8 of this Annual Report on Form 10-K.

(c) Changes in internal control over financial reporting.

The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Cincinnati Bell Inc.’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated any changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2007, and they have concluded that there was no change to Cincinnati Bell Inc.’s internal control over financial reporting in the fourth quarter of 2007 that has materially affected, or is reasonably likely to materially affect, Cincinnati Bell Inc.’s internal control over financial reporting.

Item 9B. Other Information

No reportable information under this item.

99

PART III

Item 10. Directors and Executive Officers and Corporate Governance

The information required by Item 401, Item 405, Item 406 and 407 (c)(3), (d)(4) and (d)(5) of Regulation S-K regarding directors of Cincinnati Bell Inc. can be found in the Proxy Statement for the Annual Meeting and incorporated herein by reference.

The Company’s Code of Ethics for Senior Financial Officers that applies to its Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer is filed as an exhibit to this Form 10-K and posted on the Company’s website at http://www.cincinnatibell.com. Within the time period required by the SEC and the New York Stock Exchange (“NYSE”), the Company will post on its website any amendment to the Code of Ethics for Senior Financial Officers and any waiver of such code relating to such senior executive officers of the Company.

In addition to the certifications of the Company’s Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002 and filed as exhibits to this Annual Report on Form 10-K, in May 2007 the Company’s Chief Executive Officer submitted to the NYSE the certification regarding compliance with the NYSE’s corporate governance listing standards required by Section 303 A.12 of the NYSE Listed Company Manual.

Executive Officers of the Registrant:

The names, ages and positions of the executive officers of the Company are as follows:

Name	Age	Title
John F. Cassidy (a)	53	President and Chief Executive Officer
Brian A. Ross	50	Chief Financial Officer
Jeffery D. Coleman	44	Vice President, Internal Controls
Christopher J. Wilson	42	Vice President, General Counsel, and Secretary
Brian G. Keating	54	Vice President, Human Resources and Administration
Kurt A. Freyberger	41	Vice President and Controller
Kimberly H. Sheehy	43	Vice President and Treasurer
Traci D. Bolte	38	Vice President, Investor Relations and Corporate Communications

(a) Member of the Board of Directors

Officers are elected annually but are removable at the discretion of the Board of Directors.

JOHN F. CASSIDY, President and Chief Executive Officer since July 2003; Director of the Company since September 2002; President and Chief Operating Officer of Cincinnati Bell Telephone since May 2001; President of Cincinnati Bell Wireless since 1997; Senior Vice President, National Sales & Distribution of Rogers Cantel in Canada from 1992-1996; Vice President, Sales and Marketing, Ericsson Mobile Communications from 1990-1992; Vice President, Sales and Marketing, General Electric Company from 1988-1990.

BRIAN A. ROSS, Chief Financial Officer of the Company since 2004; Senior Vice President of Finance and Accounting of the Company in 2003; Vice President of Finance and Accounting of the Company’s Cincinnati-based operating subsidiaries from 2001-2003; Vice President of Finance and Accounting of Cincinnati Bell Wireless from 1999-2001.

JEFFERY D. COLEMAN, Vice President of Internal Controls of the Company since August 2005; Director of Internal Audit of Convergys, 2000-2005; Regional General Auditor of H.J. Heinz, 1995-2000.

CHRISTOPHER J. WILSON, Vice President and General Counsel of the Company since August 2003; Associate General Counsel and Assistant Corporate Secretary for the Company’s Cincinnati-based operating subsidiaries from 1999-2003.

100

BRIAN G. KEATING, Vice President, Human Resources and Administration of the Company since August 2003; Vice President, Human Resources and Administration of the Cincinnati Operations, 2000-2003; Director of Labor Relations, Staffing and Safety of the Company, 1988-2000.

KURT A. FREYBERGER, Vice President and Controller of the Company since March 2005; Assistant Corporate Controller at Chiquita Brands International, Inc. from 2000 to March 2005; various financial reporting roles at Chiquita from 1996-2000.

KIMBERLY H. SHEEHY, Vice President and Treasurer since December 2007; Vice President of Financial Planning and Analysis from January 2007 to December 2007; Managing Director of Financial Planning and Analysis from 2005-2007; Managing Director of Corporate Tax from 2001 to 2005.

TRACI D. BOLTE, Vice President of Investor Relations and Corporate Communications since December 2007; Director of Investor Relations from February 2007 to December 2007; Director of Finance and Accounting from 2005 to 2007; various finance and operational roles within Cincinnati Bell from 2000 to 2005.

Items 11 and 12. Executive Compensation and Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by these items can be found in the Proxy Statement for the Annual Meeting and incorporated herein by reference.

Item 13. Certain Relationships, Related Transactions and Director Independence

The information required by these items can be found in the Proxy Statement for the Annual Meeting and incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by these items can be found in the Proxy Statement for the Annual Meeting and incorporated herein by reference.

101

PART IV

Item 15. Exhibits and Financial Statement Schedules

Financial Statement Schedules

Financial Statement Schedule II – Valuation and Qualifying Accounts is included on page 107. All other schedules are not required under the related instructions or are not applicable.

Exhibits

Exhibits identified in parenthesis below, on file with the Securities and Exchange Commission (“SEC”), are incorporated herein by reference as exhibits hereto.

Exhibit Number	Description
(3.1)(a)	Amended Articles of Incorporation of Cincinnati Bell (Exhibit 3.1(a) to Form S-4 dated July 17, 2003, File No. 1-8519).
(3.1)(b)	Amended Regulations of Cincinnati Bell (Exhibit 3.2 to Registration Statement No. 2-96054).
(4)(c)(i)	Indenture dated July 1, 1993, between Cincinnati Bell Inc., Issuer, and The Bank of New York, Trustee, in connection with $50,000,000 of Cincinnati Bell Inc. 7 1/4% Notes Due June 15, 2023 (Exhibit 4-A to Current Report on Form 8-K, date of report July 12, 1993, File No. 1-8519).
(4)(c)(ii)(1)	Indenture dated as of October 27, 1993, among Cincinnati Bell Telephone Company, as Issuer, Cincinnati Bell Inc., as Guarantor, and The Bank of New York, as Trustee (Exhibit 4-A to Current Report on Form 8-K, filed October 27, 1993, File No. 1-8519).
(4)(c)(ii)(2)	First Supplemental Indenture dated as of December 31, 2004 to the Indenture dated October 27, 1993 by and among Cincinnati Bell Telephone Company, as Issuer, Cincinnati Bell Inc. as Guarantor, and The Bank of New York, as Trustee (Exhibit 4(c)(ii)(2) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).
(4)(c)(ii)(3)	Second Supplemental Indenture dated as of January 10, 2005 to the Indenture dated October 27, 1993 by and among Cincinnati Bell Telephone Company, as Issuer, Cincinnati Bell Inc. as Guarantor, and The Bank of New York, as Trustee (Exhibit 4(c)(ii)(3) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).
(4)(c)(iii)(1)	Indenture dated as of November 30, 1998 among Cincinnati Bell Telephone Company, as Issuer, Cincinnati Bell Inc., as Guarantor, and The Bank of New York, as Trustee (Exhibit 4-A to Current Report on Form 8-K, filed November 30, 1998, File No. 1-8519).
(4)(c)(iii)(2)	First Supplemental Indenture dated as of January 10, 2005 to the Indenture dated November 30, 1998 among Cincinnati Bell Telephone Company, as Issuer, Cincinnati Bell Inc., as Guarantor, and the Bank of New York, as Trustee (Exhibit 4(c)(iii)(2) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).
(4)(c)(iii)(3)	Second Supplemental Indenture dated as of January 10, 2005 to the Indenture dated November 30, 1998 among Cincinnati Bell Telephone Company, as Issuer, Cincinnati Bell Inc., as Guarantor, and the Bank of New York, as Trustee (Exhibit (4)(c)(iii)(3) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).
(4)(c)(iv)	Warrant Agreement, dated as of March 26, 2003, by and among Broadwing Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers (Exhibit (4)(c)(vii) to Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-8519).
(4)(c)(vi)	Equity Registration Rights Agreement, dated as of March 26, 2003 by and between Broadwing Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers (Exhibit (4)(c)(ix) to Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-8519).

102

Exhibit Number	Description
(4(c)(vi)(1)	Purchase Agreement, dated as of March 26, 2003 by and among Broadwing Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Notes due 2009 (Exhibit (4)(c)(x)(1) to Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-8519).
(4(c)(vi)(2)	First Amendment to Purchase Agreement, dated as of March 26, 2003 by and among Broadwing Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Notes due 2009 (Exhibit (4)(c)(x)(2) to Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-8519).
(4)(c)(vi)(3)	Second Amendment to Purchase Agreement, dated as of April 30, 2004 by and among Broadwing Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Notes due 2009 (Exhibit (4)(c)(x)(3) to Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, File No. 1-8519).
(4)(c)(vi)(4)	Third Amendment to Purchase Agreement, dated April 30, 2004, by and among Cincinnati Bell Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Notes due 2009 (Exhibit 4(c)(viii)(4) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).
(4)(c)(vi)(5)	Fourth Amendment to Purchase Agreement, dated January 31, 2005, by and among Cincinnati Bell Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Notes due 2009 (Exhibit 4(c)(viii)(5) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).
(4)(c)(vi)(6)	Note Repurchase Agreement, dated August 5, 2005, by and among Cincinnati Bell Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Notes due 2009 (Exhibit 10.1 to Current Report on Form 8-K, date of Report August 8, 2005, File No. 1-8519).
(4)(c)(vii)(1)	Indenture dated as of July 11, 2003, by and among Cincinnati Bell Inc., as Issuer, the Guarantors party thereto, and the Bank of New York, as Trustee, in connection with Cincinnati Bell 7 1/4% Senior Notes due 2013 (Exhibit (4)(c)(xi) on Form S-4 dated July 17, 2003, File No. 1-8519).
(4)(c)(vii)(2)	First Supplemental Indenture dated as of January 28, 2005 to the Indenture dated as of July 11, 2003, by and among Cincinnati Bell Inc., as Issuer, the Guarantors party thereto, and the Bank of New York, as Trustee (Exhibit 4.1 to Current Report on Form 8-K dated February 2, 2005, File No. 1-8519).
(4)(c)(viii)	Indenture dated as of November 19, 2003, by and among Cincinnati Bell Inc., as Issuer, the Guarantors party thereto, and The Bank of New York, as Trustee, in connection with Cincinnati Bell 8 3/8% Senior Subordinated Notes due 2014 (incorporated by reference to Exhibit (4)(c)(xiii) to Registration Statement No. 333-110940).
(4)(c)(ix)	Indenture dated as of February 16, 2005, by and among Cincinnati Bell Inc., as Issuer, the Guarantor parties thereto, and the Bank of New York, as Trustee in connection with Cincinnati Bell 7% Senior Notes due 2015 (Exhibit 4.1 to Current Report on Form 8-K, filed on February 23, 2005, File No. 1-8519).
(4)(c)(x)	No other instrument which defines the rights of holders of long term debt of the registrant is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, the registrant hereby agrees to furnish a copy of any such instrument to the SEC upon request.
(10)(i)(A)	Credit Agreement dated as of February 16, 2005 as Amended and Restated as of August 31, 2005 among Cincinnati Bell Inc. as Borrower, the Guarantor parties thereto, Bank of America, N.A. as Administrative Agent, PNC Bank, National Association, as Swingline Lender, and Lenders party thereto (Exhibit 10.2 to Current Report on Form 8-K, filed September 1, 2005, File No. 1-8519).

103

Exhibit Number	Description
(10)(i)(B)	Second Amendment to the Credit Agreement, dated as of May 25th, 2007, among Cincinnati Bell Inc., as Borrower, certain subsidiaries as Guarantors thereto, the Lenders party thereto, Bank of America, N.A., as Administrative Agent and L/C Issuer, and PNC Bank, National Association, as Swingline Lender and L/C Issuer (Exhibit 99.1 to Current Report on Form 8-K, filed June 1, 2007, File No. 1-8519).
(10)(i)(C)(1)	Purchase and Sale Agreement, dated as of March 23, 2007, among Cincinnati Bell Funding LLC as Purchaser, Cincinnati Bell Inc. as Servicer and sole member of Cincinnati Bell Funding LLC, and various Cincinnati Bell subsidiaries as Sellers (Exhibit 99.1 to Current Report on Form 8-K, filed March 29, 2007, File No. 1-8519).
(10)(i)(C)(2)	Receivables Purchase Agreement, dated as of March 23, 2007, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell Inc., as Servicer, various Purchasers and Purchaser Agents, and PNC Bank, National Association, as Administrator. (Exhibit 99.2 to Current Report on Form 8-K, filed March 29, 2007, File No. 1-8519).
(10)(ii)(A)+	Asset Purchase Agreement, dated November 30, 2007 among Cincinnati Bell Any Distance Inc. as Buyer, EGIX,Inc and EGIX Network Services, Inc as Sellers, and the Seller’s respective subsidiaries and principal shareholders.
(10)(ii)(B)+	Asset Purchase Agreement, dated as of December 31, 2007, among GramTel USA, Inc. as Seller, BCSIVA Inc. as Buyer, and Jordan Industries, Inc.
(10)(iii)(A)(1)*	Short Term Incentive Plan of Cincinnati Bell Inc., as amended and restated effective July 24, 2000 (Exhibit (10)(iii)(A)(1) to Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-8519).
(10)(iii)(A)(1.1)+	Amendment to Cincinnati Bell Inc. Short Term Incentive Plan effective as of May 27, 2003.
(10)(iii)(A)(2)*	Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors, as amended and restated effective July 24, 2002 (Exhibit (10)(iii)(A)(2) to Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, File No. 1-8519).
(10)(iii)(A)(2.1)+	Amendment to Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors effective as of May 27, 2003.
(10)(iii)(A)(2.2)+	Amendment to Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors effective as of January 1, 2005.
(10)(ii)(A)(2.3)+	Amendment to Cincinnati Bell Deferred Compensation Plan for Outside Directors effective as of January 1, 2006.
(10)(iii)(A)(3)*	Cincinnati Bell Inc. Pension Program, as amended and restated effective July 24, 2000 (Exhibit (10)(iii)(A)(4) to Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-8519).
(10)(iii)(A)(3.2)+	Amendment to Cincinnati Bell Inc. Pension Program effective as of December 4, 2003.
(10)(iii)(A)(4)*	Cincinnati Bell Inc. Executive Deferred Compensation Plan, as amended and restated effective January 1, 2002 (Exhibit (10)(iii)(A)(4) to Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, File No. 1-8519).
(10)(iii)(A)(4.1)+	Amendment to Cincinnati Bell Inc. Executive Deferred Compensation Plan effective as of May 27, 2003.
(10)(iii)(A)(5)*	Cincinnati Bell Inc. 1997 Long Term Incentive Plan, as amended and restated effective July 24, 2000 (Exhibit (10)(iii)(A)(1) to Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-8519).
(10)(iii)(A)(5.1)+	Amendment to Cincinnati Bell Inc. 1997 Long Term Incentive Plan effective as of January 1, 2001.
(10)(iii)(A)(5.2)+	Amendment to Cincinnati Bell Inc. 1997 Long Term Incentive Plan effective as of May 27, 2003.

104

Exhibit Number	Description
(10)(iii)(A)(6)*	Cincinnati Bell Inc. 1997 Stock Option Plan for Non-Employee Directors, as revised and restated effective January 1, 2001 (Exhibit (10)(iii)(A)(6) to Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, File No. 1-8519).
(10)(iii)(A)(6.1)+	Amendment to Cincinnati Bell Inc. 1997 Stock Option Plan for Non-Employee Directors effective as of May 27, 2003.
(10)(iii)(A)(7)*	Cincinnati Bell Inc. 1989 Stock Option Plan (Exhibit (10)(iii)(A)(14) to Annual Report on Form 10-K for 1989, File No. 1-8519).
(10)(iii)(A)(8)*	Employment Agreement effective July 26, 2005 between the Company and Brian G. Keating (Exhibit 10.5 to Current Report on Form 8-K, date of Report July 29, 2005, File No. 1-8519).
(10)(iii)(A)(9)*	Employment Agreement effective January 1, 1999, between Broadwing and John F. Cassidy (Exhibit (10)(iii)(A)(11.1) to Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, File No. 1-8519).
(10)(iii)(A)(9.1)*	Amendment to Employment Agreement effective September 20, 2002 between Cincinnati Bell Inc. and John F. Cassidy (Exhibit (10)(iii)(A)(8) of Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, File No. 1-8519).
(10)(iii)(A)(9.2)*	Amendment No. 2 effective July 26, 2005 to Employment Agreement between Cincinnati Bell Inc. and John F. Cassidy (Exhibit 10.1 to Current Report on Form 8-K, date of Report July 29, 2005, File No. 1-8519).
(10)(iii)(A)(10)*	Employment Agreement effective July 26, 2005 between the Company and Christopher J. Wilson (Exhibit 10.4 to Current Report on Form 8-K, date of Report July 29, 2005, File No. 1-8519).
(10)(iii)(A)(12)*	Employment Agreement effective July 26, 2005 between the Company and Rodney D. Dir (Exhibit 10.3 to Current Report on Form 8-K, date of Report July 29, 2005, File No. 1-8519).
(10)(iii)(A)(12.1)	Amendment to Employment Agreement effective November 9, 2007 between the Company and Rodney D. Dir (Exhibit 10.1 to Current Report on Form 8-K filed November 15, 2007, File No. 1-8519).
(10)(iii)(A)(13)*	Employment Agreement effective July 26, 2005 between the Company and Brian A. Ross (Exhibit 10.2 to Current Report on Form 8-K, date of Report July 29, 2005, File No. 1-8519).
(10)(iii)(A)(14)	Cincinnati Bell Inc. 2007 Long Term Incentive Plan (Appendix A to the Company’s 2007 Proxy Statement on Schedule 14A filed March 14, 2007, File No. 1-8519).
(10)(iii)(A)(15)	Cincinnati Bell Inc. 2007 Stock Option Plan for Non-Employee Directors (Appendix B to the Company’s 2007 Proxy Statement on Schedule 14A filed on March 14, 2007, File No. 1-8519).
(10)(iii)(A)(16)	Cincinnati Bell Inc. 2007 Performance Unit Agreement (Exhibit 10 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, File No. 1-8519).
(10)(iii)(A)(17)+	Cincinnati Bell Management Pension Plan effective as of January 1, 1997.
(10)(iii)(A)(17.1)+	Amendment to Cincinnati Bell Management Pension Plan effective as of January 1, 2002.
(10)(iii)(A)(17.2)+	Amendment to Cincinnati Bell Management Pension Plan effective as of May 27, 2003.
(10)(iii)(A)(17.3)+	Amendment to Cincinnati Bell Management Pension Plan effective as of January 1, 1997.
(10)(iii)(A)(17.4)+	Amendment to Cincinnati Bell Management Pension Plan effective as of December 4, 2003.
(10)(iii)(A)(17.5)+	Amendment to Cincinnati Bell Management Pension Plan effective as of August 19, 2004.
(10)(iii)(A)(17.6)+	Amendment to Cincinnati Bell Management Pension Plan effective as of June 1, 2005.

105

Exhibit Number	Description
(10)(iii)(A)(17.7)+	Amendment to Cincinnati Bell Management Pension Plan effective as of March 28, 2005.
(10)(iii)(A)(17.8)+	Amendment to Cincinnati Bell Management Pension Plan effective as of January 1, 2006.
(10)(iii)(A)(17.9)+	Amendment to Cincinnati Bell Management Pension Plan effective as of January 1, 2007.
(10)(iii)(A)(18)	Cincinnati Bell Inc. Form of Stock Option Agreement (Employees) (Exhibit 10.1 to Current Report on Form 8-K, date of Report December 3, 2004, File No. 1-8519).
(10)(iii)(A)(19)	Cincinnati Bell Inc. Form of Cincinnati Bell Inc. Performance Restricted Stock Agreement (Exhibit 10.2 to Current Report on Form 8-K, date of Report December 3, 2004, File No. 1-8519).
(10)(iii)(A)(20)	Cincinnati Bell Inc. Form of Stock Option Agreement (Non-Employee Directors) (Exhibit 10.3 to Current Report on Form 8-K, date of Report December 3, 2004, File No. 1-8519).
(14)	Code of Ethics for Senior Financial Officers, as adopted pursuant to Section 406 of Regulation S-K (Exhibit (10)(iii)(A)(15) to Annual Report on Form 10-K for the year ended December 31, 2003, File No. 1-8519).
(21)+	Subsidiaries of the Registrant.
(23)+	Consent of Independent Registered Public Accounting Firm.
(24)+	Powers of Attorney.
(31.1)+	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31.2)+	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32.1)+	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2)+	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+ Filed herewith.

* Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.

The Company’s reports on Form 10-K, 10-Q, 8-K, proxy and other information are available free of charge at the following website: http://www.cincinnatibell.com. Upon request, the Company will furnish a copy of the Proxy Statement to its security holders without charge, portions of which are incorporated herein by reference. The Company will furnish any other exhibit at cost.

106

Schedule II

CINCINNATI BELL INC.

VALUATION AND QUALIFYING ACCOUNTS

(dollars in millions)

	Beginning of Period		Charge (Benefit) to Expenses			To (from) Other Accounts		Deductions		End of Period
Allowance for Doubtful Accounts
Year 2007	$	15.2	$	15.2		$	—	$	13.3	$	17.1
Year 2006	$	14.3	$	14.0		$	—	$	13.1	$	15.2
Year 2005	$	14.5	$	14.3		$	—	$	14.5	$	14.3
Deferred Tax
Valuation Allowance
Year 2007	$	150.7	$	(10.7	)	$	—	$	—	$	140.0
Year 2006	$	183.9	$	(33.2	)	$	—	$	—	$	150.7
Year 2005	$	144.2	$	39.7		$	—	$	—	$	183.9

107

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CINCINNATI BELL INC.
February 26, 2008	By	/s/ Brian A. Ross
		Brian A. Ross
		Chief Financial Officer
	By	/s/ Kurt A. Freyberger
		Kurt A. Freyberger
		Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature	Title	Date
/s/ John F. Cassidy John F. Cassidy	President, Chief Executive Officer, and Director	February 26, 2008
PHILLIP R. COX* Phillip R. Cox	Chairman of the Board and Director	February 26, 2008
DANIEL J. MEYER* Daniel J. Meyer	Director	February 26, 2008
ALEX SHUMATE* Alex Shumate	Director	February 26, 2008
JOHN M. ZRNO* John M. Zrno	Director	February 26, 2008
BRUCE L. BYRNES* Bruce L. Byrnes	Director	February 26, 2008
MICHAEL G. MORRIS* Michael G. Morris	Director	February 26, 2008
ROBERT W. MAHONEY* Robert W. Mahoney	Director	February 26, 2008

*By:	/s/ John. F. Cassidy	February 26, 2008
	John F. Cassidy
	as attorney-in-fact and on his behalf
	as Principal Executive Officer, President and Chief Executive Officer, and Director

108

EX-10.II.A

Exhibit (10)(ii)(A)

Execution Version

ASSET PURCHASE AGREEMENT

by and among

CINCINNATI BELL ANY DISTANCE INC.

as Buyer

and

EGIX, INC. and

EGIX NETWORK SERVICES, INC.

as Sellers

and

The Sellers’ respective subsidiaries

as Subsidiaries

and

The Sellers’ respective principal shareholders

as Shareholders

November 30, 2007

ARTICLE 1- PRINCIPAL TRANSACTION		1
SECTION 1.1	SALE AND PURCHASE OF PURCHASED ASSETS	1
SECTION 1.2	CASH PURCHASE PRICE AND METHOD OF PAYMENT	1
SECTION 1.3	PURCHASE PRICE ADJUSTMENT	2
SECTION 1.4	PREPARATION OF CLOSING BALANCE SHEET; DISPUTES	2
SECTION 1.5	EARN OUT	3
SECTION 1.6	CLOSING	6
SECTION 1.7	DELIVERIES AT CLOSING	6
SECTION 1.8	ASSUMED LIABILITIES	7
SECTION 1.9	PURCHASE PRICE ALLOCATION	7
SECTION 1.10	NONASSIGNABLE CONTRACTS AND APPROVALS	7
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF SELLERS		8
SECTION 2.1	ORGANIZATION AND GOOD STANDING	8
SECTION 2.2	CAPITALIZATION; OWNERSHIP	8
SECTION 2.3	FINANCIAL STATEMENTS	9
SECTION 2.4	BOOKS AND RECORDS	10
SECTION 2.5	NO UNDISCLOSED LIABILITIES	10
SECTION 2.6	TAXES.	10
SECTION 2.7	NO MATERIAL ADVERSE EFFECT; ABSENCE OF RESTRICTED EVENTS	11
SECTION 2.8	EMPLOYEES; LABOR RELATIONS	11
SECTION 2.9	EMPLOYEE BENEFIT PLANS	11
SECTION 2.10	LEASED REAL PROPERTY AND CO-LOCATION FACILITIES	14
SECTION 2.11	PERSONAL PROPERTY	15
SECTION 2.12	CONDITION OF TANGIBLE PURCHASED ASSETS	15
SECTION 2.13	DISPUTES; LITIGATION	15
SECTION 2.14	AUTHORIZATION AND ENFORCEABILITY; NO CONFLICTS WITH OTHER INSTRUMENTS OR PROCEEDINGS	16
SECTION 2.15	MATERIAL CONTRACTS	16
SECTION 2.16	INTELLECTUAL PROPERTY	16
SECTION 2.17	INSURANCE	17

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SECTION 2.18	CERTAIN RELATIONSHIPS	17
SECTION 2.19	ENVIRONMENTAL MATTERS	17
SECTION 2.20	GOVERNMENTAL AUTHORIZATIONS AND REGULATORY APPROVAL	17
SECTION 2.21	BANK ACCOUNTS	18
SECTION 2.22	PRODUCT AND SERVICE WARRANTIES AND LIABILITIES	19
SECTION 2.23	NO BROKER’S FEES	19
SECTION 2.24	NO OTHER REPRESENTATIONS OR WARRANTIES	19
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF BUYER		19
SECTION 3.1	ORGANIZATION AND STANDING OF BUYER	19
SECTION 3.2	AUTHORIZATION AND ENFORCEABILITY	19
SECTION 3.3	AVAILABLE FUNDS	19
SECTION 3.4	BUYER’S INVESTIGATION AND KNOWLEDGE	19
SECTION 3.5	NO BROKER’S FEES	20
ARTICLE 4 - COVENANTS AND AGREEMENTS		20
SECTION 4.1	CONDUCT PENDING THE CLOSING	20
SECTION 4.2	ACCESS BY BUYER	20
SECTION 4.3	NOTICE OF BREACH OR FAILURE OF CONDITION	20
SECTION 4.4	PUBLICITY	21
SECTION 4.5	REASONABLE EFFORTS	21
SECTION 4.6	SHAREHOLDERS’ REPRESENTATIVE	21
SECTION 4.7	STEVEN L. JOHNS AS SELLERS’ AND SUBSIDIARIES’ REPRESENTATIVE	23
SECTION 4.8	ESCROW AGREEMENT	23
SECTION 4.9	CERTAIN TAX PRORATIONS	24
ARTICLE 5 - CONDITIONS TO OBLIGATION TO CLOSE		25
SECTION 5.1	CONDITIONS TO OBLIGATION OF BUYER	25
SECTION 5.2	CONDITIONS TO OBLIGATION OF SELLERS	26
ARTICLE 6 - TERMINATION		27
SECTION 6.1	TERMINATION EVENTS	27
SECTION 6.2	EFFECT OF TERMINATION	27
ARTICLE 7 - INDEMNIFICATION		27

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SECTION 7.1	INDEMNIFICATION AND REIMBURSEMENT BY SELLERS AND SHAREHOLDERS	27
SECTION 7.2	INDEMNIFICATION AND REIMBURSEMENT BY BUYER	27
SECTION 7.3	INDEMNIFICATION PROCEDURES	28
SECTION 7.4	LIMITATIONS ON INDEMNIFICATION	29
SECTION 7.5	EXCLUSIVE REMEDY	32
ARTICLE 8 - DEFINITIONS		32
ARTICLE 9 - GENERAL		37
SECTION 9.1	SURVIVAL OF REPRESENTATIONS AND WARRANTIES	37
SECTION 9.2	BINDING EFFECT; BENEFITS; ASSIGNMENT	38
SECTION 9.3	ENTIRE AGREEMENT	38
SECTION 9.4	AMENDMENT AND WAIVER	38
SECTION 9.5	GOVERNING LEGAL REQUIREMENT; JURISDICTION AND VENUE	38
SECTION 9.6	NOTICES	39
SECTION 9.7	COUNTERPARTS	40
SECTION 9.8	EXPENSES	40
SECTION 9.9	SEVERABILITY	40
SECTION 9.10	HEADINGS; CONSTRUCTION; TIME OF ESSENCE	40
SECTION 9.11	CERTAIN INFORMATION	40

Exhibits:
Exhibit 1.1	Purchased Assets and Excluded Assets
Exhibit 1.3	Net Working Capital Calculation
Exhibit 1.5(a)(l)	Existing Territories
Exhibit 1.5(a)(2)	National Accounts
Exhibit 1.5(d)(i)(l)	Buyer’s Planned Operational Changes
Exhibit 1.5(d)(i)(2)	eGIX Operating Plan
Exhibit 1.7(a)	Bill of Sale
Exhibit 1.8	Assumed Liabilities and Excluded Liabilities
Exhibit 4.8	Escrow Agreement
Exhibit 5.l(e)	Employment Agreements
Exhibit 5. l(f)	Noncompetition Agreements
Exhibit 5.2(f)	Release of Personal Guaranties

iv

Schedules:
Schedule 2.2(a)	Capitalization; Ownership
Schedule 2.3(a)	Financial Statements
Schedule 2.3(c)	Funded Indebtedness
Schedule 2.6	Taxes
Schedule 2.7	No Material Adverse Effect; Absence of Restricted Events
Schedule 2.8	Employees; Labor Relations
Schedule 2.9(a)	Employee Benefit Plans
Schedule 2.9(k)	Retiree Benefits
Schedule 2.9(m)	Acceleration or Parachute Payment
Schedule 2.10	Leased Real Property and Co-Location Facilities
Schedule 2.11	Personal Property
Schedule 2.13	Disputes; Litigation
Schedule 2.14(a)	Resolutions of Board of Directors of Each of Sellers
Schedule 2.14(b)	No Conflicts with Other Instruments or Proceedings
Schedule 2.15	Material Contracts
Schedule 2.16	Intellectual Property
Schedule 2.18	Certain Relationships
Schedule 2.19	Environmental Matters
Schedule 2.20	Governmental Authorizations and Regulatory Approval
Schedule 2.22	Product and Service Warranties and Liabilities

v

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made as of November 30, 2007, by and among Cincinnati Bell Any Distance Inc., a Delaware corporation (“Buyer”), eGIX, Inc., an Indiana corporation (“eGIX”) and EGIX Network Services, Inc., an Indiana corporation (“ENS” and together with eGIX, the “Sellers” and individually, a “Seller”), and eGIX Network Services of Virginia, Inc., a Virginia corporation (“ENS Virginia”), @Link Networks, Inc., a Washington corporation, and DSL Indiana Acquisitions, LLC, an Indiana limited liability company, all of which are wholly-owned subsidiaries of Sellers (each a “Subsidiary” and collectively, the “Subsidiaries”), and each undersigned shareholder of Sellers (each, a “Shareholder” and collectively, the “Shareholders”). Buyer, Sellers, Subsidiaries and Shareholders are sometimes referred to individually in this Agreement as a “Party” and collectively as the “Parties.” All other capitalized terms used and not otherwise defined in this Agreement have the meanings set forth in Article 8 of this Agreement.

eGIX, through ENS and ENS Virginia, is a facilities based registered competitive local exchange carrier that offers managed internet protocol solutions to small and medium sized enterprises primarily located in the Midwest, including internet protocol voice and data services, high-speed internet access, local line services, information technology services and business applications and messaging services (the “Business”). The Shareholders collectively own more than 95% of the issued and outstanding capital stock of each Seller. Buyer desires to purchase from Sellers and Subsidiaries, and Sellers and Subsidiaries desire to sell to Buyer, substantially all of the assets, and assume certain liabilities, of the Sellers and Subsidiaries on the terms and subject to the conditions set forth in this Agreement.

Accordingly, the Parties agree as follows:

ARTICLE 1 - PRINCIPAL TRANSACTION

Section 1.1 Sale and Purchase of Purchased Assets. On the terms and subject to the conditions of this Agreement, Sellers and Subsidiaries agree to sell and transfer to Buyer free and clear of all Encumbrances, and Buyer agrees to purchase from Sellers and Subsidiaries, the assets of the Sellers and Subsidiaries that are used by the Sellers and Subsidiaries in the operation of the Business described on Exhibit 1.1 as “Purchased Assets” (collectively, the “Purchased Assets”). Notwithstanding anything herein to the contrary, the Sellers and Subsidiaries are not selling, transferring, conveying, assigning or delivering to Buyer the assets described on Exhibit 1.1 as “Excluded Assets” (collectively, the “Excluded Assets”).

Section 1.2 Cash Purchase Price and Method of Payment. In consideration of the transfer of the Purchased Assets to Buyer and the other undertakings set forth in this Agreement, at the Closing Buyer will pay to Sellers, by wire transfer of immediately available funds to an account designated by Sellers, an aggregate amount of $18,000,000 (the “Cash Purchase Price”), less an amount sufficient to pay the Funded Indebtedness in accordance with Section 1.7(c), subject to adjustment as provided in Section 1.3 below. In addition, Buyer will pay to Sellers $4,495,000 (subject to adjustment as provided in Section 1.5 below) payable over two years, all

in accordance with the provisions of Section 1.5 below (the “Earn Out” or “Earnout”). The Earn Out and the Cash Purchase Price, together will be referenced to herein as the “Purchase Price.”

Section 1.3 Purchase Price Adjustment. The Cash Purchase Price will be increased or decreased on a dollar-for-dollar basis to the extent that Sellers’ Net Working Capital on the Final Closing Balance Sheet (the “Closing Net Working Capital”) is greater than $325,000 (the “Maximum Net Working Capital”) or less than $75,000 (the “Minimum Net Working Capital”), respectively. Sellers and Buyer acknowledge and agree that the calculation of Closing Net Working Capital should be performed in a similar manner as the calculation of Net Working Capital as of September 30, 2007 included in Exhibit 1.3. The difference that results from the Closing Net Working Capital minus the Maximum Net Working Capital will be paid by Buyer to Sellers if such difference is a positive amount. The difference that results from the Closing Net Working Capital minus the Minimum Net Working Capital will be paid by Sellers to Buyer if such difference is a negative amount. Payment shall be made within two business days by wire transfer to an account designated by the applicable Party following the date that the Closing Balance Sheet becomes final, conclusive and binding on the Parties under Section 1.4.

Section 1.4 Preparation of Closing Balance Sheet; Disputes.

(a) Within sixty (60) days after the Closing Date, Buyer will prepare and deliver to eGIX a balance sheet of Sellers (with respect to the Purchased Assets and Assumed Liabilities) as of the Closing Date (the “Closing Balance Sheet”), which will be prepared in accordance with GAAP. eGIX will have the opportunity to review the Closing Balance Sheet for thirty (30) days after the Closing Balance Sheet is delivered by Buyer (the “Review Period”). During the Review Period, Buyer will provide to eGIX and its representatives reasonable access to all information, including accountant work papers, to enable eGIX to review the Closing Balance Sheet. The Closing Balance Sheet will be final, conclusive and binding on the Parties unless, prior to the end of the Review Period, eGIX notifies Buyer in writing of Sellers’ objections to the Closing Balance Sheet, specifically identifying the disputed items, the amounts or estimated amounts of the disputed items and the basic facts underlying Sellers’ objections. If eGIX provides a timely notice of objections to the Closing Balance Sheet, the Parties will try in good faith to resolve the objections among themselves within thirty (30) days after the delivery of the objection notice by eGIX.

(b) If the Parties resolve the objections within that time period, they will promptly record their resolution in a writing signed by each of them, and the resolution will be final, conclusive and binding on each of them. If the Parties are unable to resolve the objections within that time period, the Parties will refer any disputed matter to Deloitte & Touche, or if Deloitte & Touche is unwilling or unable to serve as arbitrator (because it has a professional business relationship with one of the Parties or their respective Affiliates or otherwise) and the Parties are unable to agree on another independent accounting firm to resolve the dispute, then Buyer and eGIX will each designate one nationally recognized independent accounting firm with whom the designating Party and its Affiliates has no current

2

professional relationship, and the accounting firm that will resolve the dispute will be chosen by lot. Buyer and Sellers, will each pay one-half of the fees and expenses of such accounting firm incurred in resolving their dispute. The accounting firm will act as a neutral arbitrator, and to the extent GAAP leaves room for discretion, will exercise that discretion independently, but within the range of the differences between the Parties. The Parties will be afforded an opportunity to present to the accounting firm their positions and such materials as they deem appropriate or as the accounting firm may request. The accounting firm will be instructed to resolve the disputed matters within sixty (60) days following its engagement, or as soon thereafter as is practicable, and their written resolution will be final, conclusive and binding on the Parties.

(c) The Closing Balance Sheet, in the form that is final, conclusive and binding on the Parties hereunder, is referred to in this Agreement as the “Final Closing Balance Sheet.”

Section 1.5 Earn Out. For purposes of this Section 1.5, the terms listed below have the following meanings. Other capitalized but underlined terms not listed below are defined elsewhere in this Agreement.

(a) Definitions:

“Business Revenue” All sales generated by the continued operation of the Business, including, without limitation, revenue arising from (i) the operation of the Purchased Assets, and/or (ii) the sales efforts of any sales personnel operating under the supervision of Senior Management. Business Revenue includes sales to both the direct and the indirect sales channels. Notwithstanding the foregoing, Business Revenue shall include seventeen and one-half percent (17.5%) of (x) revenue attributable to sales to National Accounts (defined below) and (y) revenue generated through, or as a result of, new sales channels or new sales representatives and/or resources added by Buyer (and, accordingly, 82.5% of all revenue described in clauses (x) and (y) shall be excluded from any calculation of Business Revenue). Further, Business Revenue shall not include (1) any sales to customers that do not utilize the eGIX network or platform (except that sales from IT consulting services provided to customers that do not utilize the eGIX network or platform shall be included in Business Revenue unless otherwise excluded in this paragraph), (2) any sales to wholesale customers other than sales to entities that are eGIX customers at the Closing, (3) any sales to non-wholesale customers generated in any territory not identified on Exhibit 1.5(a)(l), or (4) any sales resulting from the acquisition of assets, operations or business of a third party

“National Accounts” Those customer accounts of Buyer listed on Exhibit 1.5(a)(2).

“Senior Management” Steven L. Johns, James Kinnett and Andrew G. Gorogiani or their successors.

3

“First Period” The twelve (12) consecutive months commencing on the first day of the first fiscal quarter to begin after the Closing Date but not less than thirty (30) days after the Closing Date.

“Second Period” The twelve (12) consecutive months immediately following the last day of the First Period.

“First Period Hurdle” $17,000,000 (85% of $20,000,000).

“Second Period Hurdle” $20,700,000 (90% of $23,000,000).

“First Period Target” $20,000,000.

“Second Period Target” $23,000,000

“First Period Payment Goal” $2,000,000.

“Second Period Payment Goal” $2,495,000.

“First Period Maximum Payment Amount” $2,300,000 (115% of the First Period Payment Goal.)

“Second Period Maximum Payment Amount” $2,869,250 (115% of the Second Period Payment Goal.)

“Earnout Payment Percentage” The percent which is the quotient of dividing the Business Revenue in either the First or Second Period by that Period’s Target Amount.

“Target Earnout Consideration” $4,495,000.

(b) Calculation.

(i) In the event Business Revenue during the First Period is equal to or greater than the First Period Hurdle, Buyer shall pay to Sellers an amount equal to the product of the Earnout Payment Percentage times the First Period Payment Goal, up to an amount equal to the First Period Maximum Payment Amount.

(ii) The same manner of calculation applies to the Second Period.

For purposes of illustration:

If Business Revenue in the First Period is $19,000,000, the Earnout Payment Percentage is 95%, which is multiplied by the First Period Payment Goal, which is $2,000,000, yielding a payment of $1,900,000.

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If Business Revenue in the First Period is $21,000,000 the Earnout Payment Percentage is 105%, which is multiplied by the First Period Payment Goal, which is $2,000,000, yielding a payment of $2,100,000.

In the event the First Period Hurdle is not achieved, and the Second Period Target is exceeded, Sellers may, at their option, elect to carry back to the First Period all or some portion of any excess over the Second Period Target and add such excess amount to the calculation of the First Period Business Revenue (the amount carried back and added to the First Period Business Revenue is referred to as the “Carry-Back Revenue”), as though the Carry-Back Revenue were earned during the First Period, and Buyer’s Earnout payment for the First Period shall be recalculated as provided in this Section 1.5(b); provided, however, that the Carry-Back Revenue shall then be excluded from the calculation of the Second Period Business Revenue, as though the Carry-Back Revenue were not earned in the Second Period.

(c) Payment. Each Earnout payment under this Section 1.5 shall be paid within 60 days after the end of each of the First and Second Periods, respectively (any First Period Payment that would be due as a result of Carry- Back Revenue will be made within sixty (60) days of the end of the Second Period); provided, however, that if the remaining balance of the Escrow Fund is distributed to the Sellers’ Liquidating Trust prior to April 30, 2009 pursuant to Section 4.8(c)(i) hereof, Buyer may withhold from the First Period Earn Out payment $250,000 plus an amount sufficient to satisfy any then-pending Indemnification Claim(s) previously asserted by Buyer, provided further, that all such withheld amounts shall be paid by Buyer to the Sellers’ Liquidating Trust not later than April 30, 2009, except for such amounts (if any) as shall be necessary to satisfy any Indemnification Claim(s) asserted by Buyer on or before April 30, 2009. Each Earnout payment shall be accompanied by a statement detailing Buyer’s calculation of Business Revenue and the resulting Earnout payment. In the event eGIX notifies Buyer within 30 days of its receipt of any such payment that it objects to Buyer’s calculation made pursuant to this Section 1.5, Buyer and eGIX shall negotiate in good faith for a period not to exceed 30 days to resolve any such dispute. If Buyer and eGIX are unable to reach an agreement within such time, they shall follow the procedures set forth in Section 1.4(b) respecting the submission of the dispute to, and final and binding resolution by, an independent accounting firm.

(d) Change of Circumstances. Buyer acknowledges that the possibility of Sellers receiving the Earnout payments described above comprises a material inducement for Sellers to enter into and perform this Agreement. Accordingly Buyer agrees it shall:

(i) Except for Buyer’s planned operational changes described on Exhibit 1.5(d)(i)(l), conduct the Business in substantially the same manner as previously conducted by Sellers (the “Previous Operations”)

5

and in accordance with Sellers’ operating plan attached as Exhibit 1.5(d)(i)(2) (the “eGIX Operating Plan”).

(ii) Make capital expenditures and provide working capital necessary for the operation of the Business, in amounts consistent with the eGIX Operating Plan, subject to possible adjustments in the accounting treatment of certain expense items to conform to Buyer’s standard accounting practices.

(iii) Offer employment to Steven L. Johns (“Johns”) throughout the Earnout Period on the terms and subject to the conditions set forth in Johns’ Employment Agreement unless Johns’ employment thereunder is terminated prior to the expiration of the Earnout Period for “cause” (as defined in Johns’ Employment Agreement) or due to a “terminating disability” (as defined in Johns’ Employment Agreement) or due to the death or resignation of Johns.

(iv) Calculate Business Revenue in a manner which is consistent with Sellers’ Previous Operations.

(v) After the liquidation of Sellers, pay any amounts due to Sellers to the Sellers’ Liquidating Trust.

(vi) Buyer shall have the right to offset any amounts due to Sellers under Section 1.5 herein for any claim made by Buyer pursuant to Article 7.

In the event Buyer does not comply in any material respect with the terms of this Section 1.5(d), and Buyer fails to cure any such non-compliance within 60 days after receiving written notice from eGIX specifying such noncompliance, the Target Earnout Consideration shall immediately be paid to Sellers, less the amount of any Earnout payments previously made by Buyer to Sellers.

Section 1.6 Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) will take place at the offices of Barnes & Thornburg LLP, 11 South Meridian Street, Indianapolis, Indiana 46204-3535, at 10:00 a.m., local time, on the last day of the calendar month in which all of the conditions precedent set forth in Article 5 of this Agreement have been fulfilled or waived, or at such other date or time as may mutually be agreed by the Parties.

Section 1.7 Deliveries at Closing.

(a) At the Closing, Sellers and Subsidiaries will execute and/or deliver to Buyer (i) the Bill of Sale, general assignment and assumption agreement in the form attached as Exhibit 1.7(a) (the “Bill of Sale”); and (ii) the various other agreements, certificates, instruments and documents referred to in Section 5.1.

6

(b) At the Closing, Buyer will execute and/or deliver to Sellers and Subsidiaries (i) the Purchase Price (less an amount sufficient to pay all Funded Indebtedness in full accordance with Section 1.7(c)); (ii) the Bill of Sale; and (iii) the various other agreements, certificates, instruments and documents referred to in Section 5.2.

(c) At or prior to the Closing (i) Sellers will provide Buyer with customary pay-off letters from all holders of Funded Indebtedness and make arrangements for such holders to provide to Buyer appropriate releases of Encumbrances prior to the Closing, and (ii) Buyer will deliver to the holders of the Funded Indebtedness an amount sufficient to repay all such Funded Indebtedness in full. “Funded Indebtedness” shall have the meaning as stated in Schedule 2.3(c)

(d) The Parties each agree, upon the reasonable request of the other, to take all such further actions and to execute and deliver all such further documents on or after the Closing Date as may be necessary or appropriate to confirm or effectuate the transactions contemplated by this Agreement.

Section 1.8 Assumed Liabilities. At the Closing Buyer shall assume and agrees to timely discharge and perform the liabilities and obligations of Sellers and Subsidiaries described on Exhibit 1.8 as “Assumed Liabilities” (collectively, the “Assumed Liabilities”). Buyer does not assume or agree to discharge or perform the liabilities and obligations of Sellers or Subsidiaries described on Exhibit 1.8 as “Excluded Liabilities” (collectively, the “Excluded Liabilities”).

Section 1.9 Purchase Price Allocation. Sellers and Buyer shall use good faith efforts to establish, within thirty (30) days after the date hereof, a mutually agreeable preliminary allocation of the Purchase Price and Assumed Liabilities among the Purchased Assets, which preliminary allocation shall include the tax and accounting principles, and proposed treatment of asset and liability categories, upon which the final allocation shall be based (the “Preliminary Purchase Price Allocation”). Within forty-five (45) days after the Closing, Sellers and Buyer shall agree to a final allocation of the Purchase Price and Assumed Liabilities, which shall be consistent with the Preliminary Purchase Price Allocation (the “Final Purchase Price Allocation”). Sellers and Buyer shall prepare and complete all of their respective Returns (including IRS Form 8594) on a basis consistent with the Final Purchase Price Allocation and shall not take a position before any Governmental Body that is in any way inconsistent with the Final Purchase Price Allocation.

Section 1.10 Nonassignable Contracts and Approvals. To the extent that any Applicable Contract or Governmental Authorization is not capable of being assigned, transferred, subleased or sublicensed without the consent or waiver of the issuer thereof or the other party thereto or any third party, or if such assignment, transfer, sublease or sublicense (the “Assignment”) would constitute a breach thereof or a violation of any Legal Requirement, this Agreement shall not constitute any Assignment thereof or any attempted Assignment thereof, unless and until such consent or waiver of such issuer or other party or parties has been duly obtained or such Assignment has otherwise become lawful. To the extent that any such consent or waiver does not constitute a condition to the Closing as provided in Section 5.1 hereof, or if

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such consent or wavier does constitute a condition to the Closing but has been waived by Buyer, and such consent or waiver is not obtained by the Sellers before the Closing, then after the Closing and until the impracticalities of Assignment are resolved, (i) the Sellers shall cause commercially reasonable efforts to provide or cause to be provided to Buyer the benefits of any such Applicable Contract or Governmental Authorization, and (ii) Buyer shall use commercially reasonable efforts to perform the obligations of the Sellers arising under such Applicable Contract or Governmental Authorization.

ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF SELLERS

Sellers and Shareholders, jointly and severally, represent and warrant to Buyer as follows:

Section 2.1 Organization and Good Standing. Each Seller and each Subsidiary is a corporation or limited liability company duly organized and validly existing under the laws of the state of its incorporation or organization, with all requisite corporate or limited liability company power and authority to conduct the Business as is now being conducted and to own or use the properties and assets that it purports to own or use. Each Seller and each Subsidiary is duly qualified to do business as a foreign corporation or foreign limited liability company and is in good standing in each state or other jurisdiction in which either the ownership or use of the properties owned or used by it or the nature of the activities conducted by it requires such qualification, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Copies of the Organizational Documents have been made available to Buyer.

Section 2.2 Capitalization; Ownership.

(a) The authorized capital stock, as well as the issued and outstanding stock, of each Seller is as set forth in Schedule 2.2(a) There are no other authorized classes or series of capital stock or other equity securities of either Seller than as included in Schedule 2.2(a). All of the Shares were validly issued, are fully paid and nonassessable, and were not issued in violation of any preemptive or similar rights of any shareholder. No former or current shareholder of either of the Sellers or any other Person has contested, is contesting or has a valid basis for contesting the ownership of any of the Shares. Except as set forth Schedule 2.2(a) there are no warrants, options, calls, puts, rights of first refusal or first offer, registration rights, convertible Securities or other Securities or Contracts obligating either of the Sellers to issue or sell any shares of capital stock or otherwise restricting the sell or transfer of any of the Shares. Shareholders collectively own, beneficially and of record, all of the Shares free and clear of all Encumbrances.

(b) The authorized capital stock, as well as the issued and outstanding stock, of each Subsidiary is as set forth below:

Name of Subsidiary	Share Description	Authorized Shares	Outstanding Shares
@Link Networks, Inc.	Common	1,000	1,000
eGIX Network Services of Virginia, Inc.	Common	100,000	100,000

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DSL Indiana Acquisitions, LLC Membership Interests 1,000 1,000

There are no other authorized classes or series of capital stock or other equity securities of any Subsidiary. Except as set forth above, neither Seller nor any Subsidiary owns or has any right to acquire any equity interest in any other Person. All of the shares of common stock or other equity securities of the Subsidiaries were validly issued, are fully paid and nonassessable, and were not issued in violation of any preemptive or similar rights of any shareholder or member. No former or current shareholder or member of any Subsidiary or any other Person has contested, is contesting or has a valid basis for contesting the ownership of any of the shares of capital stock or membership interests of any Subsidiary. There are no warrants, options, calls, puts, rights of first refusal or first offer, registration rights, convertible Securities or other Securities or Contracts obligating any of the Subsidiaries to issue or sell any shares of capital stock or membership interests or otherwise restricting the sell or transfer of any shares of capital stock or membership interests of any Subsidiary. eGIX owns, beneficially and of record, all of the outstanding capital units of DSL Indiana Acquisitions, LLC free and clear of all Encumbrances and ENS owns, beneficially and of record, all of the outstanding capital stock of eGIX Network Services of Virginia, Inc. and @Link Networks, Inc. free and clear of all Encumbrances.

Section 2.3 Financial Statements.

(a) Copies of the audited financial statements for the Sellers and the Subsidiaries at and for the fiscal years ended December 31, 2004, 2005 and 2006, together with the notes thereto and the report thereon of Ent & Imler, independent certified public accountants, are attached to Schedule 2.3(a) (the “Financial Statements”). Also attached to Schedule 2.3(a) are copies of the interim consolidated balance sheet and interim consolidated statements of income and cash flows of the Sellers and the Subsidiaries at and for the 9-month period ended September 30, 2007, each prepared internally by the Sellers (the “Interim Financial Statements”). The Financial Statements present fairly in all material respects the financial condition of the Sellers and the Subsidiaries, on a consolidated basis, at the dates indicated and the Sellers’ and the Subsidiaries’ consolidated results of operations for the periods then ended, all in accordance with GAAP (except as may be otherwise stated in the Financial Statements including the notes thereto). The Interim Financial Statements present fairly in all material respects the financial condition of the Sellers and the Subsidiaries, on a consolidated basis, at and for the 9-month period ended September 30, 2007, all in accordance with GAAP and consistent with the Sellers’ standard accounting practices with respect to interim financial statements, which practices conform in all material respects to the practices used to prepare the Financial Statements (except as set forth in Schedule 2.3(a) and except for normal year-end adjustments and the absence of notes).

(b) Not less than five (5) calendar days prior to the Closing Date, Sellers will provide to Buyer an interim consolidated balance sheet and interim

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consolidated statements of income and cash flows of the Sellers and the Subsidiaries at and for the period ended the most recent month-end prior to the Closing Date for purposes of establishing eGIX’s EBITDA for the trailing 12-months then ended. Such interim financial statements will fairly present in all material respects the financial condition of Sellers and the Subsidiaries, on a consolidated basis at and for the period ended at such month-end, all in accordance with Sellers’ standard financial practices with respect to interim financial statements, which practices will conform in all material respects to the practices used to prepare the Financial Statements and the Interim Financial Statements (except as set forth on Schedule 2.3(a) and except for normal year-end adjustments and the absence of footnotes.)

(c) Schedule 2.3(c) sets forth the outstanding balance of all Funded Indebtedness of the Sellers and the Subsidiaries, which includes all capital leases, and identifies the holders of such Funded Indebtedness.

Section 2.4 Books and Records. All books of account, minute books, stock record books and other records of each Seller and each Subsidiary have been made available to Buyer, are complete and correct in all material respects, and have been maintained in accordance with sound business practices. As of the Closing Date, all of these books and records will be in the possession of a Seller or a Subsidiary, as applicable.

Section 2.5 No Undisclosed Liabilities. Neither Seller nor any Subsidiary has any liability or obligation (whether known or unknown and whether absolute, accrued, contingent or otherwise) of a nature required under GAAP to be recorded on financial statements, except for liabilities or obligations (a) reflected on, accrued for, reserved against or otherwise provided for in the Financial Statements or the Interim Financial Statements, (b) relating to transactions disclosed in or contemplated by this Agreement (including the Disclosure Schedule) or (c) incurred in the Ordinary Course of Business since the date of the Interim Financial Statements that individually and in the aggregate have not had and are not reasonably expected to have a Material Adverse Effect.

Section 2.6 Taxes. Except as set forth on Schedule 2.6, all Returns required to be filed by either Seller or any Subsidiary for any period ending on or before the date of this Agreement have been filed within the times and in the manner prescribed by applicable Legal Requirements. Each such Return is complete and accurate in all material respects and properly reflects all Taxes required to be reflected as due and owing thereon. Neither Seller nor any Subsidiary has requested an extension to file any Return that has not been filed prior to the date hereof. Each Seller and each Subsidiary have paid, or caused to be paid, all Taxes reflected on such Returns as due and owing by them. To Sellers’ Knowledge there are no audits of or other Proceedings pending with respect to any Returns, and no jurisdiction in which either Seller or any Subsidiary does not file a Return has made a claim that a Return be filed in its jurisdiction. Neither Seller nor any Subsidiary is a party to any Tax-sharing agreement or similar arrangement that will survive the Closing. Sellers have made available to Buyer copies of (a) all Returns regarding all open years and any amendments thereto, (b) all audit or examination reports or written proposed adjustments received from any Governmental Body during the last three years relating to any Return and (c) any closing agreements, extensions or statute of limitation waivers entered into by

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either Seller or any Subsidiary during the last three years with any Governmental Body regarding Taxes. All monies required to be collected, withheld and/or remitted by each Seller and the Subsidiaries for any Taxes have been collected, withheld and/or remitted in accordance with applicable law.

Section 2.7 No Material Adverse Effect; Absence of Restricted Events. Since the date of the Interim Financial Statements, except as set forth on Schedule 2.7 or as is contemplated by this Agreement: (a) the Sellers and the Subsidiaries have conducted their operations and affairs only in the Ordinary Course of Business; (b) no event has occurred that has had or is reasonably expected to have a Material Adverse Effect; and (c) no Restricted Event has occurred.

Section 2.8 Employees; Labor Relations.

(a) Schedule 2.8 sets forth the following information for each employee of each Seller and each Subsidiary: name; hire date; job title; current compensation paid or payable; FLSA exempt or nonexempt status; vacation or other paid time off accrued; state in which employed and (if different) state of residence; and service credited for purposes of vesting and eligibility to participate under any Employee Benefit Plan.

(b) Except as set forth on Schedule 2.8, neither Seller nor any Subsidiary is a party to any collective bargaining or other similar labor Contract and to Sellers’ Knowledge there is no pending application for certification of a collective bargaining agent.

(c) Except as set forth on Schedule 2.8, the Sellers and the Subsidiaries have complied with all Legal Requirements relating to employment, termination of employment, leaves of absence, equal employment opportunity, nondiscrimination, accommodation of disabilities, affirmative action, immigration, child labor, wages, hours, benefits, collective bargaining, the payment of social security, unemployment and similar Taxes, other payroll Taxes, occupational safety and health, workers’ compensation and plant closing or layoffs, except for failures to comply with such Legal Requirements that would not reasonably be expected to have a Material Adverse Effect.

(d) Except as set forth on Schedule 2.8, neither Seller nor any Subsidiary is a party to any written or, to Sellers’ Knowledge, oral Contract with any present or former director, officer, employee or consultant with respect to length, duration, terms or conditions of employment or independent contractor status that is not terminable by a Seller or a Subsidiary, as applicable, on thirty days’ or less notice without liability resulting from such termination.

Section 2.9 Employee Benefit Plans.

(a) Identification. Schedule 2.9(a) contains a complete and accurate list of all Employee Benefit Plans. Sellers have provided to Buyer copies of all plan documents, determination letters, pending determination letter applications, trust instruments, insurance contracts, administrative services contracts, annual

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reports and all schedules thereto, actuarial valuations, summary plan descriptions, summaries of material modifications, administrative forms and other documents that constitute a part of or are incident to the administration of the Employee Benefit Plans. In addition, Sellers have provided to Buyer a written description of all existing practices engaged in by any of the Sellers or the Subsidiaries that constitute Employee Benefit Plans. Subject to the requirements of the Code and ERISA, each of the Employee Benefit Plans can be terminated or amended at will by the Sellers or the Subsidiaries with no penalty, acceleration of vesting (other than as required by Section 411(d)(3) of the Code in connection with a termination or partial termination of any plan intended to qualify under Section 401 (a) of the Code) or required payment. No unwritten amendment exists with respect to any Employee Benefit Plan.

(b) Administration. Each Employee Benefit Plan has been administered and maintained in compliance with its terms and with all applicable Legal Requirements. The Sellers and the Subsidiaries have made all necessary filings, reports and disclosures with respect to all applicable Employee Benefit Plans.

(c) Examinations. None of the Sellers nor the Subsidiaries have received any notice that any Employee Benefit Plan is currently the subject of an audit, investigation, enforcement action or other similar proceeding conducted by any Government Body and no such audit, investigation, action or proceeding is threatened.

(d) Prohibited Transactions. No prohibited transactions (within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA) have occurred with respect to any Employee Benefit Plan, and none of the Sellers, the Subsidiaries or the Sellers have engaged in any prohibited transaction.

(e) Claims and Litigation. No pending or threatened, claims, suits or other proceedings exist with respect to any Employee Benefit Plan other than routine benefit claims filed by participants or beneficiaries. No assets of Sellers nor any member of a controlled group of businesses (within the meaning of Section 412(n)(6)(B) of the Code) in which any of the Sellers is a member (a “Controlled Group”) are subject to a lien with respect to any Employee Benefit Plan under applicable provisions of the Code and ERISA.

(f) Qualification. Each Employee Benefit Plan intended to qualify under Section 401(a) of the Code is and, since its inception, has been so qualified and a determination letter, opinion notification, or advisory letter has been issued by the IRS to the effect that each such Employee Benefit Plan is so qualified and that each trust forming a part of any such Employee Benefit Plan is exempt from tax pursuant to Section 501(a) of the Code and no circumstances exist which would adversely affect such qualification or exemption. No Employee Benefit Plan is funded by a trust described in Section 501(c)(9) of the Code.

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(g) Funding Status. All payments required by any Employee Benefit Plan or by any agreement or by law (including, without limitation, all contributions, insurance premiums and inter-company charges) with respect to all periods through the Closing Date shall have been made prior to the Closing Date (on a pro-rata basis where such payments are otherwise discretionary at year end). None of the Sellers nor the Subsidiaries have any unfunded or underfunded liabilities pursuant to any Employee Benefit Plan that is not intended to be qualified under Section 402(a) of the Code, except as otherwise reflected in the Financial Statements.

(h) Excise Taxes. None of the Sellers nor any member of a Controlled Group with any of the Sellers has any liability, direct or indirect, to pay excise taxes with respect to any Employee Benefit Plan under applicable provisions of the Code or ERISA.

(i) Multi-Employer Retirement Plans. None of the Sellers nor any member of a Controlled Group with any of the Sellers is or ever has been obligated to contribute to a Multi-Employer Retirement Plan and during the last six years has not incurred any withdrawal liability.

(j) PBGC. None of the Employee Benefit Plans is subject to the requirements of Section 302 or Title IV of ERISA or Section 412 of the Code.

(k) Retirees. Except as set forth in Schedule 2.9(k) none of the Sellers nor any of the Subsidiaries have any obligation or commitment to provide medical, dental, life or other welfare insurance benefits to or on behalf of any of its employees who may retire or terminate employment or any of its former employees who have retired or terminated employment except as may be required pursuant to the continuation of coverage provisions of Section 4980B of the Code and Sections 601 through 608 of ERISA. No event, circumstance or condition exists that would prevent or hinder the Sellers or any of the Subsidiaries from unilaterally amending or terminating the Employee Benefit Plans without penalty or liability.

(1) No Commitments. There is no plan or commitment, whether legally binding or not, to establish any new Employee Benefit Plan, or to modify or to terminate any Employee Benefit Plan (except to the extent required by law or as required by this Agreement), nor has any intention to do any of the foregoing been communicated to any employee of the Sellers or the Subsidiaries.

(m) No Acceleration and No Excess Parachute Payment. Except as required in connection with qualified plan amendments required by tax law changes, the vesting of accrued benefits under any Employee Benefit Plan intended to qualify under Section 401 (a) of the Code as a result of termination of that plan or as disclosed on Schedule 2.9(m), the consummation of the transactions contemplated by this Agreement will not: (1) accelerate the time of payment or vesting, or increase the amount, of compensation due to any

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employee, officer, former employee or former officer of the Sellers or the Subsidiaries; or (2) result in the triggering or imposition of any restrictions or limitations on the right of the Sellers and the Subsidiaries or the Buyer to amend or terminate any Employee Benefit Plan. No amount that will be received (whether in cash or property or vesting of property), or benefit provided to, any officer, director or employee of the Sellers or the Subsidiaries who is a “disqualified individual” (as such term is defined in proposed Treasury Regulation 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or benefit plan currently in effect as a result of the transactions contemplated by this Agreement will be an “excess parachute payment” (as such term is defined in section 280G(b)(l) of the Code) solely as a result of the transactions contemplated by this Agreement; and no such person is entitled to receive any additional payment from the Sellers or the Subsidiaries in the event that the excise tax of Section 4999(a) of the Code is imposed on such person.

(n) COBRA. With respect to each Employee Benefit Plan that provides healthcare coverage, the Sellers and the Subsidiaries have complied with: (a) the applicable healthcare continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), and the applicable COBRA regulations; and (b) the applicable requirements of the Health Insurance Portability and Accountability Act of 1996 and the regulations thereunder. None of the Sellers nor the Subsidiaries have incurred any liability under Sections 4980B or 4980C of the Code.

(o) 409A Compliance. Each Employee Benefit Plan that is a “nonqualified deferred compensation plan” (as defined under Section 409A(d)(l) of the Code) complies with and has been operated and administered in good faith compliance with the applicable requirements of Section 409A of the Code, including any regulations promulgated in proposed or final form and other guidance issued thereunder (“409A Requirements”) from the period beginning January 1, 2005 through the date hereof (or, if earlier, December 31, 2007), and from and after January 1, 2008, in compliance with the final regulations issued thereunder. To the extent amounts were deferred and vested (as defined under Section 409A) under any such plan prior to January 1, 2005, the plan under which the deferral is made either: (a) has not been materially modified since October 2, 2004; or (b) has been operated in compliance with the 409A Requirements and will be amended consistent with the 409A Requirement on or before the Closing (or, if earlier, December 31, 2007).

Section 2.10 Leased Real Property and Co-Location Facilities.

(a) Schedule 2.10 lists all leases of real property by either Seller or any Subsidiary including (i) corporate offices in Carmel, Indiana, (ii) caged equipment site in Indianapolis, Indiana, (iii) offices in Bloomington, Indiana, (iv) equipment sites located in Champaign, Illinois, (v) various central office co-location facilities and (vi) various warehouse and equipment sites (individually a

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“Real Property Lease” and collectively the “Real Property Leases,” and with respect to the underlying real property the “Leased Real Property”). Sellers have made available to Buyer a copy of each Real Property Lease. Neither Seller nor any Subsidiary owns any real property.

(b) The Sellers and Subsidiaries’ use and enjoyment of the premises and operation of the Business under the Real Property Leases conform in all material reports to applicable zoning codes, ordinances, regulations and laws. To Sellers’ Knowledge, the premises under the Real Property Leases are not encumbered by any outstanding building orders and do not violate any subdivision, safety, health, accessibility, or other codes, ordinances, rules and regulations of city, county, state and/or federal authorities. To Sellers’ Knowledge, there does not exist any condition or circumstance that would have a Material Adverse Effect on the continued use and enjoyment of the premises and operation of the Business by Buyer after the Closing in the manner currently used and operated by the Seller and the Subsidiaries.

Section 2.11 Personal Property. Schedule 2.11 includes a list of all tangible personal property (other than inventory) owned by either Seller or any Subsidiary that has a current book value in excess of $10,000 (the “Owned Personal Property”), all of which is owned free and clear of all Encumbrances except as set forth on Schedule 2.11. Except as set forth on Schedule 2.11, all Owned Personal Property will be in the possession of a Seller or a Subsidiary on the Closing Date. Schedule 2.11 sets forth a list of personal property leased by or to either Seller or any Subsidiary with aggregate lease payments during the remaining term of the lease in excess of $10,000 (each a “Personal Property Lease”). Sellers have made available to Buyer a copy of each Personal Property Lease.

Section 2.12 Condition of Tangible Purchased Assets. Except as set forth in Sections 2.10 and 2.11, all of the tangible Purchased Assets will be transferred to Buyer on an “AS IS, WHERE IS” basis. SELLERS MAKE NO, AND EXPRESSLY DISCLAIM ANY, WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE TANGIBLE PURCHASED ASSETS, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

Section 2.13 Disputes; Litigation.

(a) Except as set forth on Schedule 2.13, there is no Proceeding or Order pending or, to Sellers’ Knowledge threatened, against either Seller or any Subsidiary or any of their respective assets or properties that would reasonably be expected to have a Material Adverse Effect or prevent or delay the timely consummation of the transactions contemplated by this Agreement.

(b) Schedule 2.13 includes detail of unresolved and actively disputed charges assessed against Seller by telecommunications services vendors for the specific listed telecommunications services (“Disputes”). Sellers are responsible to pursue the resolution of Disputes prior to Closing, provided that Sellers shall not agree to any resolution that imposes any

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liability or obligation on Buyer after the Closing without Buyer’s prior written approval, which approval may be granted or withheld in Buyer’s sole discretion.

Section 2.14 Authorization and Enforceability; No Conflicts with Other Instruments or Proceedings

(a) Sellers have full power and authority to enter into and perform this Agreement and to carry out the transactions contemplated by this Agreement. This Agreement is binding upon each Seller and is enforceable against each Seller in accordance with its terms. Schedule 2.14(a) is a copy of the resolutions of the Board of Directors and shareholders of each of Sellers authorizing this Agreement.

(b) Except as set forth on Schedule 2.14(b), the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement will not (i) contravene the Organizational Documents; (ii) result in a breach of, or constitute a default under, or result in the early termination of any Material Contract, except for any such breach or default that would not reasonably be expected to have a Material Adverse Effect; (iii) violate any Legal Requirement or Order applicable to any Seller, either Seller or any Subsidiary; or (iv) result in any Encumbrance being created or imposed upon any of the property or assets owned, leased or used by either Seller or any Subsidiary that are material to the Business.

Section 2.15 Material Contracts. Schedule 2.15 lists each Material Contract to which either Seller or any Subsidiary is a party. Each Material Contract is in full force and effect and is valid and enforceable against each of the parties thereto in accordance with its terms (regardless of whether Sellers’ copy of any such Material Contract made available to Buyer is missing one or more signatures of the parties thereto). Each Seller and each Subsidiary, as applicable, and to Sellers’ Knowledge each other party to each Material Contract, is in compliance with the terms of such Material Contract, except for any noncompliance that has not had and would not reasonably be expected to have a Material Adverse Effect. To Sellers’ Knowledge, no event has occurred which, with the giving of notice or lapse of time or both, would constitute a default under any Material Contract and no party to any Material Contract has threatened not to fulfill its obligations thereunder through the scheduled term of such Material Contracts. Copies of each Material Contract have been made available to Buyer.

Section 2.16 Intellectual Property. Schedule 2.16 sets forth all patents, trademarks, trade names, service marks, service names, domain names, copyrights and applications therefor (collectively “Intellectual Property Assets”) that are presently owned, licensed or used by either Seller or any Subsidiary in the Business. Schedule 2.16 sets forth all licenses and agreements pertaining to Intellectual Property Assets that are presently licensed from any third party as well as all licenses and agreements pertaining to Intellectual Property Assets that are presently licensed to any third party. To Seller’s Knowledge, there is no infringement of or unlawful use by any Person of any of the Intellectual Property Assets of either Seller or any Subsidiary. To Sellers’ Knowledge, (i) neither Seller nor any Subsidiary has infringed or unlawfully used any Intellectual Property Assets of any other Person, and, (ii) the Business, as presently conducted,

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does not infringe or unlawfully use any Intellectual Property Assets of any other Person. None of the Intellectual Property Assets of either Seller or any Subsidiary is subject to any pending or, to Sellers’ Knowledge, threatened Proceeding or to any outstanding Order restricting the use of such Intellectual Property Assets by either Seller or any Subsidiary.

Section 2.17 Insurance. Sellers have made available to Buyer a list of all material policies of liability, errors and omissions, crime, fidelity, life, fire, product liability, workers’ compensation, health, director and officer liability and other forms of insurance owned, maintained by or covering each Seller and each Subsidiary. The present insurance coverage of the Sellers and the Subsidiaries will remain in effect through the Closing Date.

Section 2.18 Certain Relationships. Except as disclosed in Schedule 2.18, no Seller nor any Affiliate of any Seller (other than a Seller or a Subsidiary) is a party to any Material Contract.

Section 2.19 Environmental Matters. Except as set forth on Schedule 2.19 or in any environmental reports or surveys obtained or to be obtained by Buyer:

(a) The Sellers and the Subsidiaries are in compliance with all applicable Environmental Legal Requirements, except where the failure to comply has not had and would not reasonably be expected to have a Material Adverse Effect.

(b) Neither Seller nor any Subsidiary is subject to any existing, pending or threatened Environmental Liability that has had or would reasonably be expected to have a Material Adverse Effect.

(c) None of the Leased Real Property is listed on any list of contaminated sites maintained under any applicable Environmental Legal Requirement. None of the Leased Real Property is subject to any enforcement action under any Environmental Legal Requirement. The Leased Real Property is free from the presence of any Hazardous Substance in, on or under the air, soil, groundwater or surface water, in a quantity or concentration in violation of applicable Environmental Legal Requirements, except for any such violation that has not had and would not reasonably be expected to have a Material Adverse Effect. No underground storage tanks, receptacles or other similar containers or depositories are present on the Leased Real Property. Neither Seller nor any Subsidiary has disposed of any Hazardous Substance on the Leased Real Property in violation of applicable Environmental Legal Requirements, except for any such violation that has not had and would not reasonably be expected to have a Material Adverse Effect.

Section 2.20 Governmental Authorizations and Regulatory Approval.

(a) All Governmental Authorizations necessary for each Seller and each Subsidiary to carry on the Business as presently conducted are identified on Schedule 2.20 and are in full force and effect, except where the failure to obtain such permits, licenses or approvals or the failure of such permits, licenses or

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approvals to be in full force and effect has not and would not reasonably be expected to have a Material Adverse Effect. All fees and charges incident to the Governmental Authorizations disclosed on Schedule 2.20 have been paid, except where the failure to pay has not and would not reasonably be expected to have a Material Adverse Effect, and are current and to Sellers’ Knowledge no suspension or cancellation of any Governmental Authorization has been threatened or would be reasonably expected to result by reason of the transactions contemplated by this Agreement. Each Seller and each Subsidiary are presently, and during all applicable limitations periods have been, in compliance with all Legal Requirements, except where the failure to comply has not had and would not reasonably be expected to have a Material Adverse Effect.

(b) The Sellers and the Subsidiaries are telecommunications carriers as defined by the Federal Telecommunications Act of 1996, P.L. No. 104-104, 110 Stat. 56 (1996) and are subject to regulation as a “telecommunications carrier”, “telephone company” or “public utility” by state agencies, including the Indiana Utility Regulatory Commission, the California Public Utilities Commission, the Illinois Commerce Commission, the Maryland Public Service Commission, the New York State Public Utilities Commission, the Virginia State Corporation Commission, and the District of Columbia Public Service Commission. All certificates with all states except Indiana and Illinois will be revoked effective within thirty (30) days after the Closing Date. Certain transactions and related matters contemplated by this Agreement will be submitted to appropriate regulatory agencies, including the Indiana Utility Regulatory Commission and the Illinois Commerce Commission and the Federal Communications Commission, for such orders and approvals as are required by Legal Requirements (“Regulatory Approvals”) within thirty (30) days of the Closing Date.

(c) Except as described in this Section 2.20 or set forth on Schedule 2.20, no consent, approval or authorization of or filing with any Governmental Body is required in connection with Sellers’ execution, delivery or performance of this Agreement or Sellers’ consummation of the transactions contemplated by this Agreement.

(d) Sellers make no representation or warranty with respect to, and will not be responsible for, any failure of either Seller or any Subsidiary to have any required Governmental Authorizations with respect to any period following the Closing, and Buyer will be solely responsible therefor.

Section 2.21 Bank Accounts. Sellers have made available to Buyer a list of the names, account numbers and locations of all banks and other financial institutions at which either Seller or any Subsidiary has any accounts or safe deposit boxes and the names of all persons authorized to draft on, or have access to, such accounts.

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Section 2.22 Product and Service Warranties and Liabilities. Sellers have provided to Buyer a copy of each Seller’s and each Subsidiary’s standard written product and service warranties applicable to the products and services sold within the preceding three years. Except as set forth in Schedule 2.22, there is no Proceeding pending or, to Sellers’ Knowledge threatened, against either Seller or any Subsidiary under any such warranty, except for any such Proceedings that arise in the Ordinary Course of Business.

Section 2.23 No Broker’s Fees. No Seller nor anyone acting on a Seller’s behalf has incurred any liability or obligation to pay fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which Buyer, either Seller or any Subsidiary will be liable. Sellers shall be solely responsible for all amounts due Waller Capital Partners in connection with the transactions contemplated by this Agreement.

Section 2.24 No Other Representations or Warranties. Sellers have not made nor will be deemed to have made any representation or warranty other than as expressly set forth in this Article 2. Without limiting the generality of the foregoing, Sellers specifically make no representation or warranty with respect to (a) any projections, estimates or budgets delivered to or made available to Buyer or its Representatives at any time with respect to future revenues, expenses or expenditures or future results of operations or (b) except as expressly covered by a representation and warranty contained in this Article 2, any other information or documents (financial or otherwise) made available to Buyer or its Representatives before or after the date of this Agreement including that certain Confidential Information Memorandum dated as of May 2007 prepared by Waller Capital Partners and delivered to Buyer or its Representatives by Sellers or their Representatives or any similar information memoranda.

ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Sellers as follows:

Section 3.1 Organization and Standing of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware.

Section 3.2 Authorization and Enforceability. Buyer has full corporate power and authority to enter into this Agreement and to carry out the transactions contemplated by this Agreement. This Agreement is binding upon Buyer and is enforceable against Buyer in accordance with its terms. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement will not (i) contravene the organizational documents of Buyer, or (ii) violate any Legal Requirement or Order applicable to Buyer.

Section 3.3 Available Funds. Buyer has readily available to it committed funds sufficient to allow it to consummate the transactions contemplated by this Agreement on a timely basis.

Section 3.4 Buyer’s Investigation and Knowledge. Buyer acknowledges that it has had access to the books, records and business operations of each Seller and each Subsidiary. Buyer does not have actual knowledge of any fact or circumstance which makes, or which would

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reasonably be expected to render, inaccurate any of the representations or warranties made by Sellers in this Agreement.

Section 3.5 No Broker’s Fees. Neither Buyer nor anyone acting on Buyer’s behalf has incurred any liability or obligation to pay fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which any Seller will be liable.

ARTICLE 4 - COVENANTS AND AGREEMENTS

The Parties covenant and agree as follows:

Section 4.1 Conduct Pending the Closing. From the date of this Agreement to the Closing Date:

(a) Sellers will cause the Sellers and the Subsidiaries to conduct their operations only in the Ordinary Course of Business (except as contemplated by or disclosed in this Agreement or the Disclosure Schedule);

(b) Sellers will preserve intact the present business organization, personnel and goodwill of the Sellers and the Subsidiaries; and

(c) Neither Sellers, neither Seller nor any of the Subsidiaries will, without the prior written consent of Buyer, (i) enter into any negotiations, discussions or agreements contemplating or respecting the acquisition of either Seller or any Subsidiary by any Person other than Buyer, whether through a sale of stock, a merger or consolidation, the sale of all or substantially all of the properties or assets of either Seller or any Subsidiary, any type of recapitalization or otherwise, or (ii) take any action that would constitute a Restricted Event.

Section 4.2 Access by Buyer. From the date of this Agreement to the Closing Date, Sellers will give Buyer and its Representatives full reasonable access, including without limitation for the purpose of testing equipment and systems and conducting any environmental investigation deemed appropriate by Buyer, to the properties, Contracts, books, records and other documents and data of each Seller and their respective Subsidiaries, as well as certain personnel, upon advance notice to Sellers, of the Sellers and the Subsidiaries. Buyer (a) will conduct itself in a manner that does not unreasonably interfere with the normal operations and employee relationships of the Sellers and the Subsidiaries, provided that Buyer shall be given sufficient access, including during normal business hours, to develop and complete proper integration planning to its reasonable satisfaction prior to Closing, and (b) will hold, and will cause its Representatives to hold, any information concerning the Business, the Sellers, or the Subsidiaries in strict confidence in accordance with the confidentiality agreement between the Parties dated May 25, 2007.

Section 4.3 Notice of Breach or Failure of Condition. Each Party will give prompt notice to the other of the occurrence of any event or the failure of any event to occur that might preclude or interfere with the timely satisfaction of any condition precedent to the obligations of

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either Party under this Agreement or the timely consummation of the transactions contemplated by this Agreement. Unless the Party receiving such notice has the right to terminate this Agreement pursuant to Section 6.1 by reason of such development and timely exercises that right, any such notice relating to a breach of a representation or warranty set forth in Article 2 or Article 3 will be deemed to cure any breach that otherwise might have existed by reason of that development and, with respect to Article 2, will be deemed to amend and supplement the Disclosure Schedule as if originally disclosed therein.

Section 4.4 Publicity. From the date of this Agreement to the Closing Date, no Party will issue any press release or otherwise make any public statements or announcement concerning this Agreement or the transactions contemplated by this Agreement without the prior written consent of the other Parties. Notwithstanding the foregoing, no Party will be prevented at any time from furnishing any required information to any Governmental Body or from complying with that Party’s Legal Requirements.

Section 4.5 Reasonable Efforts. Each Party will use its reasonable efforts to obtain all Governmental Authorizations and all consents, approvals and authorizations of other Persons necessary for the timely consummation of the transactions contemplated by this Agreement. Each Party will cooperate fully with the other Party in promptly seeking to obtain all such Governmental Authorizations and other consents, approvals and authorizations. Each Party will take all other actions and do, or cause to be done, all other things necessary, proper or advisable to consummate as promptly as practicable the transactions contemplated by this Agreement.

Section 4.6 Shareholders’ Representative.

(a) Shareholders hereby irrevocably make, constitute and appoint Steven L. Johns (in his capacity under this Section 4.6, the “Shareholders’ Representative”) as their true and lawful attorney-in-fact with full power of substitution to do on behalf of Shareholders any and all things and execute any and all documents which may be necessary, convenient or appropriate to facilitate the consummation of the transactions contemplated by this Agreement and the other Transaction Documents, including: (i) receiving and disbursing payments to be made hereunder; (ii) receiving notices and communications pursuant to this Agreement and the other Transaction Documents; (iii) administrating this Agreement and the other Transaction Documents, including the resolution of any disputes or claims; (iv) resolving, settling or compromising claims for indemnification asserted against Shareholders pursuant to Article 7; (v) agreeing to waivers of conditions and obligations under this Agreement and the other Transaction Documents; and (vi) asserting claims for indemnification under Article 7 and resolving, settling or compromising any such claim.

(b) In the event that Shareholders’ Representative, with the advice of counsel, is of the opinion that he requires further authorization or advice from Shareholders on any matters concerning this Agreement, Shareholders’ Representative is entitled to seek such further authorization from Shareholders prior to acting on their behalf. In such event and on any other matter requiring or permitting Shareholders to vote in this Section 4.6, each Shareholder will have a

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number of votes equal to the Shares owned by that Shareholder immediately prior to Closing and the authorization of a majority of such Shares will be binding on all Shareholders and will constitute authorization by Shareholders.

(c) Buyer will be fully protected in dealing with Shareholders’ Representative with respect to this Agreement, the other Transaction Documents and the transactions contemplated by this Agreement and may rely upon the authority of Shareholders’ Representative to act as the agent of Shareholders for all purposes under this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby. Any payment by Buyer to Shareholders’ Representative under this Agreement or any other Transaction Document will be considered a payment by Buyer to the Shareholders. The appointment of Shareholders’ Representative is coupled with an interest and will be irrevocable by any Shareholder in any manner or for any reason. This power of attorney will not be affected by the disability or incapacity of the principal pursuant to any applicable Legal Requirement.

(d) Any Shareholders’ Representative may resign from his capacity as a Shareholders’ Representative at any time by written notice delivered to the other Shareholders and to Buyer. If at any time there is no person acting as a Shareholders’ Representative for any reason, Shareholder will promptly designate a new Shareholders’ Representative and promptly notify Buyer in writing of such determination. Following the time that Buyer is notified that there is no Shareholders’ Representative and until such time as a new Shareholders’ Representative is designated as provided herein and Buyer is so notified in writing, Shareholders will collectively act as Shareholders’ Representative, with decisions made in the manner specified in Section 4.6(b).

(e) Mr. Johns, as the initial sole Shareholders’ Representative, acknowledges that he has carefully read and understands this Agreement, hereby accepts such appointment and designation, and represents that he will act in his capacity as Shareholders’ Representative in strict compliance with and conformance to the provisions of this Agreement and the other Transaction Documents.

(f) Shareholders’ Representative will not be liable to Shareholder for any error of judgment, or any act done or step taken or omitted by him in good faith or for any mistake in fact or Legal Requirement, or for anything that he may do or refrain from doing in connection with this Agreement or the other Transaction Documents, except for his own bad faith or willful misconduct. Shareholders’ Representative may seek the advice of legal counsel in the event of any dispute or question as to the construction of any of the provisions of this Agreement or the other Transaction Documents or his duties hereunder or thereunder, and except as otherwise set forth in this Agreement or the other Transaction Documents, as a Shareholder, he will incur no liability to Shareholders and will be fully protected with respect to any action taken, omitted or suffered by him in good faith in accordance with the opinion of such counsel.

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(g) Any expenses incurred by Shareholders’ Representative in connection with the performance of his duties under this Agreement (including any fees and expenses of legal counsel retained by Shareholders’ Representative) will not be the personal obligations of Shareholders’ Representative but will be payable and will be promptly paid or reimbursed by Shareholders, pro rata in accordance with their respective ownership in the Sellers.

Section 4.7 Steven L. Johns as Sellers’ and Subsidiaries’ Representative.

(a) Sellers and Subsidiaries hereby irrevocably make, constitute and appoint Steven L. Johns (in his capacity under this Section 4.7, the “Sellers’ Representative”) as their true and lawful attorney-in-fact with full power of substitution to do on behalf of Sellers and Subsidiaries any and all things and execute any and all documents which may be necessary, convenient or appropriate to facilitate the consummation of the transactions contemplated by this Agreement and the other Transaction Documents, including: (i) receiving and disbursing payments to be made hereunder; (ii) receiving notices and communications pursuant to this Agreement and the other Transaction Documents; (iii) administrating this Agreement and the other Transaction Documents, including the resolution of any disputes or claims; (iv) resolving, settling or compromising claims for indemnification asserted against Sellers or Subsidiaries pursuant to Article 7; (v) agreeing to waivers of conditions and obligations under this Agreement and the other Transaction Documents; and (vi) asserting claims for indemnification under Article 7 and resolving, settling or compromising any such claim.

(b) Buyer will be fully protected in dealing with Mr. Johns with respect to this Agreement, the other Transaction Documents and the transactions contemplated by this Agreement and may rely upon the authority of Mr. Johns to act as the agent of Sellers and Subsidiaries for all purposes under this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby. Any payment by Buyer to eGIX or its Liquidating Trust under this Agreement or any other Transaction Document will be considered a payment by Buyer to the Sellers and Subsidiaries. The appointment of Mr. Johns is coupled with an interest and will be irrevocable by Sellers and Subsidiaries in any manner or for any reason. This power of attorney will not be affected by the disability or incapacity of the principal pursuant to any applicable Legal Requirement.

Section 4.8 Escrow Agreement. Effective as of the Closing, Sellers will fund or cause to be funded out of the Cash Purchase Price a post-closing indemnification escrow in the amount of $500,000 (together with interest and earnings thereon, the “Escrow Fund”) for the benefit of Buyer to be held by Key Bank (“Escrow Agent”) in accordance with the provisions of an escrow agreement in the form attached as Exhibit 4.8 (the “Escrow Agreement”). The Escrow Fund shall be distributed as follows (and Buyer, Sellers and Shareholders agree jointly to instruct the Escrow Agent accordingly):

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(a) if after the Closing, Buyer is entitled to receive indemnification in accordance with Article 7 hereof (an “Indemnification Claim”), then Buyer shall be entitled to withdraw the amount of such Indemnification Claim(s) from the Escrow Fund;

(b) on the first anniversary of the Closing, the Escrow Agent shall release to the Sellers’ Liquidating Trust any amounts then held in the Escrow Fund in excess of (x) $250,000 plus (y) an amount sufficient to satisfy any then-pending Indemnification Claim(s) previously asserted by Buyer; and

(c) on the earlier of (i) the date that Buyer and Sellers have determined that the First Period Hurdle has been met, and provided that the resulting Earn Out payment is greater than $250,000 plus an amount sufficient to satisfy any then-pending Indemnification Claim(s) previously asserted by Buyer, and (ii) April 30, 2009 (the expiration date of Sellers’ and Shareholders’ representations and warranties), the Escrow Agent shall distribute to the Sellers’ Liquidating Trust the remaining balance of the Escrow Fund.

Section 4.9 Certain Tax Prorations. Liability of Sellers and Subsidiaries for any real and tangible personal property taxes and assessments, general and special, for the 2007 and 2008 tax years shall be equal to the amount of such property taxes for each year multiplied by a fraction, the numerator of which is the number of days in each year that precede the Closing Date and the denominator of which is 365 days. Liability for the remainder of such taxes and assessments shall be borne by Buyer. All tax pro-rations shall be based on tax rates and assessments for 2007 and 2008 unless such rates and/or assessments are unavailable. If either the tax rates or the tax assessments for 2007 or 2008 are not available, then such pro-ration shall be made based upon the tax rates and assessments for the prior year (or if only the assessed value for 2007 or 2008 is known, then based on the prior year’s tax rates and the current year’s assessed value), and shall be adjusted by a cash payment between Sellers and Buyer after the Closing as soon as such rates and assessments for 2007 and 2008 are available. To the extent such property taxes and assessments have already been paid for the 2007 or 2008 tax years prior to the Closing Date, Buyer shall pay to the Sellers an amount of money equal to Buyer’s pro-rated portion at Closing. To the extent that such taxes and assessments have not been paid prior to the Closing Date, Sellers’ pro-rated portion will be withheld from the Purchase Price paid at Closing. Buyer shall thereafter pay all such taxes and assessments to the taxing authority when due and shall provide to Sellers proof of such payment upon request.

Section 4.10 Accounts Receivable Management. Buyer and Sellers acknowledge that Closing Net Working Capital will include any accounts receivable of Sellers or Subsidiaries that are less than 90 days old as of the Closing Date together with all accounts receivables from customers currently using the Sellers’ services that are aged ninety (90) days or greater (the “Accounts Receivables”). The only accounts receivables that will not be transferred from Sellers to Buyer at Closing will be the receivables that are aged ninety (90) days or greater and due from customers of Sellers that are no longer using the Sellers’ services. Sellers will deliver to Buyer, within thirty (30) days after the Closing, a complete list of all such aged ninety (90) days or greater receivables that have been retained by Sellers. Sellers will retain a third-party unrelated

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collection agency to collect the accounts receivables that are not delivered by Sellers to Buyer at Closing.

ARTICLE 5 - CONDITIONS TO OBLIGATION TO CLOSE

Section 5.1 Conditions to Obligation of Buyer. Buyer’s obligation to purchase the Purchased Assets and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or before the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part):

(a) The representations and warranties set forth in Article 2 of this Agreement, individually and collectively, must have been accurate in all material respects as of the date of this Agreement and must be accurate in all material respects as of the Closing Date as if made on the Closing Date;

(b) Sellers and Shareholders must have performed and complied in all material respects with their respective covenants and obligations under this Agreement;

(c) Sellers and Shareholders must have delivered to Buyer in form reasonably acceptable to Buyer a certificate stating that the conditions specified in Sections 5.1 (a) and (b) have been satisfied;

(d) Sellers shall have executed and delivered the Escrow Agreement;

(e) Each of Steven L. Johns, James H. Kinnett and Andrew G. Gorogiani must have executed and delivered to Buyer his respective employment agreement substantially in the forms attached collectively as Exhibit 5.1(e) (individually, an “Employment Agreement” and collectively, the “Employment Agreements”) which Employment Agreements remain conditioned upon and subject to the approval of Buyer’s Board of Directors;

(f) Each of the Sellers and Shareholders must have executed and delivered a noncompetition agreement substantially in the form attached as Exhibit 5.1(f) (the “Noncompetition Agreement”);

(g) All outstanding options and warrants described on Schedule 2.2(a) shall have been fully exercised or cancelled with no further obligation on the part of Sellers.

(h) Sellers shall have delivered the legal opinion of Hall, Render, Killian, Heath & Lyman, P.C., counsel to Sellers, regarding matters of incorporation, organization, capitalization and authority of Sellers and Subsidiaries, in form and substance reasonably satisfactory to Buyer and its counsel;

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(i) There must not be any Proceeding or Order pending or threatened since the date of this Agreement that would prevent the consummation of the transactions contemplated by this Agreement;

(j) Buyer shall have established to its reasonable satisfaction that eGIX has achieved a minimum 12-month trailing EBITDA of $3,000,000 as of the most recent month-end prior to the Closing Date;

(k) Sellers shall have obtained and delivered to Buyer the written consent to the assignment of any Material Contract requiring consent in connection with the assignment of such contract to Buyer hereunder; and

(1) All Governmental Authorizations and Regulatory Approvals that are necessary for the consummation of the transactions contemplated by this Agreement must have been received and must be in full force and effect.

Section 5.2 Conditions to Obligation of Sellers. Each Seller’s obligation to sell the Purchased Assets and to take the other actions required to be taken by each Seller at the Closing is subject to the satisfaction, at or before the Closing, of each of the following conditions (any of which may be waived by Sellers, in whole or in part):

(a) The representations and warranties set forth in Article 3 of this Agreement, individually and collectively, must have been accurate in all material respects as of the date of this Agreement and must be accurate in all material respects as of the Closing Date as if made on the Closing Date;

(b) Buyer must have performed and complied with in all material respects its covenants and obligations under this Agreement;

(c) Buyer must have delivered to Sellers in form reasonably acceptable to each Sellers a certificate stating that each of the conditions specified in Sections 5.2(a) and (b) have been satisfied;

(d) Buyer shall have executed and delivered the Escrow Agreement;

(e) Buyer shall have executed and delivered the Employment Agreements, which Employment Agreements remain conditioned upon and subject to the approval of Buyer’s Board of Directors;

(f) Buyer must have delivered documentation satisfactory to Sellers that Buyer has obtained the release of the personal guarantees in Exhibit 5.2(f);

(g) There must not be any Proceeding or Order pending or threatened since the date of this Agreement that would prevent the consummation of the transactions contemplated by this Agreement; and

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(h) All Governmental Authorizations that are necessary for the consummation of the transactions contemplated by this Agreement must have been received and must be in full force and effect.

ARTICLE 6 - TERMINATION

Section 6.1 Termination Events. This Agreement may be terminated by mutual consent of the Parties. In addition, this Agreement may be terminated by notice given before or at the Closing by either Buyer or either Seller if:

(a) the opposing Party materially defaults in the timely performance of any covenant, agreement or obligation contained in this Agreement, or if the other Party materially breaches any of its representations or warranties set forth in this Agreement, and such default or breach is not cured within 30 days following receipt of a written notice identifying the default or breach; or

(b) the Closing has not occurred (other than through the failure of the Party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before March 31, 2008 or such later date upon which the Parties may agree.

Section 6.2 Effect of Termination. Each Party’s right of termination under Section 6.1 is in addition to any other rights that the Party may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 6.1, all further obligations of the Parties under this Agreement will terminate, except those rights and obligations set forth in Section 4.2 (relating to confidentiality), Section 9.8 and this Section 6.2. If this Agreement is terminated by a Party because of a breach of the Agreement by the other Party or because one or more of the conditions to the terminating Party’s obligations under this Agreement is not satisfied as a result of the other Party’s failure to comply with its obligations under this Agreement, the terminating Party’s right to pursue all legal remedies will survive such termination unimpaired.

ARTICLE 7 - INDEMNIFICATION

Section 7.1 Indemnification and Reimbursement by Sellers and Shareholders. Sellers and Shareholders will jointly and severally indemnify and hold harmless Buyer from and against all Adverse Consequences arising from or related to (a) any Pre-Closing Taxes, (b) any breach by Sellers or Shareholders of any representation, warranty, covenant, agreement or obligation of Sellers or Shareholders in this Agreement and (c) the successful enforcement of indemnification rights under this Article 7.

Section 7.2 Indemnification and Reimbursement by Buyer. Buyer will indemnify and hold harmless each Seller and each Shareholder from and against all Adverse Consequences arising from or related to (a) any breach by Buyer of any representation, warranty, covenant or obligation of Buyer in this Agreement and (b) the successful enforcement of indemnification rights under this Article 7.

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Section 7.3 Indemnification Procedures.

(a) Third-Party Claims.

(i) Promptly after receipt by a Party entitled to be indemnified under this Article 7 (an “Indemnified Party”) of notice of the commencement of any Proceeding for which the Indemnified Party intends to assert a claim for indemnification against the opposing Party (an “Indemnifying Party”) under this Article 7, the Indemnified Party will give notice to the Indemnifying Party of the commencement of such Proceeding with reasonable promptness (so as to not prejudice the Indemnifying Party’s rights).

(ii) The Indemnifying Party will be entitled to participate in any Proceeding described in Section 7.3(a)(i) above and, to the extent that it wishes, to assume the defense of such Proceeding with counsel reasonably satisfactory to the Indemnified Party. Following the assumption of defense by an Indemnifying Party, the Indemnifying Party will not be liable for any subsequent fees of legal counsel or other expenses incurred by the Indemnified Party in connection with the defense of such Proceeding, and the Indemnified Party will have the right to participate in the defense with its own counsel at its own expense. No compromise or settlement of any claims in a Proceeding will be binding on an Indemnifying Party for purposes of the Indemnifying Party’s indemnity obligations under this Agreement without the Indemnifying Party’s express written consent.

(iii) A Party granted the right to direct the defense of any Proceeding under this Section 7.3 hereunder will (A) keep the opposing Party informed of material developments in the Proceeding, (B) promptly submit to the opposing Party copies of all pleadings, responsive pleadings, motions and other similar legal documents and papers received in connection with the Proceeding, (C) permit the opposing Party and its counsel, to the extent practicable, to confer on the conduct of the defense of the Proceeding and (D) to the extent practicable, permit the opposing Party and its counsel an opportunity to review all legal papers to be submitted prior to their submission. The Parties will make available to each other and each other’s counsel and accountants all of their books and records relating to the Proceeding, and each Party will provide to the other such assistance as may be reasonably required to insure the proper and adequate defense of the Proceeding. Each Party will use its good faith efforts to avoid the waiver of any privilege of the other Party. The assumption of the defense of any Proceeding by an Indemnifying Party will not constitute an admission of responsibility to indemnify or in any manner impair or restrict the Indemnifying Party’s rights to later seek to be reimbursed its costs and expenses if indemnification under this Agreement with respect to the Proceeding was not required. An

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Indemnifying Party may elect to assume the defense of a Proceeding at any time during the pendency of the Proceeding, even if initially the Indemnifying Party did not elect to assume the defense, so long as the assumption at such later time would not materially prejudice the rights of the Indemnified Party.

(b) Other Claims. A claim for indemnification for any matter not involving a third-party claim may be asserted by written notice of the claim, setting forth in reasonable detail the factual and contractual bases for the claim, to the Party from whom indemnification is sought.

Section 7.4 Limitations on Indemnification.

(a) No Seller or Shareholder will have any liability under this Article 7 until the aggregate amount of all Adverse Consequences described in Section 7.1 exceeds $500,000 (the “Threshold Amount”), and then only for the amount by which such Adverse Consequences exceed the Threshold Amount, provided, however, that the Threshold Amount will not apply to claims for payment of Pre-Closing Taxes, a payment default under Section 1.3 or claims of breach by Sellers or Shareholders of Sections 2.1, 2.2, 2.4, 2.14(a) and 2.23. Solely for purposes of determining whether a representation, warranty, covenant or agreement has been breached by Sellers or Shareholders and the Adverse Consequences resulting therefrom “credited” against the Threshold, any representation, warranty, covenant or agreement that is otherwise subject to a “materiality” qualifier shall be interpreted, and any breach thereof determined, without regard to such “materiality” qualifier. Upon reaching the Threshold Amount, Sellers and Shareholders will be jointly and severally liable to Buyer for all claims for Adverse Consequences in excess of the Threshold Amount up to twenty-five percent of the Purchase Price (the “Maximum Amount”). The joint and several liability of Shareholders for Adverse Consequences shall not apply to any Shareholder who does not own more than five percent (5%) of the capital stock of either Seller on the date hereof. All indemnity claims shall be satisfied first from the Escrow Fund, then from the Ernout prior to any payment from any individual Shareholder. Under no circumstances will Sellers or Shareholders be liable to Buyer for any amount in excess of the Maximum Amount; provided, however, that the Maximum Amount will not apply to claims for payment of Pre-Closing Taxes, a payment default under Section 1.3 or claims of breach by Sellers or Shareholders of Section 2.2.

(b) Sellers and Shareholders will not be required to indemnify and hold Buyer harmless with respect to any claim for indemnification if the facts upon which Buyer bases such claim were actually known by or disclosed in writing to Buyer or its Representatives prior to or at the Closing.

(c) To the extent that recovery from another Person (including any insurer) is available to Buyer to compensate for any item for which indemnification may be sought hereunder, Buyer will exhaust all available

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remedies to recover the amount of its claim as may be available from such other Person and will only seek indemnification against Sellers and Shareholders in the event that it fails to obtain such reimbursement from the other Person or if such reimbursement is insufficient to satisfy the claim (and in the latter instance will only seek indemnity for the amount of the deficiency). To the extent Sellers or Shareholders indemnify Buyer on any claim referred to in the previous sentence, Buyer will assign to Sellers and Shareholders, to the fullest extent allowable, its rights and causes of action with respect to such claim against other Persons, or in the event assignment is not permissible, Sellers and Shareholders will be allowed to pursue such claim in the name of Buyer, as applicable, at Sellers’ or Shareholders’ expense. Sellers and Shareholders will be entitled to retain all recoveries for their own accounts made as a result of any such action. Buyer will provide Sellers and Shareholders reasonable assistance in prosecuting any such claim, including making their books and records relating to such claim available to Sellers and Shareholders and their respective Representatives and making their respective employees available for interviews, testimony and similar assistance. If Buyer or its Affiliates recover from a third party any part of a claim that has previously been paid by Sellers or Shareholders pursuant to this Article 7, Buyer will promptly remit to Sellers’ (or Sellers’ Liquidating Trust) the amount of such recovery without regard to the time limitations described in Section 9.1. Sellers and Shareholders will have no liability with respect to any claim that would have been covered by insurance had Buyer maintained the same insurance coverage that were in effect before the Closing with respect to the Sellers or the Subsidiaries.

(d) In computing the amount of any indemnification to which Buyer may be entitled under this Article 7 by virtue of a breach of Sections 2.3 or 2.5, if the amount of any liability has been understated or unrecorded, on one hand, but on the other hand the amount of any other liabilities has been overstated or any assets understated, only the net effect (benefits or detriment as the same are determined in accordance with GAAP) of such errors will be taken into account.

(e) Any amounts recoverable by Buyer from Sellers or Shareholders under this Article 7 will be net of any Tax benefits to Buyer or its Affiliates (including the Sellers and the Subsidiaries). For purposes of this paragraph, “Tax benefit” will mean the present value of any refund, credit or reduction in otherwise required Tax payments, including any interest payable thereon, which present value will be computed as of the later of the Closing Date or the first date on which the right to the refund, credit or other Tax reduction arises or otherwise becomes available to be utilized (regardless of the time that Buyer or its Affiliates actually utilize the benefit), using (i) the Tax rate applicable to the highest level of income with respect to such Tax under applicable Legal Requirements on such date, and (ii) the interest rate on such date imposed on corporate deficiencies paid within thirty (30) days of the notice of proposed deficiency under the Code.

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(f) Buyer is not entitled to recover any amounts for a claim for indemnification that are attributable to any delay in delivering notice of the indemnification claim to Sellers. Buyer is not entitled to any indemnity (i) on account of consequential, incidental or indirect damages or losses including business interruption, loss of profits, loss of use of facilities and loss of goodwill, and no “multiple of profits” or other similar damage calculation methodology will be applied in calculating any damage that may be claimed hereunder, except with respect to indemnification for third party claims, to which this clause (i) shall not apply or (ii) in respect of any claim to the extent that the matter that is the subject of the claim is reflected on, accrued for or reserved against or otherwise provided for in the Financial Statements, Interim Financial Statements or the Final Closing Balance Sheet or that was raised and resolved by agreement of the Parties or through the dispute resolution procedures described in Section 1.4 above. Sellers and Shareholders will have no liability for indemnification with respect to any claim for indemnification that relates to the passing of, or any change in, any Legal Requirement or any accounting policy, principle or practice after the Closing Date or any increase in Tax rates in effect on the Closing Date, even if the change or increase has retroactive effect or requires action at a future date.

(g) To the extent that any breach of a representation or warranty made by Sellers or Shareholders is capable of cure, Buyer will, as a condition precedent to asserting a claim concerning the breach, afford Sellers and Shareholders a reasonable opportunity (which will not be less than 30 days) to cure the breach and will provide, and will cause its Affiliates to provide, Sellers and Shareholders all reasonable assistance (including access to buildings, offices, records, files, properties and assets) in connection with such remedy or cure. Buyer agrees that in the event of any breach giving rise to an indemnity obligation of Sellers or Shareholders hereunder, Buyer will take all reasonable measures to mitigate the Adverse Consequences arising from the breach (including taking all reasonable steps to prevent any contingent liability from becoming an actual liability).

(h) Sellers and Shareholders will have no liability with respect to any claim for indemnification or part of a claim for indemnification that would not have arisen but for any act or omission after Closing by Buyer or its Affiliates, other than any act or omission done pursuant to this Agreement or required by applicable Legal Requirements.

(i) No claim for indemnification may be made or maintained against any Seller or Shareholder following the sale by Buyer of a majority of the Purchased Assets, whether through a sale of stock, a merger or consolidation, the sale of assets or otherwise.

(j) Notwithstanding anything contained herein to the contrary, to the extent that any facts or circumstances give rise to (i) a claim for indemnification under this Article 7 and (ii) a purchase price adjustment to the Cash Purchase

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Price under Section 1.3, such facts or circumstances shall first be resolved under the purchase price adjustment mechanism pursuant to Section 1.3. To the extent that the Purchase Price has been adjusted pursuant to Section 1.3 and Buyer is paid in connection therewith, Buyer shall not be entitled to a “second” payment under Article 7 for any facts or circumstances which could have also given rise to a claim for indemnification under Article 7.

Section 7.5 Exclusive Remedy. This Article 7 constitutes the sole and exclusive remedy of the Parties with respect to any matters arising under or with respect to this Agreement, and each of Buyer and Sellers and Shareholders hereby waives and releases the other from any and all claims and other causes of action, including claims for contribution, relating to such matters; provided, however, that nothing in this Agreement will prevent any Party from seeking injunctive or other equitable relief, including specific performance, where appropriate.

ARTICLE 8 – DEFINITIONS

For purposes of this Agreement, the following terms have the meanings specified or referred to in this Article 8:

“Adverse Consequence” means any loss, cost, liability, penalty, Tax, damage or expense (including reasonable legal and other professional fees).

“Affiliate” means with respect to a Person, any Person directly or indirectly controlling, controlled by, or under common control with, that Person and any officer, director or controlling Person of that Person.

“Applicable Contract” means any Contract (a) to which either Seller or any Subsidiary is a party or (b) by which either Seller or any Subsidiary or any of their respective assets is bound.

“Business” has the meaning set forth in the Preamble.

“Buyer” has the meaning set forth in the first paragraph of this Agreement.

“Closing” has the meaning set forth in Section 1.6 of this Agreement.

“Closing Balance Sheet” has the meaning set forth in Section 1.4 of this Agreement.

“Closing Date” means the date and time at which the Closing actually takes place.

“Code” means the Internal Revenue Code of 1986, as amended.

“Contract” means any agreement, contract, obligation, promise or undertaking that is legally binding.

“Disclosure Schedule” means the Schedules referred to in Article 2.

“Employee Benefit Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA and any stock purchase, stock option, severance, retention, change-in-

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control, fringe benefit, termination, supplemental retirement, collective bargaining, bonus, performance awards, incentive, deferred compensation and any and all other employee benefit plans, agreements, programs, policies or other arrangements relating to the employees of the Sellers or the Subsidiaries, whether or not subject to ERISA (including any funding mechanism now in effect or required in the future as a result of the transactions contemplated in this Agreement or otherwise), sponsored, maintained or participated in by the Sellers or the Subsidiaries or to which the Sellers or the Subsidiaries contribute (or have an obligation to contribute) on behalf of their current or former employees (or their beneficiaries or dependents) and all employee benefit plans previously sponsored or contributed to on behalf of their employees within the last five years.

“Encumbrance” means any charge, claim, community property interest, condition, equitable interest, mortgage, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting (in the case of any security) or transfer, but excluding (a) liens for water, sewage and similar charges and current Taxes and assessments not yet due and payable or being contested in good faith, (b) mechanics’, carriers’, workers’, repairers’, materialmen’s, warehousemen’s and other similar liens arising or incurred in the Ordinary Course of Business, (c) liens arising or resulting from any action taken by Buyer, (d) liens of record, (e) easements, rights of way, restrictions and other similar liens that do not materially interfere with the ordinary conduct of operations, (f) imperfections or defects in title that do not materially adversely affect the value or use of the applicable asset, (g) purchase money security interests created in the Ordinary Course of Business and (h) any other liens to which Buyer consents in writing.

“Environment” means soil, land surface or subsurface strata, surface waters (including navigable waters and ocean waters), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource.

“Environmental Legal Requirement” means all Legal Requirements relating to pollution or the protection of human health, safety or the environment, including laws, rules or regulations designed (a) to prevent, report or regulate the release, discharge or emission of pollutants or Hazardous Substances into the Environment; (b) to regulate the generation, treatment, storage, handling, transportation or disposal of Hazardous Substances; (c) to assure that products or chemicals are designed, formulated, packaged or used so that they do not present unreasonable risks to human health or the Environment; (d) to protect or pay for damages to natural resources such as wetlands, sand dunes or forests, as well as plant and animal species; and (e) to clean up Hazardous Substances that have been released and to apportion the costs of the cleanup.

“Environmental Liability” means any Adverse Consequence arising from or relating to any Environmental Legal Requirement proximately caused by acts or omissions prior to the Closing Date.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Financial Statements” has the meaning set forth in Section 2.3 of this Agreement.

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“GAAP” means United States generally accepted accounting principles. To the extent GAAP leaves room for discretion, GAAP shall be applied consistent with the preparation of the Financial Statements.

“Governmental Authorization” means any approval, consent, license, permit, waiver or other authorization (including Regulatory Approvals and other approvals pursuant to competitive local exchange carrier registrations) issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

“Governmental Body” means any: (a) nation, state, county, city, town, village, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature.

“Hazardous Substance” means any hazardous, toxic or polluting substance, waste, material or contaminant, including petroleum or petroleum products, governed or regulated under any Environmental Legal Requirement.

“Indemnified Party” has the meaning set forth in Section 7.3 of this Agreement.

“Indemnifying Party” has the meaning set forth in Section 7.3 of this Agreement.

“Intellectual Property Assets” has the meaning set forth in Section 2.16 of this Agreement.

“Interim Financial Statements” has the meaning set forth in Section 2.3 of this Agreement.

“Leased Real Property” has the meaning set forth in Section 2.10 of this Agreement.

“Legal Requirement” means any federal, state, local, municipal, foreign, international, multinational or other constitution, law, ordinance, principle of common law, statute, code, regulation, order, rule or treaty.

“Material Adverse Effect” means a material adverse effect on the financial condition of the Sellers and the Subsidiaries taken as a whole, but will not be deemed to include (a) any changes resulting from general economic, regulatory or political conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, (b) acts attributable to any act or omission by Buyer or its Affiliates, (c) circumstances that affect generally the industries in which the Sellers and the Subsidiaries operate, (d) changes in Legal Requirements after the Closing, (f) any adverse effect that has been disclosed to Buyer in writing on or before the Closing Date, (g) any adverse change in or effect on the Business that is cured by Sellers to Buyer’s reasonable satisfaction before the Closing, and/or (h) any changes resulting from the announcement or pendency of the transactions provided for in this Agreement.

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“Maximum Amount” has the meaning set forth in Section 7.4 of this Agreement.

“Maximum Net Working Capital” has the meaning set forth in Section 1.3 of this Agreement.

“Material Contract” means any Applicable Contract that: (a) involves interconnection and commercial agreements with primary incumbent local exchange carriers; (b) involves strategic partnership agreements or authorized distribution agreements with distributors, sales representatives or strategic partners; (c) involves the leasing of DS-3 circuits (or circuits of greater capacity) from local telephone companies or other competitive carriers; (d) involves performance of services or delivery of goods or materials by or to either Seller or any Subsidiary of an amount in excess of $100,000 in any twelve-month period; (e) involves expenditures or receipts (other than for the performance of services or delivery of goods or materials) in excess of $100,000 in any twelve-month period; (f) relates to capital expenditures in excess of $50,000 in any twelve-month period; (g) relates to indebtedness for borrowed money or that creates an Encumbrance on any properties or assets of either Seller or any Subsidiary that are material to the Business; (h) relates to the length, duration or condition of employment or the termination thereof and which cannot be terminated by a Seller or a Subsidiary, as applicable, on 90 days’ or less notice without liability arising from such termination; or (i) amends, supplements or modifies any of the foregoing.

“Minimum Net Working Capital” has the meaning set forth in Section 1.3 of this Agreement.

“Multi-Employer Retirement Plan” has the meaning set forth in Section 3(37)(A) of ERISA.

“Net Working Capital” means all accounts receivable less than 90 days old, physical inventory less than six months old, all other non-physical (including Broadsoft and other software licenses that have not expired) inventory, prepaid expense that is acquired by Buyer, and other receivables that are acquired by Buyer less, to the extent included in the Exhibit 1.8 Assumed Liabilities, gross trade accounts payables inclusive of disputes, prepaid and deferred subscriber fees and other current liabilities (excluding accrued interest and Exhibit 1.8 Excluded Liabilities). Any amounts related to cash, intercompany accounts, property and equipment, deposits, intangibles, or assets not acquired, cash over-drafts, Shareholder receivables or Shareholder payables will be excluded from the computation of Net Working Capital, as will all liabilities for Funded Indebtedness.

“Order” means any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any Governmental Body or arbitrator.

“Ordinary Course of Business” means in accordance with the customary day-to-day practices of the Sellers and its Subsidiaries with respect to the activity in question.

“Organizational Documents” means the articles of incorporation and the bylaws or articles of organization and operating agreement, if any, including all amendments thereto, of each Seller and each Subsidiary as applicable.

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“Owned Personal Property” has the meaning set forth in Section 2.12 of this Agreement.

“Party or “Parties” has the meaning set forth in the first paragraph of this Agreement.

“Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Body or other entity.

“Personal Property Lease(s)” has the meaning set forth in Section 2.11 of this Agreement.

“Pre-Closing Taxes” shall mean all Taxes paid or payable by Sellers or Subsidiaries for any period prior to the Closing Date (including Taxes that may not become due and payable until after the Closing Date).

“Proceeding” means any claim or dispute asserted or any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“Purchase Price” has the meaning set forth in Section 1.2 of this Agreement.

“Real Property Lease(s)” has the meaning set forth in Section 2.10 of this Agreement.

“Representative” means with respect to a particular Person, any director, manager, officer, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors.

“Restricted Event” means (a) declaring or paying any dividend or other distribution or payment in respect of shares of capital stock or other equity securities; (b) making any material amendment of the Organizational Documents; (c) amending the terms of any existing employment agreement with any officer or key employee of either Seller or any Subsidiary; (d) paying or increasing any bonuses, salaries or other compensation to any officer or key employee of either Seller or any Subsidiary except in the Ordinary Course of Business; (e) adopting or increasing the payments to or benefits under any Employee Benefit Plan except in the Ordinary Course of Business; (f) selling (other than sales of inventory in the Ordinary Course of Business), leasing or otherwise disposing, or incurring any Encumbrance on, any property or asset of either Seller or any Subsidiary that is material to the Business; (g) entering into any Contracts requiring payment for products or services (including without limitation employment, consulting or other professional services) of more than $50,000 in a year; (h) incurring any indebtedness for borrowed money or assuming or guarantying obligations of any other Person in excess of $50,000; (i) making or committing to make any capital expenditure or expense obligation in excess of $50,000 individually or $150,000 in the aggregate; or (j) entering into any Contract to do any of the foregoing; provided that the term “Restricted Event” does not include actions contemplated by or disclosed in this Agreement or Disclosure Schedule.

“Returns” means any return (including any information return), report, statement, schedule, notice, form or other document or information filed with or submitted to, or required to

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be filed with or submitted to, any Governmental Body by either Seller or any Subsidiary in connection with the determination, assessment, collection or payment of any Tax.

“Review Period” has the meaning set forth in Section 1.4 of this Agreement.

“Seller” has the meaning set forth in the first paragraph of this Agreement.

“Sellers” has the meaning set forth in the first paragraph of this Agreement.

“Sellers’ Knowledge” means the actual knowledge of Steven L. Johns, James H. Kinnett and/or Andrew G. Gorogiani.

“Sellers’ Representative” has the meaning set forth in Section 4.7(a).

“Shareholders’ Representative” has the meaning set forth in Section 4.6(a) of this Agreement.

“Subsidiary” has the meaning set forth in the Preamble.

“Subsidiaries” has the meaning set forth in the Preamble.

“Tax” means any tax (including any income tax, capital gains tax, payroll tax, value-added tax, sales tax, use tax, personal property tax, property tax, gift tax or estate tax), levy, assessment, tariff, duty (including any customs duty), deficiency or other fee, and any related charge or amount (including any fine, penalty or interest), imposed, assessed or collected by or under the authority of any Governmental Body or payable pursuant to any tax-sharing agreement or any other Contract relating to the sharing of payment of any such tax, levy, assessment, tariff, duty, deficiency or fee.

“Threshold Amount” has the meaning set forth in Section 7.4 of this Agreement.

“Transaction Documents” means this Agreement and all other Contracts and documents to be executed and delivered by any Party or any Party’s Affiliates or Representatives in connection with the consummation of the transactions contemplated by this Agreement.

ARTICLE 9 – GENERAL

Section 9.1 Survival of Representations and Warranties The representations and warranties made by each Party in this Agreement will survive the Closing until April 30, 2009, at which time they will expire except that Sellers’ representations and warranties in Section 2.6 will survive until the expiration of the statute of limitations applicable to claims thereunder, and Sellers’ representations and warranties in Section 2.2 will survive indefinitely. No claim for a breach of a representation or warranty may be made after termination of such survival period. The making of a claim for indemnification under Article 7 will toll the running of the foregoing limitation period with respect to such claim. For purposes of the preceding sentence, a claim will

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be deemed to be made upon the commencement of an independent judicial Proceeding with respect to the claim or receipt by the Party from whom indemnification is sought of a written notice of claim for indemnification setting forth in reasonable detail the factual and contractual bases for the claim.

Section 9.2 Binding Effect; Benefits; Assignment. All of the terms of this Agreement will be binding upon, inure to the benefit of and be enforceable by and against the successors and authorized assigns of Buyer and Sellers. Nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies under or by reason of this Agreement, this Agreement being for the exclusive benefit of the Parties and their respective successors and assigns. Neither Buyer nor Sellers will assign any of its rights or obligations under this Agreement to any other Person without the prior written consent of the other, and any assignment without such consent will be void ab initio, except that Buyer may assign the Agreement to a wholly-owned subsidiary of Buyer provided that no such assignment will in any manner limit Buyer’s obligations hereunder and Buyer guarantees the performance of its assignee and that Sellers may assign its rights and obligations to any entity designed to liquidate the companies.

Section 9.3 Entire Agreement. This Agreement, including the exhibits and schedules to this Agreement (including the Disclosure Schedule), sets forth the entire agreement and understanding of the Parties with respect to the transactions contemplated by this Agreement and supersedes all prior agreements, arrangements and understandings relating to the transactions contemplated by this Agreement. No representation, promise, inducement or statement of intention has been made by either Party, except as expressly set forth in this Agreement, and no Party will be bound by or liable for any alleged representation, promise, inducement or statement of intention not so set forth.

Section 9.4 Amendment and Waiver. This Agreement may be amended, modified, superseded or canceled and any of its provisions may be waived only by a written instrument executed by the Parties or, in the case of a waiver, by or on behalf of the Party waiving compliance. The failure of either Party at any time to require performance of any provision of this Agreement will in no manner affect the right of that Party at a later time to enforce the same or a different provision. No waiver by either Party of any condition or any breach of any provision of this Agreement, in any one or more instances, will be deemed to be or construed as a further or continuing waiver of any such condition or of any breach of the same or a different provision.

Section 9.5 Governing Legal Requirement; Jurisdiction and Venue. This Agreement will be governed by and construed in accordance with the laws of the state of Indiana as applicable to contracts made and to be performed in that state without regard to conflicts of laws principles. The Parties irrevocably agree and consent to the exclusive jurisdiction for the resolution of claims, disputes and controversies hereunder of the Circuit or Superior Court for Marion County, Indiana, and the United States District Court for the Southern District of Indiana. Any actions arising out of or relating in any way to any of the provisions of this Agreement or the transactions contemplated hereby be will brought and maintained in one of such courts. The Parties hereby irrevocably waive any objection that they may now have or hereafter acquire to the laying of venue of any such Proceeding brought in these courts and any

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claim that any Proceeding brought in any such court has been brought in an inconvenient forum. The Parties further agree that a final judgment in any Proceeding brought in any of these courts will be conclusive and binding upon them and may be enforced in any court of competent jurisdiction located elsewhere.

Section 9.6 Notices. All notices, requests, demands and other communications to be given pursuant to the terms of this Agreement must be in writing and will be deemed to have been duly given on the day it is delivered by hand, on the day it is sent by facsimile with confirmation, on the next business day after it is sent by a nationally recognized overnight mail service (delivery charge prepaid), or on the third business day after it is mailed first class, postage prepaid:

(a)	If to Sellers or Subsidiaries:	with a copy to:
	eGIX, Inc.	Barnes & Thornburg, LLP
	c/o Hall Render	11 S. Meridian Street
	1 American Square, Suite 2000	Indianapolis, Indiana 46204
	Indianapolis, IN 46282
	Attn: Jeffrey Peek	Attn: Marcus Chandler
	Telephone: 317.633.4884	Telephone: 317.236.1313
	Facsimile: 317.633.4878	Facsimile: 317.231.7433
(b)	If to Sellers’ Representative or Shareholders’ Representative:
	Steven L. Johns	Barnes & Thornburg
	c/o Hall Render	11 S. Meridian Street
	1 American Square, Ste 2000	Indianapolis, IN 46204
	Indianapolis, IN 46282
	Attn: Jeffrey Peek	Attn: Marcus Chandler
	Telephone: 317.633.4884	Telephone: 317.236.1313
	Facsimile: 317.633.4878	Facsimile: 317.231.7433
(c)	If to Buyer:	with a copy to:
	Cincinnati Bell Any Distance Inc.	Cincinnati Bell Any Distance Inc.
	221 East Fourth Street, 103-1240	221 East Fourth Street 103-1290
	Cincinnati, Ohio 45202	Cincinnati, Ohio 45202
	Attn: Shane A. Brown	Attn: Christopher J. Wilson, Esq.
	Telephone: (513)397-1118	Telephone: (513)397-6351
	Facsimile: (513)397-7638	Facsimile: (513)397-9557

A Party may change its address, telephone number or facsimile number by prior written notice to the other Party.

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Section 9.7 Counterparts. This Agreement may be executed in counterparts and by facsimile or Adobe^® portable document format, each of which when so executed will be deemed to be an original and such counterparts will together constitute one and the same agreement.

Section 9.8 Expenses. Each Party will pay its own respective expenses, costs and fees (including professional fees) incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement.

Section 9.9 Severability. Any provision of this Agreement that is contrary to Indiana law or otherwise unenforceable or incapable of performance will not affect the remaining provisions of this Agreement. In such event, the Parties will undertake to substitute for any such invalid provision or for any provision incapable of performance a provision which corresponds to the spirit and purpose of such invalid or unperformable provision as far as permitted under applicable Legal Requirements, so as to provide the Parties to the fullest extent possible the economic purpose and effect of this Agreement.

Section 9.10 Headings; Construction; Time of Essence. The headings of the sections and paragraphs in this Agreement have been inserted for convenience of reference only and will not restrict or otherwise modify any of the terms or provisions of this Agreement. The words “including”, “includes” or words of similar import whenever used in this Agreement do not limit the preceding words or terms. Notwithstanding anything contained herein to the contrary, if a subject matter is addressed in more than one representation and warranty in Article 2, Buyer will be entitled to rely only on the most specific representation and warranty addressing the matter. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.

Section 9.11 Certain Information. Neither the specification of any dollar amount in Article 2 nor the disclosure of a document or information in a Schedule comprising part of the Disclosure Schedule is intended, or will be construed or offered in any dispute between the Parties as evidence of, the material nature of such dollar amount, document or information, nor does it establish any standard of materiality upon which to judge the inclusion or omission of any similar documents or information in that Schedule or any other Schedule comprising the Disclosure Schedule. The information contained in this Agreement and the Disclosure Schedule is disclosed solely for the purposes of this Agreement, and no information contained herein or therein will be deemed to be an admission of any matter whatsoever, including of any violation of Legal Requirement or breach of any Contract. An exception or qualification set forth in the Disclosure Schedule with respect to a particular representation or warranty shall be deemed to be an exception or qualification with respect to all other applicable representations and warranties to the extent the description of the facts regarding the event, item or matter disclosed is adequate so as to make reasonably clear or otherwise make the Buyer reasonably aware that such exception or qualification is applicable to such other representations and warranties whether or not such exception or qualification is so numbered.

[Signature Pages Follow]

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The Parties have executed this Asset Purchase Agreement as of the date stated in the first paragraph of this Agreement.

Cincinnati Bell Any Distance, Inc.
By:	/s/ Shane A. Brown
	Shane A. Brown
	Its:	VP Business Development
	“Buyer”
eGIX, Inc.
By:	/s/ Steven L. Johns
	Its:	President & CEO
eGIX Network Services, Inc.
By:	/s/ Steven L. Johns
	Its:	President & CEO
“Sellers”
eGIX Network Services of Virginia, Inc.
By:	/s/ Steven L. Johns
	Its:	President & CEO
@Link Networks, Inc.
By:	/s/ Steven L. Johns
	Its:	President & CEO

DSL Indiana Acquisitions, LLC
By:	/s/ Steven L. Johns
	Its:	Managing Member
“Subsidiaries”
/s/ John F. Hays
John F. Hays
/s/ Jeffrey Peek
Jeffrey Peek, Co-Trustee of Laurence W. Grabb Credit Trust
/s/ Sally Derflinger
Sally Derflinger, Co-Trustee of Laurence W. Grabb Credit Trust
/s/ Steven L. Johns
Steven L. Johns
/s/ James H. Kinnett
James H. Kinnett
“Shareholders”

EX-10.II.B

Exhibit 10(ii)(B)

ASSET PURCHASE AGREEMENT

between

GRAMTEL USA, INC.

and

BCSIVA INC.

ASSET PURCHASE AGREEMENT

THIS AGREEMENT (this “Agreement”), dated as of the 31^st day of December 2007, is made by and among GramTel USA, Inc., a Delaware corporation (the “Company”), Jordan Industries, Inc., (“Jordan”) (solely for the purpose of agreeing to the provisions of Section 6.5 and Section 6.9) and BCSIVA Inc., a Virginia corporation (“Buyer”).

ARTICLE I

PURCHASE AND SALE; PRICE

1.1 Purchase and Sale of Assets. In consideration of the Purchase Price (hereinafter defined), and subject to the terms and conditions set forth in this Agreement, at the Closing (hereinafter defined) except for the Excluded Assets (hereinafter defined), the Company will sell to Buyer and Buyer will purchase from the Company all or substantially all of the assets (real and personal, tangible and intangible), properties and business of the Company, as the same are more specifically set forth in Section 1.2 hereof.

1.2 Overview of Purchased Assets. The assets to be purchased from the Company are all of the Company’s assets, properties and rights (real and personal, tangible and intangible) owned or used primarily in the conduct of its business as of the Closing Date (the “Business”) except for the Excluded Assets and those assets sold, transferred or disposed of in the ordinary and regular course of business in accordance with Section 4.1 below (hereinafter collectively referred to as the “Purchased Assets”). The Purchased Assets shall include, without limitation, the following at the Closing Date:

(a) Equipment. All of the Company’s machinery, equipment, telephone numbers (toll-free and others) and other personal property and all of the Company’s fixed assets, including those listed in Exhibit 1.2(a) including all warranty claims with respect to the Company’s fixed assets.

(b) Business Records. All of the Company’s records (other than income and franchise tax returns and related work papers) relating to the Business, including with respect to customers and customer relationships.

(c) Inventory. All inventories and other supplies pertaining to the Company’s operations on hand or at third party premises or in transit including raw materials, work in process and finished goods, and including any rights of the Company to warranties received from suppliers.

(d) Intellectual Property. All of the Company’s right, title and interest in and to all United States and foreign registered, pending and common law, trade names,

service marks, trademarks, trade dress, logos, domain names, the GramTel name and proprietary designations, including all of the good will of the Company’s Business associated therewith, all United States and foreign issued and pending patents, all United States and foreign copyrights and copyrightable material, whether or not registered, rights of publicity, franchises and all technology rights and licenses, including computer software and programs (including all source codes and object codes), websites (all as set forth in Exhibit 2.12) and all proprietary know-how, trade secrets, inventions, discoveries, developments, research, and formulas, whether or not patentable, and all other proprietary information or property relating to the Company’s current Business or business prospects and any improvements, updates, enhancements or modifications related to any of the foregoing (hereinafter collectively referred to as “Intellectual Property Assets”).

(e) Other Intangibles. All of the Company’s right, title and interest in and to franchises, licenses, permits, options and any inventions, developments and ideas.

(f) Contracts; Materials; Etc. Except for the contracts set forth on Exhibit 1.2(f) (the “Excluded Contracts”), all of the Company’s rights and privileges arising from its unshipped orders, customer contracts, customer lists, outstanding offers, sales records, advertising materials, and all agreements for the sale, purchase or lease of goods or services, causes of action (other than causes of action arising from or relating to Excluded Assets, Excluded Contracts or Excluded Liabilities) and all other contracts, agreements, assets and things of value now beneficially owned or acquired by the Company at or before the Closing Date, whether tangible or intangible, real or personal, inchoate, partial or complete, fixed or contingent, of every kind and description and wherever situated (all contracts of the Company which are not Excluded Contracts, collectively the “Contracts”),

(g) Real Property. All land, together with all buildings, structures, improvements and fixtures located thereon, and all easements and other rights and interests appurtenant thereto, owned by the Company and used in the Business of the Company as identified on Exhibit 1.2(g) (the “Real Property”).

(h) Accounts Receivable. All accounts receivable and rights to payment from services performed by the Company, whether billed or unbilled, and whether or not accrued or on the books and records of the Company, and all reserves and allowances accrued therefor (“Receivables”).

(i) Long-Term Assets and Current Assets. All long-term assets together with all Current Assets (as defined in Section 1.7 below) on the books and records of the Company, to the extent not specified above.

(j) Post Office Boxes. The Company’s Post Office box or boxes.

1.3 Confirmation of Assets Excluded From Purchased Assets. The parties hereto acknowledge and agree that the Purchase Price (hereinafter defined) has been calculated,

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and is being paid, based on the agreement and understanding that the Purchased Assets do not include those assets set forth on Exhibit 1.3 (the “Excluded Assets”).

1.4 Purchase Price. In consideration of the sale, conveyance, transfer and delivery of the Purchased Assets provided for in this Agreement, Buyer agrees to pay an aggregate purchase price of $19,900,000, subject to the adjustments set forth below in this Section 1.4 and in Section 1.7 (the “Purchase Price”). At Closing, the Purchase Price shall be paid as follows:

(a) The Buyer shall wire such funds as are sufficient to satisfy the payoff amounts identified in the payoff letters received from 1^st Source Bank as contemplated by Section 6.7 below and any other Liens to be paid off at Closing as may be agreed upon by the Company and Buyer;

(b) The Buyer will hold back the sum of $200,000 (the “Chicago Holdback”) to be paid to the Company in accordance with the payment schedule identified on Exhibit 6.10 within ten (10) days of the successful renegotiation (in whole or in part) of the Chicago Lease to incorporate some or all of the terms set forth in Section 6.10 below.

(c) The Buyer will deposit the sum of $400,000 (the “Capex Escrow”) in immediately available funds by wire transfer to the bank account of the Escrow Agent (defined below) to be held and disbursed in accordance with the terms and conditions of the Escrow Agreement (defined below) and Section 6.14 below.

(d) The Buyer will deposit the sum of $300,000 (the “Consents Escrow”) in immediately available funds by wire transfer to the bank account of the Escrow Agent to be held and disbursed in accordance with the terms and conditions of the Escrow Agreement and Section 1.8, below; and

(e) The remaining amount, in immediately available funds by wire transfer to the Company.

1.5 Assumption of Liabilities. At the Closing, Buyer agrees that it will assume, discharge, and will indemnify the Company against the following liabilities and obligations: (a) all liabilities and obligations arising in connection with the Purchased Assets from events applicable to any and all periods after the Closing, including, without limitation, all Contracts included in the Purchased Assets and (b) the Current Liabilities (as defined in Section 1.7, below), accrued as of Closing in the ordinary course of business in accordance with Section 2.15 and 4.1 below, (the “Assumed Liabilities”). Other than the Assumed Liabilities, Buyer shall not assume any other obligations of the Company hereunder and notwithstanding the foregoing, Buyer expressly excludes and will not assume, discharge or indemnify the Company against any liabilities or obligations arising in connection with any Pre-existing Environmental Conditions as defined in Section 2.13(a)(iii) (all liabilities not expressly assumed as Assumed Liabilities hereunder, the “Excluded Liabilities”).

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1.6 Purchase Price Allocation. The Company shall provide a proposed allocation of the Purchase Price (and the amount of Assumed Liabilities that are liabilities for Federal income tax purposes) among the Purchased Assets in accordance with Code Section 1060 (the “Allocation”) to Buyer within thirty (30) days following the Closing Date. Buyer shall propose any changes to the proposed final Allocation within thirty (30) days thereafter, together with a reasonably detailed explanation of the reasons therefore. Buyer and the Company will negotiate in good faith to resolve any disputed items. In the event Buyer and the Company cannot agree on the Allocation, the disputed items shall be submitted to an Independent Accountant (hereinafter defined) for resolution in accordance with the principles of Section 1.7(a). Each of Buyer and the Company shall timely file IRS Form 8594 and all other Federal, state, local and foreign tax returns in accordance with the final Allocation, and neither Buyer or the Company nor any of their respective affiliates or representatives shall take any position on any tax return or in any examination, claim for refund or tax contest (administrative or judicial) that is inconsistent with the final Allocation. The Company and Buyer agree to promptly provide the other party with any additional information as required to complete Form 8594.

1.7 Working Capital Adjustment. The Purchase Price shall be adjusted after the Closing if the Net Working Capital (hereinafter defined) of the Company as of the Closing is less than Three Hundred Thousand Dollars ($300,000) (the “Minimum Target Net Working Capital”) or more than Six Hundred Thousand Dollars ($600,000) (the “Maximum Target Net Working Capital”), in accordance with this Section 1.7. For purposes of this Agreement, “Net Working Capital” shall mean the Current Assets of the Company minus the Current Liabilities of the Company which constitute Assumed Liabilities, in each case as determined in accordance with Generally Accepted Accounting Principles. For purposes of this Agreement, “Current Assets” means Receivables less reserves and allowances, pre-paid expenses which accrue or will accrue to the benefit of Buyer (including, but not limited to prepaid advertising, prepaid maintenance and prepaid connectivity), sales commission advances, and vendor and real estate deposits, all determined in accordance with Generally Accepted Accounting Principles, but specifically excluding cash, prepaid insurance, the Signal Hill deposit and the No.place.com asset. For purposes of this Agreement, “Current Liabilities” shall mean trade accounts payable, advance billings and customer deposits and other current liabilities on the books and records of the Company, in each case accrued in accordance with Sections 2.15 and 4.1 and in accordance with Generally Accepted Accounting Principles (other than for advance billings, which shall be calculated in accordance with the Company’s past practice), but specifically excluding payroll accruals, obligations to employees for wages, sales commissions, bonuses, benefits, vacations or otherwise, any intercompany liabilities or accounts payable and any accrued interest thereon, any line of credit or other debt borrowings and any accrued interest thereon, and any tax liabilities or accruals and any accrued interest thereon. An example calculation of the Company’s Net Working Capital as of November 30, 2007 is set forth on Exhibit 1.7.

(a) Procedure. After the Closing, at no cost to the Company, Buyer will prepare a calculation of the Net Working Capital of the Company as of the Closing Date (the “Closing Calculation”). The Closing Calculation will be completed within forty-five (45) days after the Closing Date and delivered to the Company for its review. To facilitate such review, Buyer shall make its work papers relating to the Closing Calculation available to the Company and its accountants. The Company shall then have

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thirty (30) days from the receipt of same to notify Buyer of any objections to or disputes of the Closing Calculation. If the Company contests the Closing Calculation, the parties shall use reasonable efforts to resolve their dispute. If final resolution is not obtained within ten (10) days following the Company’s notice to Buyer of its objections, Buyer and the Company shall retain a mutually acceptable national independent accounting firm (the “Independent Accountant”) to resolve any remaining dispute. If Buyer and the Company are unable to agree upon an Independent Accountant, each of Buyer and the Company shall appoint an independent accounting firm, which independent accounting firms shall then select a third independent accounting firm which shall serve as the Independent Accountant pursuant to this Agreement. The Independent Accountant shall have thirty (30) days after submission of the dispute to resolve the disputed items in writing, with a copy to all parties. The determination of the Independent Accountant shall be final and binding on the parties, and the costs of the Independent Accountant shall be borne by the party whose position is determined to be least correct by the Independent Accountant.

(b) Adjustment. After the final determination of the Closing Calculation, the Purchase Price shall be (i) increased by the excess, if any, of the Net Working Capital of the Company as of the Closing Date as reflected in the Closing Calculation over the Maximum Target Net Working Capital (any such excess, a “Net Working Capital Excess”), or (ii) decreased by the shortfall, if any, of the Net Working Capital of the Company as of the Closing Date as reflected in the Closing Calculation under the Minimum Target Net Working Capital (any such deficiency, a “Net Working Capital Deficiency”). If there is a Net Working Capital Excess, Buyer shall promptly (but in any event within ten (10) business days following the final determination of the Closing Calculation) pay to the Company, in cash to an account designated by the Company, the amount of such Net Working Capital Excess. If there is a Net Working Capital Deficiency, the Company shall promptly (but in any event within ten (10) business days following final determination of the Closing Calculation) pay to Buyer, in cash to an account designated by Buyer, the amount of such Net Working Capital Deficiency.

1.8 Consents Escrow. Certain consents to transactions contemplated by this Agreement may be required from parties to contracts, leases, licenses or other agreements to which the Company is a party (including the Contracts). Prior to the Closing, the Company shall use commercially reasonable efforts to obtain the Material Consents (defined in Section 7.2 below); including, without limitation, those Material Consents that relate to customer Contracts (the “Material Customer Consents”); provided, that such efforts shall not include any requirement of the Company to expend money, commence any litigation or offer or grant any accommodation (financial or otherwise) to any third party. After the Closing, Buyer shall use commercially reasonable efforts to obtain those Consents (defined below) that relate to customer Contracts (the “Customer Consents”) (including, without limitation, any Material Customer Consents) which have not been obtained prior to Closing; provided, that such efforts shall not include any requirement of the Buyer to expend money, commence any litigation or offer or grant any accommodation (financial or otherwise) to any third party. Buyer shall provide periodic reports to the Company on the progress of such consent process (with such reports to in

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no event be less frequent than weekly) and shall, upon request of the Company, allow the Company to participate with Buyer in such consent process provided that the Company shall participate to the extent reasonably requested by Buyer. With respect to the Material Customer Consents that have not been obtained prior to Closing, upon Buyer obtaining a Material Customer Consent as specified on Exhibit 1.8 hereto, the Company and Buyer shall cause distributions to be made to the Company from the Consents Escrow in an amount equal to the amount set forth on Exhibit 1.8 for that respective Material Customer Consent. Thereafter, on March 31, 2008, the Buyer shall provide to the Company a list of all customer Contracts: (i) for which Customer Consents (which include, for the avoidance of doubt, Material Customer Consents) have not been obtained as of such date and which were terminable by the customer as a result of the failure to obtain Consent and were in fact terminated by the customer for such reason, or (ii) which were terminated by the customer pursuant to the exercise of a change-in-control right under the Contract (collectively, the “Non-Consenting Customers”). The Company shall have ten (10) business days to object to such list and, if so objected, the parties will meet in good faith to resolve such issue. In the event no resolution is reached within fifteen (15) business days of such objection, the dispute shall be resolved in accordance with the provisions of this Agreement or as otherwise agreed to by the parties. Upon resolution, Buyer shall make a claim against the Consents Escrow in an amount equal to four (4) times the amount of recurring monthly revenue (as of the month in which Closing occurs) attributable to the Non-Consenting Customers and the remainder of the Consents Escrow shall be payable to the Company within ten (10) business days of such determination. The Company and Buyer agree to execute such joint written instructions under the Escrow Agreement as may be reasonably necessary to effect the payments described in this Section 1.8. For the avoidance of doubt, the Consents Escrow shall be Buyer’s sole recourse with respect to any customer revenue lost or not transferred to Buyer as a result of the failure to obtain the Customer Consents, and Buyer shall bear all risk for any and all such amounts in excess of the Consents Escrow. In addition, Buyer shall have no recourse against the Consents Escrow with respect to the failure to obtain Consent for assignment of any non-customer Contract required in connection with the transactions contemplated by this Agreement. For purposes of this Agreement, “Consent” shall mean the consent or approval required of a third party, or waiver of a right by a third party such as a right to terminate an agreement under a change-of-control provision, in each case as a result of the consummation of the transactions contemplated by this Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF COMPANY

Subject to the provisions of Article XI, the Company hereby represents and warrants to Buyer, as follows:

2.1 Corporate Organization, etc. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. The Company has all requisite corporate power and authority to carry on its business as it is now being conducted and to own, operate and lease its properties and assets and the Company is qualified as a foreign corporation in the States of Illinois and Indiana. Exhibit 2.1 contains complete and correct copies of the Company’s (i) certificate of incorporation; (ii) bylaws; (iii) certificates of authority for the States of Illinois and Indiana, each amended to date; and (iv) all

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federal, state, local and foreign licenses, permits or other approvals required for the operation of its business as now being conducted.

2.2 Capital Stock; Options. The Company has authorized 10,000,000 shares of Common Stock, par value $0.01 (the “Common Stock”), 500 shares of Class A Preferred Stock, par value $0.01 (the “Class A Preferred Stock”), and 10,500 shares of Class B Preferred Stock, par value $0.01 (the “Class B Preferred Stock” and together with the Common Stock and the Class A Preferred Stock, the “Shares”). Of such authorized shares, 9,000,000 shares of Common Stock are issued and outstanding, 450,000 shares of Common Stock are held in treasury by the Company, all of the shares of Class A Preferred Stock are issued and outstanding and no shares of Class B Preferred Stock are issued and outstanding. All of the Shares are validly issued, fully paid and nonassessable and are owned by the entities set forth on Exhibit 2.2, free and clear of all encumbrances or claims. There are no issued and outstanding options, warrants, rights, securities, contracts, commitments, understandings or arrangements by which the Company is bound to issue any additional shares of its capital stock or options to purchase shares of its capital stock.

2.3 Subsidiaries. The Company has no subsidiaries.

2.4 Authorization, etc. The Company has full power and authority to enter into this Agreement and to carry out the transactions contemplated hereby.

2.5 No Violation. Except as set forth in Exhibit 2.5, the Company is not subject to or obligated under any article or certificate of incorporation, bylaw or any material agreement or instrument, or any material license, franchise or permit, which would be breached or violated by Company’s execution, delivery and performance of this Agreement.

2.6 Governmental Authorities. The Company is in material compliance with all laws and orders applicable to the Business, and is not required to submit any notice, report or other filing with, and no consent, approval or authorization is required, by any governmental or regulatory authority in connection with their execution, delivery, consummation or performance of this Agreement or the transactions contemplated hereby.

2.7 Contracts. Exhibit 2.7 sets forth a list of all written Contracts to which the Company is bound which:

(a) Have a remaining obligation in excess of $50,000;

(b) Are agency, dealer, sales representative, marketing or other similar agreements;

(c) Is an agreement for the lease of personal property to or from any individual, partnership, corporation, limited liability company, association, trust, association, joint venture, governmental entity (or any department, agency or political division thereof) or other entity (collectively, a “Person”);

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(d) Is an agreement for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will occur over a period of more than one (1) year or involve consideration in excess of $10,000;

(e) Is an agreement under which the Company has created, incurred, assumed or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation which it has imposed a security interest on any of the Purchased Assets;

(f) Is an agreement for the lease of real property; or

(g) Involves any restriction with respect to the geographical area, scope or type of business in which the Company may operate.

True and complete copies of each Contract have been delivered to Buyer. Assuming due and valid execution by the other parties thereto, each Contract is, in all material respects, valid, in good standing and enforceable by and against the Company in accordance with its terms, subject to (i) bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors’ rights generally and (ii) equitable principles. Neither the Company, nor to the Company’s knowledge any other party to any Contract, is in breach of any Contract.

2.8 Title. Except with respect to real property, which is addressed in Section 2.14 below, the Company has good title to all the Purchased Assets (except properties sold or otherwise disposed of as permitted by Section 4.1 below), free and clear of all mortgages, security interests, liens, pledges, claims, escrows, options, rights of first refusal, indentures, easements, licenses, security agreements or other agreements, arrangements, contracts, commitments, understandings, obligations, charges or encumbrances of any kind or character (collectively, “Liens”), except for Permitted Personal Property Liens. “Permitted Personal Property Liens” shall mean (i) Liens for Taxes, assessments or other governmental charges not yet delinquent; (ii) title of a lessor under an operating lease; and (iii) Liens set forth on Exhibit 2.8, which Liens set forth on Exhibit 2.8 shall be removed at or in connection with the Closing as set forth in Section 6.7 below.

2.9 Litigation. Except as set forth in Exhibit 2.9, there is no lawsuit pending or, to the Company’s knowledge threatened against the Company, nor to the Company’s knowledge is there any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator outstanding against the Company having, or which, insofar as can be reasonably foreseen, in the future may have, any adverse effect on the ability of the Company to operate the Business.

2.10 Tax Matters. The term “Taxes” means all net income, capital gains, gross income, gross receipts, sales, use, transfer, ad valorem, franchise, profits, license, capital, withholding, payroll, employment, excise, goods and services, severance, stamp, occupation, premium, property, windfall profits, customs, duties, regulatory assessments or other taxes, together with any interest, fines and any penalties, additions to tax or additional amounts incurred or accrued under applicable law or assessed, charged or imposed by any governmental authority, domestic or foreign, provided that any interest, penalties, additions to tax or additional

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amounts that relate to Taxes for any taxable period (including any portion of any taxable period ending on or before the Closing Date) shall be deemed to be Taxes for such period, regardless of when such items are incurred, accrued, assessed or imposed. Except as stated in Exhibit 2.10:

(a) The Company has duly and timely filed true, correct and complete tax returns, reports or estimates, all prepared in accordance with applicable laws, for all years and periods and for all jurisdictions (whether federal, state, local or foreign) in which any such returns, reports or estimates were due. All Taxes shown as due and payable on such returns, reports and estimates have been paid.

(b) The Company has (i) withheld all required amounts from its employees, agents, contractors and nonresidents and remitted such amounts to the proper agencies; (ii) paid all employer contributions and premiums and (iii) filed all federal, state, local and foreign returns and reports with respect to employee income tax withholding, and social security and unemployment taxes and premiums, all in compliance with the withholding tax provisions of the Internal Revenue Code of 1986, as amended (the “Code”), as in effect for the applicable year and other applicable laws.

(c) No asset of the Company is tax exempt use property under Code Section 168(h). No portion of the cost of any asset of the Company has been financed directly or indirectly from the proceeds of any tax exempt state or local government obligation described in Code Section 103(a).

(d) None of the assets of the Company is property that the Company is required to treat as being owned by any other person pursuant to the safe harbor lease provision of former Code Section 168(f)(8).

(e) The Company is not a foreign person within the meaning of Code Section 1445.

(f) The Company has withheld or collected all Taxes required to be withheld or collected with respect to the Business, including sales and use Taxes, and has properly remitted such Taxes to the proper taxing authority.

2.11 Employment and Benefit Matters.

(a) Exhibit 2.11 lists all of the following: (i) employment contracts, or contractual arrangements with any agent, employee, officer, director or shareholder of the Company; (ii) contracts or arrangements with any Person providing for bonuses, profit sharing payments, deferred compensation, stock options, stock purchase rights, retainer, consulting, incentive, severance pay or retirement benefits, life, medical or other insurance or any other employee benefits or any other payments, “fringe benefits” or perquisites which are not terminable at will without liability to the Company or which are subject to ERISA. The contracts or arrangements referred to in the foregoing clause (ii) are herein called “Benefit Plans”.

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(b) Except as set forth on Exhibit 2.11, neither the Company, nor any of its ERISA affiliates, has any union contracts, collective bargaining, union or labor agreements or other Contract with any group of employees, labor union or employee representative(s), nor is the Company currently engaged in any labor negotiations, excepting minor grievances, nor, to the Company’s knowledge, is the Company the subject of any union organization effort. The Company is in material compliance with applicable legal requirements respecting employment and employment practices and terms and conditions of employment, including without limitation, health and safety and wages and hours. No unfair labor practice complaint is pending against the Company before the National Labor Relations Board or other Governmental Agency. There is no labor dispute, strike, slowdown or work stoppage pending or, to the Company’s knowledge, threatened against the Company.

(c) True and correct copies of each of the Benefit Plans listed in Exhibit 2.11 that is subject to ERISA (the “Company ERISA Plan”) and related trust agreements, insurance contracts, and summary descriptions have been delivered or made available to Buyer by the Company. The Company has also delivered or made available to Buyer a copy of the most recently filed IRS Forms 5500, with attached financial statement and accountant’s opinion, if applicable, for each of the Company ERISA Plans. The Company has also delivered or made available to Buyer a copy of, in the case of each of the Company ERISA Plans intended to qualify under Section 401(a) of the Code, the most recent Internal Revenue Service letter as to its qualification under Section 401(a) of the Code. To the Company’s knowledge, nothing has occurred prior to or since the issuance of such letters that could reasonably cause the loss of qualification under the Code of any of such plans.

(d) Except as disclosed in Exhibit 2.11, none of the Company ERISA Plans has participated in, engaged in or been a party to any prohibited transaction as defined in ERISA or the Code, and there are no claims pending or, to the Company’s knowledge, threatened, involving any Benefit Plan listed in Exhibit 2.11. To the Company’s knowledge, there have been no violations of any reporting or disclosure requirements with respect to any of the Company ERISA Plans.

2.12 Intellectual Property. The Company has good title to, and Exhibit 2.12 contains a detailed listing of, each copyright, trademark, trade name, service mark, domain name and patent (collectively “Intellectual Property Rights”) used in the operation of its business as currently conducted. Except as otherwise set forth on Exhibit 2.12, all of said Intellectual Property Rights are free and clear of all royalty obligations, security interests, liens and encumbrances. The Company has taken all reasonable action to protect against and defend against, and has no knowledge of, any conflicting use of any Intellectual Property Rights. The Company does not have nor does the Company utilize any Intellectual Property Rights except those which are set forth in Exhibit 2.12.

2.13 Environmental.

(a) For purposes of this Section:

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(i) “Hazardous Materials” means any hazardous, infectious or toxic substance, chemical, pollutant, contaminant, emission or waste which is regulated by any local, state or federal authority (“Governmental Authorities”). Hazardous Materials include, without limitation, anything which is: (1) defined as a “pollutant” pursuant to 33 U.S.C. § 1362(6); (2) defined as a “hazardous waste” pursuant to 42 U.S.C. § 6921; (3) defined as a “regulated substance” pursuant to 42 U.S.C. § 6991; (4) defined as a “hazardous substance” pursuant to 42 U.S.C. § 9601(14); (5) defined as a “pollutant or contaminant” pursuant to 42 U.S.C. § 9601(33); (6) petroleum; (7) asbestos; and (8) polychlorinated biphenyl.

(ii) “Environmental Laws and Regulations” means all limitations, restrictions, conditions, standards, prohibitions, requirements and obligations contained in any laws relating to the regulation or abatement of pollution, or protecting the environment including, without limitation, (1) the Federal Clean Air Act, 42 U.S.C. §§ 7401 et seq.; (2) the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601 et seq.; (3) the Federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. §§ 1101 et seq.; (4) the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq.; (5) the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq.; (6) the Solid Waste Disposal Act, 42 U.S.C. §§ 6901 et seq.; (7) the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; (8) laws relating in whole or part to emissions, discharges, releases, or threatened releases of any Hazardous Material; and (9) laws relating in whole or part to the manufacture, processing, distribution, use, coverage, disposal, transportation, storage or handling of any Hazardous Material.

(iii) “Pre-existing Environmental Condition” means the presence as of the Closing Date of any Hazardous Materials in, on, under or about (A) any real property currently owned by the Company and to be transferred to Buyer in connection with this Agreement, and (B) solely to the extent the Hazardous Materials were released, discharged or disposed during the Company’s tenancy, any leased real property for which Buyer will assume the lease from the Company following the Closing Date.

(b) Except as set forth on Exhibit 2.13, there are no pending or, to the Company’s knowledge threatened, claims, investigations, litigations, administrative proceedings or orders relating to any Hazardous Materials (collectively, “Environmental Claims”) asserted against the Company, or relating to any real property currently or heretofore owned, leased or operated by the Company. Except as set forth on Exhibit 2.13, the Company is not liable, and has not assumed any liability of any person for investigation, cleanup, compliance or required capital expenditures in connection with any Environmental Claim or under any Environmental Laws and Regulations.

(c) Except as set forth on Exhibit 2.13: (i) no Hazardous Materials are or previously have been stored in any aboveground or underground storage tanks, containers or surface impoundments that are located on real property currently or

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formerly owned by the Company, or to the Company’s knowledge any property leased by the Company; and (ii) no part of real property currently or formerly owned by the Company, or to the Company’s knowledge any property leased by the Company, including the soil and groundwater located thereon, contains Hazardous Materials at concentrations or in amounts that any Environmental Law or Regulation would require any person to investigate or remediate, (iii) the Company has not received any notices of violation, warning letters, orders, or civil or administrative penalties from Governmental Authorities under any Environmental Laws and Regulations regarding its operation and its operations are in compliance with all applicable Environmental Laws and Regulations, (iv) the Company holds all permits, licenses and authorizations required under any Environmental Laws and Regulations and there are currently no proceedings to revoke or deny such permits, licenses and authorizations, and (v) there are no asbestos containing materials or polychlorinated biphehyls present in or on any real property currently or formerly owned by the Company, or to the Company’s knowledge, any real property leased by the Company.

2.14 Real Property. Except as set forth on Exhibit 2.14:

(a) The Company has good title to the Real Property free and clear of all Liens, except Real Property Permitted Liens. “Real Property Permitted Liens” shall mean (i) all exceptions, restrictions, easements and rights of way disclosed in policies of title insurance; (ii) Liens for Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings; (iii) landlords’ Liens arising or incurred in the ordinary course of business; and (iv) Liens set forth on Exhibit 2.14 which such Liens set forth on Exhibit 2.14 shall be removed at or in connection with the Closing.

(b) The Company has not leased or otherwise granted to any Person the right to use or occupy the Real Property or any portion thereof; and

(c) There are no outstanding options, rights of first offer or rights of first refusal to purchase the Real Property or any portion thereof or interest therein.

2.15 Financial Statements; Absence of Changes.

(a) Exhibit 2.15(a)(i) contains correct and complete copies of the consolidated statements of the Company and its subsidiaries of its: (i) balance sheet; and (ii) income statement; and (iii) cash flows (the “Statements”), in each case as of and for the fiscal year ended December 31, 2006 and the unaudited Statements as of and for the ten (10) months ended October 31, 2007 (collectively the “Financial Statements”). The Financial Statements were prepared in conformity with Generally Accepted Accounting Principles, except as set forth on Exhibit 2.15(a)(ii) (the “GAAP Exceptions”).

(b) Except as set forth on Exhibit 2.15(b), the Financial Statements present fairly, in all material respects, the consolidated and consolidating financial condition and results of operations of the Company and its subsidiaries as of and for the periods then ended in accordance with Generally Accepted Accounting Principles.

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(c) Exhibit 2.15(c) is an accurate and complete schedule of all Receivables as of November 30, 2007. Except as set forth on Exhibit 2.15(c), each Receivable represents a sale made in the ordinary course of business for a bona fide sale of goods or for services performed.

(d) Except as set forth in the balance sheets included in the Financial Statements or on Exhibit 2.15(d), there are no liabilities, debts, claims or obligations, whether accrued, absolute, contingent or otherwise, whether due or to become due that are required to be included in such Financial Statements in accordance with Generally Accepted Accounting Principles.

(e) Except as contemplated by this Agreement and as set forth in Exhibit 2.15(e), since October 31, 2007, the Company has operated the Business in the ordinary course consistent with past practice and except as set forth in Exhibit 2.15(e):

(i) There has been no material destruction, damage or other loss to any material assets;

(ii) Other than in the ordinary course of business, there has been no sale, lease, or other disposition of any asset;

(iii) The Company has not waived, released or canceled any claims against third parties or debts owing to it or any rights which have a value in excess of $10,000 individually or $50,000 in the aggregate;

(iv) The Company has not made any borrowing or incurred any debt (other than under the arrangements with 1^st Source identified in this Agreement or the Exhibits hereto) or otherwise become liable for the obligations of any other person (other than by operation of law pursuant to the mergers contemplated by Section 6.8);

(v) The Company has not made any loan, advance or capital contribution to, or investment in, any other person (other than advances to employees made in the ordinary course of business);

(vi) The Company has not granted or permitted the creation of any Lien, other than Permitted Personal Property Liens;

(vii) The Company has not made any material changes in its accounting systems, policies, principles or practices, other than any changes required by applicable accounting standards; and

(viii) The Company has not contractually committed or agreed to any of the foregoing in the future.

2.16 Knowledge. Whenever a representation and warranty made by the Company herein refers to the knowledge or expectation of the Company, such knowledge or

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expectation shall be deemed to consist only of the actual knowledge or expectation of Tracy D. Graham and Lisa Ondrula.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to the Company, as follows:

3.1 Corporate Organization, etc. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and will be qualified to do business in the States of Illinois and Indiana on the Closing Date.

3.2 Capitalization. As of the date of this Agreement, Buyer has authorized capital stock consisting of 5,000 shares of Common Stock, no par value per share.

3.3 Authorization, etc. Buyer has full corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby. The Board of Directors of Buyer has duly authorized the execution and delivery of this Agreement and the transactions contemplated hereby, and no other corporate proceedings on its part are necessary to authorize this Agreement and the transactions contemplated hereby.

3.4 No Violation. Buyer is not subject to or obligated under any certificate of incorporation, bylaw, law, or any agreement or instrument, or any license, franchise or permit, which would be breached or violated by its execution, delivery or performance of this Agreement. Buyer will comply with all laws in connection with its execution, delivery and performance of this Agreement and the transactions contemplated hereby.

3.5 Governmental Authorities. Buyer is not required to submit any notice, report or other filing with and no consent, approval or authorization is required by any governmental or regulatory authority in connection with Buyer’ execution or delivery of this Agreement or the consummation of the transactions contemplated hereby.

3.6 Financial Ability to Complete Transactions. Buyer has the financial capability to complete the transactions contemplated hereby, including, without limitation, the ability to pay the Purchase Price on the Closing Date.

3.7 No Knowledge of Breach of the Company’s Representation and Warranties. Neither Buyer nor any of its affiliates or representatives, including, without limitation, Shane Brown and Steve Holter (the “Buyer Affiliates”), are aware of any facts, events or occurrences which would cause the Company to be in breach of any of its representations and warranties contained in this Agreement and neither Buyer nor any of the Buyer Affiliates have any information which could cause them to believe that any of the representations and warranties of the Company contained in this Agreement are untrue.

3.8 Knowledge. Whenever a representation and warranty made by the Buyer herein refers to the knowledge or expectation of the Buyer, such knowledge or expectation shall

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be deemed to consist only of the actual knowledge or expectation of Shane Brown and Steve Holter.

ARTICLE IV

COVENANTS OF THE COMPANY

Except as otherwise consented to or approved by Buyer in writing, until the Closing, the Company covenants and agrees as follows:

4.1 Regular Course of Business.

(a) The Company will operate its business in the ordinary course, diligently and in good faith, consistent with past management practices; will not engage in any significant or unusual transaction; will not cancel, release, waive or compromise any debt, claim or right in its favor having a value in excess of $10,000 individually or $50,000 in the aggregate other than in the ordinary course of business; and will maintain the current insurance coverage of the Company up to the Closing Date.

(b) Without limiting the generality of clause (a), until the Closing Date, without the prior written consent of Buyer, the Company and its subsidiaries will not:

(i) do any act or omit to do any act, or permit any act or omission to act, which would cause a material breach of any of the Contracts;

(ii) sell, transfer, convey, assign or otherwise dispose of any assets with a fair market value in excess of $5,000 (without purchasing a replacement of the same or better quality and condition) other than for goods or inventory, including parts or supplies, sold or otherwise disposed of in the ordinary course of business and consistent with past practice;

(iii) except for capital improvements, purchases and expenditures permitted by clause (iv), purchase, lease or otherwise acquire any assets, except for any such transaction less than $5,000 individually in value or $25,000 in the aggregate in value, except for services acquired in the ordinary course of business and consistent with past practice for the purpose of supporting ongoing sales activities;

(iv) other than in the ordinary course of business and consistent with past practice, waive, release or cancel any claims against third parties for debts owing to it, or any rights which have a value of $5,000 individually or $25,000 in the aggregate;

(v) (A) make any borrowing, incur any debt (other than trade payables in the ordinary course of business and consistent with past practice); (B) assume, guarantee, endorse (except for the negotiation or collection of negotiable instruments in the ordinary course of business and consistent with past practice)

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or otherwise become liable (whether directly, contingently or otherwise) for the obligations of any other person; or (C) make any payment or repayment in respect of any indebtedness (other than trade payables and accrued expenses in the ordinary course of business and consistent with past practice);

(vi) grant or permit the creation of any Lien, except Personal Property Permitted Liens and Real Property Permitted Liens, over any of the Purchased Assets;

(vii) make any loan, advance or capital contribution to, or investment in, any other person other than in the ordinary course of business;

(viii) enter into, adopt, amend or terminate any bonus, profit sharing, compensation, termination, stock appreciation right, restricted stock, performance unit, pension, retirement, deferred compensation, employment, severance or other employee benefit agreement, trust, plan, fund or other arrangement for the benefit or welfare of any director, officer, consultant (except with respect to termination of any consultants) or employee, or increase in any manner the compensation or fringe benefits of any director, officer, consultant or employee or pay any benefit not required by any existing plan and arrangement or enter into any Contract to do any of the foregoing;

(ix) terminate the employment of any employee without cause;

(x) pay any amount, perform any obligation or agree to pay any amount or perform any obligation, in settlement or compromise of any suits or claims of liability against the Company or any of its directors, officers, employees or agents;

(xi) enter into any employment agreement or other Contract of any kind with any director, officer or employee of the Company;

(xii) enter into any Contract with respect to any material modification or termination of any real property Lease;

(xiii) issue any additional shares of capital stock or member interests; or

(xiv) enter into any Contract to do any of the foregoing.

(c) Without limiting the generality of clause (a), until the Closing Date, the Company shall use its commercially reasonable efforts to:

(i) maintain all licenses and permits that are required for and material to the conduct of its business as currently conducted;

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(ii) maintain its books, accounts and records in the usual, regular and ordinary manner, and on a basis consistent with the Financial Statements and past practices; and

(iii) duly comply in all material respects with all Laws and orders applicable to the Company or as may be required for the valid and effective consummation of the transactions contemplated herein.

(d) The Company shall continue to carry their existing insurance policies applicable to periods up to the Closing Date and shall not allow any breach, default, termination or cancellation of such insurance policies or agreements to occur or exist.

4.2 Amendments. Except as required for the transactions contemplated in this Agreement, no change or amendment shall be made in the Company’s certificate of incorporation or bylaws. The Company will not change the character of its Business.

4.3 Access and Disclosure. The Company shall afford to Buyer and its counsel, accountants and other authorized representatives reasonable access during business hours to the Company’s plants, properties, books and records in order that Buyer may have full opportunity to make such reasonable investigations as it shall desire to make of the affairs of the Company and the Company will cause its officers and employees to furnish such additional financial and operating data and other information as Buyer shall from time to time reasonably request. From time to time prior to the Closing Date, the Company will promptly supplement or amend in writing information previously delivered to Buyer with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or disclosed.

ARTICLE V

CONFIDENTIALITY

Each party hereby covenants and agrees that:

5.1 Confidentiality. Each party will hold in strict confidence and not disclose to any other party (other than its counsel and other advisors), without the other party’s prior written consent, all information received regarding the other party, any of the other party’s officers, directors, employees, agents, counsel or auditors in connection with the transactions contemplated hereby, except as may be required by applicable law or as otherwise contemplated herein.

5.2 Books and Records. Buyer shall preserve and keep the Company’s books and records delivered hereunder for a period of seven (7) years from the date hereof and shall, during such period, make such books and records available to the Company and any successor of the Company and former officers and directors of the Company for any reasonable purpose.

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ARTICLE VI

OTHER AGREEMENTS

Buyer and the Company covenant and agree that:

6.1 Agreement to Defend. In the event any action, suit, proceeding or investigation of the nature specified in Section 9.3 hereof is commenced, whether before or after the Closing Date, all the parties hereto agree to cooperate and use their best efforts to defend against and respond thereto.

6.2 Consultants, Brokers and Finders. The Company and Buyer each represent and warrant to the other that they have not retained any consultant, broker or finder in connection with the transactions contemplated by this Agreement, except for Signal Hill Capital Group LLC retained by the Company and FTI Consulting retained by Buyer. The Company and Buyer each hereby agree to indemnify, defend and hold the other party and its officers, directors, employees and affiliates, harmless from and against any and all claims, liabilities or expenses for any brokerage fees, commissions or finders fees due to any consultant, broker or finder retained by the indemnifying party.

6.3 Cooperation; Tax Filings. After Closing, the Company will duly and timely file when due, true, correct and complete tax returns, reports and estimates prepared in accordance with applicable laws, for all years and periods and for all jurisdictions (whether federal, state, local or foreign) in which such returns, reports or estimates are required. The Company will timely pay all Taxes for all years and periods shown as due on such returns, reports and estimates. Buyer and the Company shall provide each other with such assistance as may reasonably be requested by the other in connection with the preparation of any return or report of Taxes, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liabilities for Taxes. Such assistance shall include making employees available on a mutually convenient basis to provide additional information or explanation of material provided hereunder and shall include providing copies of relevant tax returns and supporting material. The party requesting assistance hereunder shall reimburse the assisting party for reasonable out-of-pocket expenses incurred in providing assistance. Buyer and the Company will retain for the full period of any statute of limitations and provide the others with any records or information which may be relevant to such preparation, audit, examination, proceeding or determination.

6.4 Representations and Warranties in Article II. Prior to and at the Closing, the only right or remedy of Buyer on account of any misrepresentation or breach of warranty in Article II or any violation of any covenant contained in Article IV will be to decline to consummate the Closing and/or terminate this Agreement under Section 10.1(b). After the Closing, the only right or remedy of Buyer on account of any misrepresentation or breach of warranty in Article II (or in the certificate delivered pursuant to Section 7.1, which shall for purposes of this Agreement constitute a representation and warranty of the Company made in Article II) or any violation of any covenant contained in Article IV shall be those stated in Section 11.1. The Company shall not have any liability or obligation of any kind whatsoever to

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Buyer, or any other person on account of any misrepresentation or breach of warranty in Article II or any violation of any covenant except as stated in this Section 6.4.

6.5 Collateral Agreements. At Closing:

(a) Buyer on the one hand, and the Company and Jordan on the other hand, will enter into a non-competition agreement in the form attached hereto as Exhibit 6.5(a) (the “Noncompetition Agreement”).

(b) Buyer on the one hand, and each of Deflecto Corporation and The Jordan Company, L.P. on the other hand, will enter into the commercial agreement in the forms attached hereto as Exhibit 6.5(b) (the “Commercial Agreement”).

6.6 Certain Matters Relating to Employees.

(a) Buyer will make offers of employment to all employees of the Company, effective the day after the Closing. Any employee who accepts an offer of employment with Buyer will be terminated by the Company effective as of close of business on the Closing Date. All liabilities, costs and actions related to the termination of employees by the Company shall be Excluded Liabilities hereunder, and shall remain the obligation of the Company.

(b) The Company shall be responsible for any and all liabilities relating to or arising out of the employment of all employees by the Company or its affiliates.

(c) Neither Buyer nor any of its affiliates will adopt, become a sponsoring employer, or have any obligations with respect to the Benefits, and the Company shall be responsible for any and all liabilities which have arisen or may arise under or in connection with any Benefit Plan.

(d) The Company will be responsible for and will perform all applicable tax withholding, payment and reporting duties with respect to any wages and other compensation and benefits paid or provided by the Company to employees, and Buyer will be responsible for and will perform all applicable tax withholding, payment and reporting duties with respect to any wages and other compensation and benefits paid or provided by Buyer to employees after the Closing Date for any employee accepting employment with the Buyer.

6.7 Release of Liens. Prior to Closing, the Company shall have terminated all Liens other than Personal Property Permitted Liens and Real Property Permitted Liens which are not required to be removed pursuant to Section 2.8 and 2.14 above. With respect to amounts owed to 1^st Source Bank, the Company shall provide an appropriate payoff letter from 1^st Source Bank confirming that all Liens and mortgages of 1^st Source (other than Permitted Personal Property Liens for operating leases) will be released upon payment of the funds identified in such payoff letter to 1^st Source Bank. Any amount owed by Company to 1^st Source Bank shall be paid from the funds received by the Company at Closing as set forth in Section 1.4(a). The

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Company represents that prior to Closing a tax judgment lien in the amount of $18,916.64, as evidenced in the title records for the South Bend Real Property has been fully paid, but that the title records have not yet been updated to reflect such payment. Subsequent to Closing, the Company will promptly obtain all filings necessary such that the lien shall be released of record and the title policy for the South Bend Real Property can be issued with the lien exception deleted.

6.8 Merger of Subsidiaries. Prior to Closing, the Company shall have caused all of its subsidiaries to merge into the Company such that all assets of each subsidiary be transferred to Buyer hereunder, except for any Excluded Assets.

6.9 Jordan Guaranty. Jordan unconditionally and irrevocably guarantees the faithful and prompt payment, performance and observance by the Company of each and every one of the terms, conditions, agreements and covenants hereunder to be kept and performed by the Company (subject to any and all limitations set forth in this Agreement on such payment, performance or observance). Jordan’s guaranty is a continuing guaranty of payment and not of collection. The reduction of or limitation on any liabilities of the Company, whether pursuant to any federal or state bankruptcy or insolvency proceeding or other action, shall not cause a reduction in or otherwise affect the liabilities or obligations of Jordan. Buyer shall have the right to proceed against Jordan following any default by the Company without first proceeding against the Company. Jordan waives any and all requirements that Buyer pursue any remedy or institute any proceeding at law or in equity against the Company as a condition precedent to making a demand or claim under, or bringing an action against Jordan, and agrees that the Company may be released from its obligations to perform all or part of the matters guaranteed by Jordan without in any way affecting the duties, obligations and liabilities of Jordan under this Section 6.9. If any provision of this Section 6.9 or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Section 6.9, or the application of such provision to persons or circumstances other than those to which it is invalid or unenforceable, shall not be affected thereby, and shall be valid and enforceable to the fullest extent permitted by law. This guaranty shall inure to the benefit of Buyer and its successors and assigns, and shall be binding upon Jordan and its successors and assigns.

6.10 Chicago Lease. Upon the Closing, Buyer shall commence negotiations with the Landlord of the Lombard, Illinois data center lease (“Chicago Lease”), for an amendment to the lease on terms as specified in Exhibit 6.10 hereof. Upon completion, in whole or in part, of an amendment containing some or all of such terms, Buyer shall pay the Chicago Holdback in accordance with Exhibit 6.10 and Section 1.4(b) hereof.

6.11 Use of GramTel name. Promptly following the Closing, the Company shall cause to be filed with the Delaware Secretary of State an amendment to its charter changing its corporate name to one that is not confusingly similar to “GramTel”. Thereafter, the Company shall promptly file all paperwork necessary with each jurisdiction in which it is authorized to do business to change its name under which such authority is granted.

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6.12 Sonnenschein Waiver. As a condition of Closing, the Company shall obtain a written waiver from Sonnenschein Nath and Rosenthal LLP agreeing to waive the termination for convenience rights under its Customer Contract with the Company.

6.13 Capital Expenditures. The parties acknowledge that the Chicago Data Center requires additional capital expenditures in order to complete the build-out for 12,000 square feet of conditioned data center floor space at a minimum of a Tier III level (as defined by the Uptime Institute). Attached hereto as Exhibit 6.13 is a copy of the specifications which the Company represents are the plans as of the date of Closing for the completion of the build-out of such space (the “Specifications”). A copy of the Company’s proposed budget for completing such buildout in accordance with those Specifications is set forth on Exhibit 6.13 (the “Budget”). Buyer shall use good faith, commercially reasonable efforts to complete the build-out in accordance with the Specifications and the Budget. To the extent the actual costs incurred by Buyer to complete the build-out in accordance with the Specifications (but excluding any premiums or similar payments or costs associated with expediting the build-out in a manner that is outside the regular and ordinary course of construction contemplated by the Budget) exceed the Budget by more than Fifty Thousand Dollars ($50,000), Buyer may make a claim against the Capex Escrow for such excess over Fifty Thousand Dollars ($50,000), and the remainder (if any) of the Capex Escrow shall be payable to the Company within ten (10) business days of the earlier of (i) the completion of the build-out in accordance with the Specifications or (ii) June 30, 2008. The Company and Buyer agree to execute such join written instructions under the Escrow Agreement as may be reasonably necessary to effect the payments described in this Section 6.13. For the avoidance of doubt, the Capex Escrow shall be Buyer’s sole recourse for the capital expenditures to complete the build-out of the Chicago Data Center, and Buyer shall bear all risk for any and all amounts in excess of the Capex Escrow.

6.14 Escrow Agreement. At the Closing, the Company, Buyer and 1^st Source Bank (the “Escrow Agent”) shall enter into an Escrow Agreement in the form set forth as Exhibit 6.14 (the “Escrow Agreement”). Pursuant to Sections 1.4(c) and (d), Buyer shall deposit the Capex Escrow and the Consents Escrow with the Escrow Agent to be held and disbursed pursuant to the terms and conditions hereof and of the Escrow Agreement. All costs attributable to the Escrow Agreement shall be borne equally by the Company and Buyer.

6.15 Certain Termination Costs. The Company and Buyer agree that any damages, costs or expenses incurred by the contract counterparty (and for which recovery is sought by such counterparty against the Company or Buyer) in connection with the termination by such contract counterparty of any contract for which consent is required pursuant to the terms thereof but not obtained in connection with the transactions contemplated by this Agreement (to the extent such termination is due to the failure to obtain consent to the assignment of such contract from the Company to Buyer) shall be the responsibility of the Company, and shall expressly be deemed to be Excluded Liabilities hereunder.

6.16 Further Assurances and Co-Operation. After Closing, each party agrees to take all actions and execute all documents reasonably requested by the other party in order to further the purposes of this Agreement. Such cooperation shall include without limitation

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execution of any documents required in connection with transferring title and Buyer’s obtaining title insurance on the Real Property located in South Bend, Indiana.

ARTICLE VII

CONDITIONS TO THE OBLIGATIONS OF BUYER

Each and every obligation of Buyer under this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions unless waived in writing by Buyer:

7.1 Representations and Warranties; Performance. The representations and warranties made by the Company herein shall be true and correct in all material respects on the date of this Agreement and on the Closing Date with the same effect as though made on such date; the Company shall have performed and complied in all material respects with all material agreements, covenants and conditions required by this Agreement to be performed and complied with by it prior to the Closing Date; the Company shall have, and shall have caused a corporate officer of the Company to have delivered to Buyer a certificate, dated the Closing Date, in the form designated on Exhibit 7.1, certifying to such matters and the other conditions contained in this Article VII.

7.2 Material Consents. The Company shall have obtained and delivered to Buyer the consents listed on Exhibit 7.2 (collectively, the “Material Consents”), except for delivery of Material Customer Consents that are subject to Section 1.8 hereunder.

7.3 Employment of Tracy Graham. Tracy Graham shall have executed an employment agreement with the Buyer, on terms acceptable to Buyer in its sole discretion.

7.4 Collateral Agreements. The Company and Jordan shall have executed and delivered the Noncompetition Agreement and the Commercial Agreement.

7.5 Escrow Agreement. Buyer, the Company and the Escrow Agent shall have executed and delivered the Escrow Agreement.

7.6 Post Office Box. The Company shall have delivered all keys and assignments with respect to Post Office boxes.

7.7 Other Documents. The Company will furnish or cause the Company to furnish Buyer with such other and further documents and certificates of its officers and others as Buyer shall reasonably request to evidence compliance with the conditions set forth in this Agreement, including but not limited to the 1^st Source payoff letter and the Sonnenschein waiver referenced in Section 6.12.

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ARTICLE VIII

CONDITIONS TO THE OBLIGATIONS OF SELLERS

Each and every obligation of the Company under this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions unless waived in writing by the Company:

8.1 Representations and Warranties; Performance. The representations and warranties made by Buyer herein shall be true and correct in all material respects on the date of this Agreement and on the Closing Date with the same effect as though made on such date; Buyer shall have performed and complied with all material agreements, covenants and conditions required by this Agreement to be performed and complied with by it prior to the Closing Date; Buyer shall have delivered to the Company a certificate of its President, dated the Closing Date, certifying to the fulfillment of the conditions set forth herein, in the form designated as Exhibit 8.1 and the other conditions contained in this Article VIII.

8.2 Payment. The payments described in Section 1.4 shall have been made.

8.3 Collateral Agreements. The Buyer shall have executed and delivered the Noncompetition Agreement and the Commercial Agreement.

8.4 Other Documents. Buyer will furnish the Company with such other documents and certificates to evidence compliance with the conditions set forth in this Article as may be reasonably requested by the Company.

ARTICLE IX

CLOSING

9.1 Closing. Unless this Agreement shall have been terminated or abandoned pursuant to the provisions of Article X hereof, a closing (the “Closing”) shall be held on December 31, 2007, or on such other date (the “Closing Date”) mutually agreed upon at such place or places as Buyer shall designate.

9.2 Deliveries at Closing.

(a) At Closing, the Company shall transfer and assign to Buyer all of the Purchased Assets by delivering a bill of sale, deed for owned real property and the other agreements, certifications and other documents required to be executed and delivered hereunder at the Closing shall be duly and validly executed and delivered.

(b) At Closing, the Company shall deliver to Buyer the Material Consents.

(c) At Closing, Buyer shall deliver the Purchase Price to the Company as specified in Section 1.4 hereof and the other agreements, certifications and other documents required to be executed and delivered hereunder at Closing shall be duly and validly executed and delivered.

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9.3 Legal Actions. If, prior to the Closing Date, any action or proceeding shall have been instituted by any third party before any court or governmental agency to restrain or prohibit this Agreement or the consummation of the transactions contemplated herein, the Closing shall be adjourned at the option of any party hereto for a period of up to one hundred twenty (120) days. If, at the end of such one hundred twenty (120) day period, the action or proceeding shall not have been favorably resolved, any party hereto may, by written notice thereof to the other party or parties, terminate its obligation hereunder.

9.4 Specific Performance. The parties hereto agree that if any party hereto is obligated to, but nevertheless does not, consummate this transaction, then any other party, in addition to all other rights or remedies, shall be entitled to the remedy of specific performance mandating that the other party or parties consummate this transaction. In an action for specific performance by any party hereto against any other party, the other party shall not plead adequacy of damages at law.

9.5 Assumption of Liabilities. After the Closing, Buyer and its successors and assigns will forever defend, indemnify and hold harmless the Company from and against any and all liabilities and obligations which Buyer assumed pursuant to Section 1.5.

ARTICLE X

TERMINATION AND ABANDONMENT

10.1 Methods of Termination. This Agreement may be terminated and the transactions herein contemplated may be abandoned at any time:

(a) By mutual consent of Buyer and the Company;

(b) By either Buyer or the Company, if (i) such party is not in breach hereunder and the other party is in material breach hereunder, (ii) this Agreement is not consummated on or before the Closing Date, including extensions, and/or (iii) the other party seeks protection in a bankruptcy or similar proceeding; or

(c) By Buyer, if there has been a material adverse change in the operation, assets, condition (financial or other) or results of operation of the Business.

10.2 Procedure Upon Termination. In the event of termination and abandonment pursuant to Section 10.1 hereof, this Agreement shall terminate and shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein:

(a) each party hereto will upon request redeliver all documents and other materials of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same;

(b) no party hereto shall have any liability or further obligation to any other party to this Agreement; and

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(c) each party hereto shall bear its own expenses.

ARTICLE XI

INDEMNIFICATION

11.1 Indemnification. To the extent set forth in this Section 11.1 only (and subject to the limitations set forth herein), Buyer will be indemnified by the Company from breaches of the representations and warranties contained in Article II and breaches of any of the covenants or agreements of the Company contained herein and claims arising from the Excluded Assets or the Excluded Liabilities. The Company will have no other liability to Buyer whatsoever. The Company will be indemnified by Buyer from a breach of Buyer’s representations, warranties and covenants and from the Assumed Liabilities and liabilities related to the Purchased Assets and/or Buyer’s operations and activities arising after the Closing. All indemnification obligations of the Company will be subject to the following limitations:

(a) The Company shall only indemnify Buyer for any loss, damage, or expense, (including but not limited to reasonable attorney’s fees) (“Damages”), proximately resulting to Buyer on account of (i) any misrepresentation or breach of warranty under Article II, or covenant under Article IV made by the Company; of which Buyer gives written notice to the Company pursuant to Section 11.2 on or before the six (6) month anniversary of the Closing, except that Buyer shall have until the expiration of the applicable statute of limitations to give written notice to the Company pursuant to Section 11.2 of any misrepresentation or breach of warranty made or deemed made by the Company pursuant to Sections 2.1, 2.2, 2.4, 2.8, 2.10, 2.11, 2.13 or 2.14, provided, however, that Buyer shall not be entitled to any indemnification by the Company with respect to any misrepresentation or breach of warranty made or deemed made in Article II or breach of a covenant under Article IV as to which Buyer had knowledge of on or before the Closing or with respect to matters disclosed on the exhibits hereto; (ii) breach by the Company of this Agreement or any of the Collateral Agreements; (iii) the Excluded Assets or Excluded Liabilities; or (iv) any Pre-existing Environmental Condition.

(b) Notwithstanding anything contained herein to the contrary, with respect to indemnity under Section 1 l.l(a)(i) or (iv) above: (i) Buyer shall not be entitled to any indemnification by the Company until the aggregate amount of all such indemnification amounts exceeds an amount equal to two percent (2%) of the Purchase Price (after which the Company shall only be responsible for indemnifying Buyer for amounts in excess of the amount equal to two percent (2%) of the Purchase Price) (the “Threshold”); and (ii) in no event shall the total liability of the Company exceed an amount equal to ten percent (10%) of the Purchase Price in the aggregate (the General Cap); provided, that with respect to breaches by the Company of the representations and warranties set forth in Section 2.10 or Section 2.13, or indemnification under Section ll.l(a)(iv) above, such indemnification shall not be subject to the Threshold, and the maximum total liability shall not exceed fifty percent (50%) of the Purchase Price in the

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aggregate (the “Tax/Environmental Cap”). For the avoidance of doubt, any Damages applied against the General Cap shall also be applied against the Tax/Environmental Cap.

(c) Notwithstanding anything contained herein to the contrary, in no event shall the Company have any indemnification obligations for Damages relating to any breach of the representations in Section 2.13 resulting from Buyer or its respective agents and representatives conducting invasive investigations, sampling or monitoring of or at the real properties owned, leased or operated by the Company unless (i) required to do so by Environmental Laws and Regulations or a governmental authority or (ii) conducted in response to an Environmental Claim.

(d) The amount of any Damages for which indemnification is provided under this Article XI shall be net of any (i) Tax benefits actually realized by the Indemnified Party (hereinafter defined) and amounts recoverable by the Indemnified Party under insurance policies or otherwise with respect to such Damages, (ii) amounts recoverable by the Indemnified Party pursuant to any indemnification by or indemnification or other agreement with any third party or (iii) insurance proceeds or other cash receipts or sources of reimbursement actually received as an offset against such Damages (in each case net of any Tax or costs incurred to recover such amounts).

(e) Notwithstanding anything contained herein to the contrary, in no event will the Company have any obligation to indemnify Buyer for any Damages to the extent such Damages arise from or relate to any breach by Buyer of this Agreement or the Collateral Agreements.

11.2 Notice of Claim. A party entitled to indemnification hereunder (“Indemnified Party”) shall give written notice to the other party (“Indemnifying Party”) stating specifically the basis for the claim for Damages in reasonable detail, including the nature and amount thereof, and shall tender defense thereof to Indemnifying Party as provided in Section 11.3.

11.3 Tender of Defense for Damages. Promptly (and in any event within fifteen (15) business days) upon receipt by Indemnified Party of a notice of a claim by a third party which may give rise to a claim for Damages, Indemnified Party shall give written notice thereof to Indemnifying Party. Indemnifying Party will have the right to at any time, at its sole expense, undertake the defense against such claim and may contest or settle such claim on such terms, at such time and in such manner as Indemnifying Party, in its sole discretion, shall elect and Indemnified Party shall execute such documents and take such steps as may be reasonably necessary in the opinion of counsel for Indemnifying Party to enable Indemnifying Party to conduct the defense of such claim for Damages. Unless and until the Indemnifying Party assumes the defense of any claim for Damages, the Indemnified Party may defend any claim for Damages, provided, however, the Indemnifying Party may nevertheless, at its own expense, participate in the defense of such claim by Indemnified Party and in any and all settlement negotiations relating thereto. In any and all events, Indemnifying Party shall have such access to the records and files of Indemnified Party relating to any claim for Damages as may be reasonably necessary to effectively defend or participate in the defense thereof. In no event will

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the Indemnified Party consent to the entry of any judgment on or enter into any settlement with respect to a third party claim for Damages, without the prior written consent of the Indemnifying Party.

11.4 Other. Notwithstanding anything herein to the contrary, in no event will either party be liable to the other for special, incidental, indirect, consequential or punitive damages.

ARTICLE XII

MISCELLANEOUS PROVISIONS

12.1 Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified and supplemented only by written agreement of the Company and Buyer.

12.2 Waiver of Compliance; Consents. Any failure of the Company on the one hand, or Buyer on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived in writing by Buyer or the Company, respectively, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 12.2.

12.3 Expenses. Each party hereto will pay its own legal, accounting and other expenses incurred by such party or on its behalf in connection with this Agreement and the transactions contemplated herein.

12.4 Payment of Sales, Use or Similar Taxes.

(a) Each of the Company and Buyer shall pay fifty percent (50%) of any and all transfer, sales, use, intangible, recordation, documentary, purchase, value added, excise, real property, stamp, or similar taxes (“Transfer Taxes”) imposed on, or result from, the transfer of any Purchased Assets pursuant to this Agreement (including those Transfer Taxes imposed on the Company or the Purchased Assets) and any other out-of-pocket costs and expenses that resulting from the transfer of the Purchased Assets to the Buyer pursuant to the terms of this Agreement. Buyer shall, at its own expense, file all necessary tax returns and other documentation with respect to all such Taxes, fees and charges, and, if required by applicable Law, the Company will join in the execution of any such tax returns and other documentation.

(b) Liability of the Company for any real and tangible personal property taxes and assessments, general and special, for the 2007 and 2008 tax years shall be equal to the amount of such property taxes for each year multiplied by a fraction, the numerator of which is the number of days in each year including the Closing Date and the denominator of which is 365 days. Liability for the remainder of such taxes and assessments shall be borne by Buyer. All tax pro-rations shall be based on tax rates and

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assessments for 2007 and 2008 unless such rates and/or assessments are unavailable. If either the tax rates or the tax assessments for 2007 or 2008 are not available, then such pro-ration shall be made based upon the tax rates and assessments for the prior year (or if only the assessed value for 2007 or 2008 is known, then based on the prior year’s tax rates and the current year’s assessed value), and shall be adjusted by a cash payment between the Company and Buyer after the Closing as soon as such rates and assessments for 2007 and 2008 are available. To the extent such property taxes and assessments have already been paid for the 2007 or 2008 tax years prior to the Closing Date, Buyer shall pay to the Company Buyer’s pro-rated portion. To the extent that such taxes and assessments have not been paid prior to the Closing Date, the Company will pay to the Buyer the Company’s pro-rated portion. Buyer shall thereafter pay all such taxes and assessments to the taxing authority when due and shall provide to the Company proof of such payment upon request. For all amounts owed by a party which were not paid as part of the Closing, within 90 days of Closing, the parties agree to meet and reconcile such amounts between themselves, subject to the dispute resolution mechanisms set forth in this Agreement. After reconciliation, the party owing the net amount to the other shall remit such amount to the other party within 10 days of final resolution.

12.5 Notices. Any notice, request, consent or communication (collectively a “Notice”) under this Agreement shall be effective only if it is in writing and (i) personally delivered, (ii) sent by certified or registered mail, return receipt requested, postage prepaid, (iii) sent by a nationally recognized overnight delivery service, with delivery confirmed, or (iv) faxed, with receipt confirmed, addressed as follows:

(a) If to the Company, to each of:

Thomas H. Quinn

GramTel USA, Inc.

ArborLake Centre, Suite 550

1751 Lake Cook Road

Deerfield, Illinois 60015

Telephone: (847) 945-5522

Facsimile: (847) 945-9099

with a copy to:

Steven L. Rist, Esq.

Sonnenschein, Nath & Rosenthal

4520 Main Street, Suite 1100

Kansas City, Missouri 64111

Telephone: (816) 460-2400

Facsimile: (816) 460-2652

28

(b) If to Buyer to:

BCSIVA Inc.

Attn: General Counsel

221 E. Fourth Street. 103-1290

Cincinnati, OH 45202

Telephone: (513) 397-9900

Facsimile: (513) 397-9557

with a copy to:

Thomas W. Bosse, Esq.

The Law Offices of Thomas W. Bosse, PLLC

2101 Chamber Center Drive

Ft. Mitchell, KY 41017

Telephone: (859) 344-9500

Facsimile: (859) 344-4952

or such other persons or addresses as shall be furnished in writing by any party to the other party. A Notice shall be deemed to have been given as of the date when (i) personally delivered, (ii) five (5) days after the date when deposited with the United States mail properly addressed, (iii) when receipt of a Notice sent by an overnight delivery service is confirmed by such overnight delivery service, or (iv) when receipt of the telex or telecopy is confirmed, as the case may be, unless the sending party has actual knowledge that a Notice was not received by the intended recipient.

12.6 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by Buyer without the prior written consent of the Company except in the case of an assignment to an affiliate in which case notice, but no consent, shall be required provided that no such assignment shall relieve Buyer of any of its obligations hereunder.

12.7 Governing Law. This Agreement shall be governed by the laws of the State of New York (regardless of the laws that might otherwise govern under applicable principles of conflicts of law of the State of New York) as to all matters including, but not limited to, matters of validity, construction, effect, performance and remedies.

12.8 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

12.9 Neutral Interpretation. This Agreement constitutes the product of the negotiation of the parties hereto and the enforcement hereof shall be interpreted in a neutral manner, and not more strongly for or against any party based upon the source of the draftsmanship hereof.

29

12.10 Headings. The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

12.11 Entire Agreement. This Agreement, which term as used throughout includes the Exhibits hereto, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

30

IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the date first hereinabove set forth.

GRAMTEL USA, INC.
By:	/s/ Lisa Ondrula
Name:
Title:
JORDAN INDUSTRIES, INC., solely for the purpose of agreeing to the provisions of Section 6.5 and Section 6.9
By:	/s/ Lisa Ondrula
Name:
Title:
BCSIVA INC.
By:	/s/ Shane Brown
Name:	Shane Brown
Title:	VP Business Development

SCHEDULE OF EXHIBITS

TO

AGREEMENT FOR PURCHASE AND SALE OF

GRAMTEL USA, INC.

	Exhibits	Title
C	Exhibit 1.2(a)	Equipment
C	Exhibit 1.2(f)	Excluded Contracts
C	Exhibit 1.2(g)	Real Property
C	Exhibit 1.3	Excluded Assets
B	Exhibit 1.8	Material Customer Consents
C	Exhibit 2.1	Certificate of Incorporation, Bylaws and Certificates of Authority of the Company
C	Exhibit 2.2	List of Stockholders
C	Exhibit 2.5	No Violation
C	Exhibit 2.7	Schedule of Contracts
C	Exhibit 2.8	Title and Related Matters
C	Exhibit 2.9	Legal Proceedings and Judgments
C	Exhibit 2.10	Certain Tax Matters
C	Exhibit 2.11	Benefit Plans
C	Exhibit 2.12	Schedule of Intellectual Property Rights
C	Exhibit 2.13	Environmental Matters
C	Exhibit 2.14	Real Property
C	Exhibit 2.15(a)(i)	Financial Statements
C	Exhibit 2.15(a)(ii)	GAAP Exceptions
C	Exhibit 2.15(b)	Exceptions to Financial Condition

32

	Exhibits	Title
C	Exhibit 2.15(c)	Receivables Aging Schedule
C	Exhibit 2.15(d)	Additional Liabilities
C	Exhibit 2.15(e)	Ordinary Course Exceptions
B	Exhibit 6.5(a)	Noncompetition Agreement
B	Exhibit 6.5(b)	Commercial Agreement
B	Exhibit 6.10	Chicago Lease Amendment
C	Exhibit 6.13(a)	Chicago Buildout Plan
C	Exhibit 6.13(b)	Chicago Buildout Budget
C	Exhibit 6.14	Escrow Agreement
C	Exhibit 7.1	Certificate of Fulfillment of Conditions by the Company
C	Exhibit 7.2	Material Consents
C	Exhibit 8.1	Certificate of Fulfillment of Conditions of Buyer
	C - First draft to be prepared by counsel for the Company.

33

EX-10.III.A.1.1

Exhibit (10)(iii)(A)(1.1)

AMENDMENT TO

BROADWING INC. SHORT TERM INCENTIVE PLAN

The Broadwing Inc. Short Term Incentive Plan (the “Plan”) is hereby amended, effective as of May 27,2003 and in order to reflect the change in the name of the sponsor of the Plan from Broadwing Inc. to Cincinnati Bell Inc., in the following respects.

1.      The name of the Plan is amended to be the “Cincinnati Bell Inc. Short Term Incentive Plan”.

2.      Subsection 1.1 of the Plan is amended in its entirety to read as follows:

1.1      The purpose of this plan, which shall be named the Cincinnati Bell Inc. Short Term Incentive Plan (the “Plan”) and the sponsor of which is the Company (as defined in subsection 1.2 below), is to provide key executives of the Company and its Subsidiaries (as defined in subsection 1.2 below) with incentive compensation based upon the achievement of specific short term performance goals.

3.      Subsection 1.2 of the Plan is amended in its entirety to read as follows:

1.3      For purposes of the Plan, “Company” refers to Cincinnati Bell Inc. (which corporation was named Broadwing Inc. from April 20, 2000 to May 27, 2003) or, if applicable, any corporate successor to Cincinnati Bell Inc. that results from a merger or similar transaction. Also, for purposes of the Plan, a “Subsidiary” refers to any corporation which is part of an unbroken chain of corporations that begins with the Company and in which each corporation in such chain, other than the Company, has at least 80% of the total combined voting power of all classes of its stock owned by the Company or one of the other corporations in such chain. In addition, for purposes of the Plan, the Company’s “Subsidiaries” refers to each and every Subsidiary in the aggregate.

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	V.P. and General Counsel
Date:	8-15-03

EX-10.III.A.2.1

Exhibit (10)(iii)(A)(2.1)

AMENDMENT TO BROADWING INC.

DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS

The Broadwing Inc. Deferred Compensation Plan for Outside Directors (the “Plan”) is hereby amended, effective as of May 27, 2003 and in order to reflect the change in the name of the sponsor of the Plan from Broadwing Inc. to Cincinnati Bell Inc., in the following respects.

1.      The name of the Plan is amended to be the “Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors”.

2.      Section 2.1.4 of the plan is amended in its entirety to read as follows:

2.1.4      “Cincinnati Bell Shares” shall mean common shares of the Company

3.      Section 2.1.6 of the Plan is amended in its entirety to read as follows:

2.1.6      “Company” shall mean Cincinnati Bell Inc. (which corporation was named Broadwing Inc. from April 20, 2000 to May 27, 2003).

4.      Each reference in the Plan to “Broadwing Shares” or “Broadwing Share” is amended to be a reference to “Cincinnati Bell Shares” or “Cincinnati Bell Share”, respectively.

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	V.P. and General Counsel
Date:	8-15-03

EX-10.III.A.2.2

Exhibit (10)(iii)(A)(2.2)

AMENDMENT TO CINCINNATI BELL INC.

DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS

The Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors (the “Plan”) is hereby amended, effective as of January 1, 2005 (and in order (1) to increase the number of annual “phantom” Cincinnati Bell Inc. common share credits made to a Plan participant’s account under the Plan for 2005 and subsequent years and (2) to provide that any distribution made under the Plan to a Plan participant that is attributable to any annual “phantom” Cincinnati Bell Inc. common share credits ever made to the participant’s Plan account be paid in cash and not in Cincinnati Bell Inc. common shares), in the following respects.

1.      Section 4.1.4 of the Plan is amended in its entirety to read as follows:

4.1.4      As of the first business day of 2000 and each subsequent calendar year that ends before January 1, 2005, there shall be credited to the Account of each Participant who is an Outside Director on such day an amount equal to the value on such day of 1,500 Cincinnati Bell Shares. As of the first business day of 2005 and each subsequent calendar year, there shall be credited to the Account of each Participant who is an Outside Director on such day an amount equal to the value on such day of 6,000 Cincinnati Bell Shares. Amounts credited to a Participant’s Account under this Section 4.1.4 shall be assumed to be invested at all times exclusively in Cincinnati Bell Shares.

2.      The second sentence of Section 5.6 of the Plan is amended in its entirety to read as follows:

Further, subject to the other provisions of this Section 5.6, any payment made under the Plan on or after December 13, 2000 to a Participant (or a Participant’s Beneficiary) shall be made in Cincinnati Bell Shares to the extent it is attributable to amounts credited to the Participant’s Account that are assumed to be invested in Cincinnati Bell Shares; except that, notwithstanding any other provision of this Section 5.6 or the other sections of the Plan, (1) any such payment shall be made in cash and not Cincinnati Bell Shares to the extent it is attributable to amounts credited to the Participant’s Account that are assumed to be invested in a fractional and not a whole Cincinnati Bell Share and (2) any such payment that is made on or after January 1, 2005 shall be made in cash and not Cincinnati Bell Shares to the extent it is attributable to amounts credited to the Participant’s Account pursuant to the provisions of Section 4.1.4.

3.      Section 5.6.1 of the Plan is amended in its entirety to read as follows:

5.6.1      For purposes of this Section 5.6, the portion of any payment made under the Plan on or after December 13, 2000 to the Participant (or the

1

Participant’s Beneficiary) that is attributable to amounts credited to the Participant’s Account that are both assumed to be invested in Cincinnati Bell Shares and required to be paid in Cincinnati Bell Shares under the foregoing provisions of this Section 5.6 shall be deemed to be equal to the product obtained by multiplying (a) by (b), where (a) and (b) are as follows:

(a)      equals the value of the entire amount of the payment (with such value determined as of the date as of which the payment is made); and

(b)      equals a fraction, (1) the numerator of which is the value (on the date as of which the payment is made and determined without regard to the payment) of the amounts then credited to the Participant’s Account that are then both assumed to be invested in a whole number of Cincinnati Bell Shares and not then subject to forfeiture (not including any such amounts that are then assumed to be invested in a fractional and not a whole Cincinnati Bell Share or, when the subject payment is made on or after January 1, 2005, any such amounts that are attributable to credits made to the Participant’s Account pursuant to the provisions of Section 4.1.4) and (2) the denominator of which is the value (on the date as of which the payment is made and determined without regard to the payment) of the entire amount that is both then credited to the Participant’s Account and not then subject to forfeiture.

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By :	/s/ Christopher J. Wilson
Title :	Vice President and General Counsel
Date :	December 15, 2004

2

EX-10.III.A.2.3

Exhibit (10)(iii)(A)(2.3)

AMENDMENT TO CINCINNATI BELL INC.

DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS

The Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors (the “Plan”) is hereby amended, effective as of January 1, 2006 and in order to permit the Board of Directors of Cincinnati Bell Inc. (the “Company”) discretion to set the number of annual “phantom” Company common share credits made to a Plan participant’s account under the Plan for 2006 and subsequent years so that such Board can better ensure that the equity-based compensation provided the Company’s non-employee directors is competitive with the equity-based compensation provided by comparable companies to their non-employee directors, by amending Section 4.1.4 of the Plan in its entirety to read as follows.

4.1.4 In its discretion but subject to other terms of this Plan, the Board may, as of any business day that occurs in 2006 or any subsequent calendar year (each such day referred to in this Section 4.1.4 as a “credit day”), credit to the Account of each Participant who is an Outside Director on such credit day an amount equal to the value on such credit day of a number of Cincinnati Bell Shares that is set by the Board. The Board shall exercise its discretion in crediting amounts to the Accounts of Participants who are Outside Directors pursuant to the immediately preceding sentence with the intent that such credited amounts, together with other compensation that is either paid in the form of Common Shares has its value determined in relation to the value of Common Shares (such credited amounts and such other compensation referred to in this sentence as “equity-based compensation”) and taking into account the Fair Market Value of a Common Share when crediting or providing any such equity-based compensation, provide equity-based compensation for the Company’s Outside Directors that each year is approximately equal to the median level of the value of equity-based compensation provided by a group of comparable peer group companies to their non-employee directors. Amounts credited to a Participant’s Account under this Section 4.1.4 shall be assumed to be invested at all times exclusively in Cincinnati Bell Shares.

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL
By:	/s/ Christopher J. Wilson
Title:	Vice President and General Counsel
Date:	February 25, 2008

EX-10.III.A.3.2

Exhibit(10)(iii)(A)(3.2)

AMENDMENT TO

CINCINNATI BELL MANAGEMENT PENSION PLAN

The Cincinnati Bell Management Pension Plan (the “Plan”), which for a certain prior period (that ended as of May 27, 2003) was named the Broadwing Pension Plan, is hereby amended, effective as of December 4, 2003 and in order to permit certain Plan participants to participate in both the non-qualified excess benefit part of the Plan and the Cincinnati Bell Inc. Pension Program, by deleting Subsection 18.15.6 of the Plan in its entirety.

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	Vice President and General Counsel
Date:	1-30-04

EX-10.III.A.4.1

Exhibit (10)(iii)(A)(4.1)

AMENDMENT TO BROADWING INC.

EXECUTIVE DEFERRED COMPENSATION PLAN

The Broadwing Inc. Executive Deferred Compensation Plan (the “Plan”) is hereby amended, effective as of May 27, 2003 and in order to reflect the change in the name of the sponsor of the Plan from Broadwing Inc. to Cincinnati Bell Inc., in the following respects.

1.      The name of the Plan is amended to be the “Cincinnati Bell Inc. Executive Deferred Compensation Plan”.

2.      Section 1.1 of the Plan is amended in its entirety to read as follows:

1.1      Name. The plan set forth herein shall be known as the Cincinnati Bell Inc. Executive Deferred Compensation Plan (for purposes of this entire document, the “Plan”).

3.      The reference in Section 1.2 of the Plan to “Broadwing Inc.” is amended to be a reference to “Cincinnati Bell”.

4.      Section 2.1.3 of the Plan is amended in its entirety to read as follows:

2.1.3      “Cincinnati Bell” means Cincinnati Bell Inc. (which corporation was named Broadwing Inc. from April 20, 2000 to May 27, 2003) or any corporate successor thereto.

5.      Section 2.1.4 of the Plan is amended in its entirety to read as follows:

2.1.4      “Cincinnati Bell Shares” means common shares of the Cincinnati Bell.

6.      Each reference in the Plan to “Broadwing”, “Broadwing Shares”, or “Broadwing Share” is amended to be a reference to “Cincinnati Bell”, “Cincinnati Bell Shares”, or “Cincinnati Bell Share”, respectively.

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By :	/s/ Christopher J. Wilson
Title :	V.P. and General Counsel
Date :	8-15-03

EX-10.III.A.5.1

Exhibit (10)(iii)(A)(5.1)

AMENDMENT TO

BROADWING INC. 1997 LONG TERM INCENTIVE PLAN

The following resolution, which amends the Broadwing Inc. 1997 Long Term Incentive Plan effective as of January 1, 2001, was approved by the Board of Directors of Broadwing Inc. at such Board’s December 4, 2001 meeting that was held in Cincinnati, Ohio.

RESOLVED, that the Broadwing Inc. 1997 Long Term Incentive Plan (the “Plan”) is hereby amended, effective as of January 1, 2001, by deleting the current paragraph (b) of Section 5.1 of the Plan and renumbering the subsequent paragraphs of such Section 5.1 accordingly.

EX-10.III.A.5.2

Exhibit (10)(iii)(A)(5.2)

AMENDMENT TO

BROADWING INC. 1997 LONG TERM INCENTIVE PLAN

The Broadwing Inc. 1997 Long Term Incentive Plan (the “Plan”) is hereby amended, effective as of May 27, 2003 and in order to reflect the change in the name of the sponsor of the Plan from Broadwing Inc. to Cincinnati Bell Inc., in the following respects.

1.      The name of the Plan is amended to be the “Cincinnati Bell Inc. 1997 Long Term Incentive Plan”.

2.      Subsection 1.1 of the Plan is amended in its entirety to read as follows:

1.1      The purpose of this plan, which shall be named the Cincinnati Bell Inc. 1997 Long Term Incentive Plan (the “Plan”) and the sponsor of which is the Company (as defined in subsection 1.3 below), is to further the long term growth of the Company by offering competitive incentive compensation related to long term performance goals to those salaried employees of the Company and its Subsidiaries (as defined in subsection 1.3 below) who will be largely responsible for planning and directing such growth.

3.      Subsection 1.3 of the Plan is amended in its entirety to read as follows:

1.3      For purposes of the Plan, “Company” refers to Cincinnati Bell Inc. (which corporation was named Broadwing Inc. from April 20, 2000 to May 27, 2003) or, if applicable, any corporate successor to Cincinnati Bell Inc. that results from a merger or similar transaction. Also, for purposes of the Plan, a “Subsidiary” refers to any corporation which is part of an unbroken chain of corporations that begins with the Company and in which each corporation in such chain, other than the Company, has at least 80% of the total combined voting power of all classes of its stock owned by the Company or one of the other corporations in such chain. In addition, for purposes of the Plan, the Company’s “Subsidiaries” refers to each and every Subsidiary in the aggregate.

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	V.P. and General Counsel
Date:	8-15-03

EX-10.III.A.6.1

Exhibit (10)(iii)(A)(6.1)

AMENDMENT TO BROADWING INC.

1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

The Broadwing Inc. 1997 Stock Option Plan for Non-Employee Directors (the “Plan”) is hereby amended, effective as of May 27, 2003 and in order to reflect the change in the name of the sponsor of the Plan from Broadwing Inc. to Cincinnati Bell Inc., in the following respects.

1.      The name of the Plan is amended to be the “Cincinnati Bell Inc. 1997 Stock Option Plan for Non-Employee Directors”.

2.      The first paragraph of text under Paragraph 1 of the Plan is amended in its entirety to read as follows:

The Cincinnati Bell Inc. 1997 Stock Option Plan for Non-Employee Directors (the “Plan”) is intended to attract and retain the services of experienced and knowledgeable independent directors of the Company for the benefit of the Company and its shareholders and to provide additional incentive for such directors to continue to work for the best interest of the Company and its shareholders. For purposes of the Plan, the term “Company” means Cincinnati Bell Inc. (which corporation was named Broadwing Inc. from April 20, 2000 to May 27, 2003).

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	V.P. and General Counsel
Date:	8-15-03

EX-10.III.A.17

Exhibit (10)(iii)(A)(17)

BROADWING PENSION PLAN

(Amending and restating the Cincinnati Bell Management

Pension Plan effective as of January 1, 1997)

BROADWING PENSION PLAN

TABLE OF CONTENTS

		Page
ARTICLE 1 - NAME, PURPOSE, AND EFFECTIVE DATE		1-1
1.1	Name of Plan	1-1
1.2	Purpose of Plan	1-1
1.3	Effective Date	1-1
ARTICLE 2 - GENERAL DEFINITIONS AND GENDER AND NUMBER		2-1
2.1	Defined Terms	2-1
2.2	Gender and Number	2-8
ARTICLE 3 - SERVICE		3-1
3.1	Hour of Service	3-1
3.2	Break in Service	3-3
3.3	Employment and Reemployment Commencement Dates	3-3
3.4	Eligibility Service	3-3
3.5	Eligibility Computation Period	3-3
3.6	Vesting Service	3-3
3.7	Mandatory Portability Agreement	3-4
3.8	Service With Predecessor Entities	3-4
ARTICLE 4 - ELIGIBILITY AND PARTICIPATION		4-1
4.1	Eligibility	4-1
4.2	Participation	4-1
4.3	Reemployment of Former Participants	4-1
ARTICLE 5 - MONTHLY BENEFIT FORMULA AMOUNT RULES		5-1
5.1	General Rules for Monthly Benefit Formula Amount	5-1
5.2	Cash Balance Accounts for Participants	5-1
5.3	Initial Cash Balance Amount Credited to Cash Balance Account	5-2
5.4	Pension Credit Amounts Credited to Cash Balance Account	5-4
5.5	Interest Credit Amounts Credited to Cash Balance Account	5-5
5.6	Special Cash Balance Account Credit for Broadwing Communications Employees	5-6
5.7	Covered Compensation	5-7
ARTICLE 6 - RETIREMENT BENEFITS AND VESTED PERCENTAGE		6-1
6.1	Normal Retirement	6-1
6.2	Late Retirement	6-1
6.3	Vested Retirement	6-1

i

6.4	Vested Percentage	6-1
6.5	Other Cessation of Employment	6-2
ARTICLE 7 - PAYMENT OF RETIREMENT BENEFITS		7-1
7.1	Commencement Date of Retirement Benefit	7-1
7.2	Normal Form of Benefit	7-1
7.3	Optional Forms of Benefit	7-2
7.4	Claim for Benefit	7-3
7.5	Automatic Single Sum Payment	7-5
7.6	Reemployment of Participant Prior to Required Beginning Date	7-6
7.7	Employment After Age 65	7-7
7.8	Requirements of Code Section 401(a)(9) and Additional Accruals After Required Beginning Date	7-8
ARTICLE 8 - DEATH BENEFITS		8-1
8.1	Unmarried Participants	8-1
8.2	Married Participants	8-1
8.3	Waiver of Death Benefit	8-3
ARTICLE 9 - SPECIAL MINIMUM, EARLY RETIREMENT WINDOW, AND TRANSITION BENEFITS		9-1
9.1	Minimum Benefit	9-1
9.2	Transition Retirement Benefits	9-1
9.3	Transition Death Benefits	9-4
ARTICLE 10 - MAXIMUM RETIREMENT BENEFIT LIMITATIONS		10-1
10.1	Maximum Plan Benefit - Separate Limitation as to This Plan	10-1
10.2	Maximum Plan Benefit - Combined Limitation for This Plan and Other Defined Contributions Plans	10-5
10.3	Restrictions of Benefits Payable to Certain Highly Compensated Participants	10-7
10.4	Compensation	10-9
10.5	Former Highly Compensated Employee	10-11
10.6	Highly Compensated Employee	10-11
ARTICLE 11 - ADDITIONAL RETIREMENT AND DEATH BENEFIT PAYMENT PROVISIONS		11-1
11.1	Incompetency	11-1
11.2	Commercial Annuity Contracts	11-1
11.3	Timing of Benefit Distributions	11-1
11.4	Nonalienation of Benefits	11-2
11.5	Actuarial Assumptions	11-2
11.6	Applicable Benefit Provisions	11-3

ii

11.7	Forfeitures	11-4
11.8	Direct Rollover Distributions	11-4
ARTICLE 12 - CONTRIBUTIONS		12-1
12.1	Contributions	12-1
12.2	Mistake of Fact	12-1
12.3	Disallowance of Deductions	12-1
ARTICLE 13 - ADMINISTRATION OF THE PLAN		13-1
13.1	Plan Administration	13-1
13.2	Committee Procedures	13-1
13.3	Authority of Committee	13-1
13.4	Reliance on Information and Effect on Decisions	13-3
13.5	Appointment of Actuary	13-3
13.6	Funding Policy and Method	13-3
13.7	Participant Information Forms	13-3
13.8	Disbursement of Funds	13-4
13.9	Insurance	13-4
13.10	Compensation of Committee and Payment of Plan Administrative and Investment Charges	13-4
13.11	Indemnification	13-4
13.12	Employees’ Benefit Claim Review Committee	13-5
ARTICLE 14 - CLAIMS PROCEDURE		14-1
14.1	Initial Claim	14-1
14.2	Actions in Event Initial Claim is Denied	14-1
14.3	Appeal of Denial of Claim	14-1
14.4	Decision on Appeal	14-2
14.5	Additional Rules	14-2
ARTICLE 15 - CERTAIN RIGHTS AND OBLIGATIONS OF COMPANY RELATING TO AMENDMENTS, PLAN TERMINATIONS, AND CONTRIBUTIONS		15-1
15.1	Authority to Amend Plan	15-1
15.2	Amendment to Vesting Schedule	15-1
15.3	Authority to Terminate Plan	15-2
15.4	Modification or Termination of Contributions	15-2
15.5	Benefits Not Guaranteed	15-2
15.6	Procedure for Amending or Terminating Plan	15-2
ARTICLE 16 - TERMINATION OF PLAN		16-1
16.1	Full Vesting on Termination	16-1
16.2	Distribution Method on Termination	16-1
16.3	Allocation of Assets on Termination	16-1

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ARTICLE 17 - TOP-HEAVY PROVISIONS		17-1
17.1	Determination of Whether Plan is Top Heavy	17-1
17.2	Effect of Top Heavy Status on Vesting	17-5
17.3	Effect of Top Heavy Status on Benefit Amounts	17-5
17.4	Effect of Top Heavy Status on Combined Maximum Plan Limits	17-6
ARTICLE 18 - MISCELLANEOUS		18-1
18.1	Exclusive Benefit of Participants	18-1
18.2	Mergers, Consolidations, and Transfers of Assets	18-1
18.3	Benefits and Service for Military Service	18-2
18.4	Actions Required by Mandatory Portability Agreement	18-2
18.5	Authority to Act for Company	18-3
18.6	Relationship of Plan to Employment Rights	18-3
18.7	Applicable Law	18-3
18.8	Separability of Pro visions	18-3
18.9	Counterparts	18-3
18.10	Headings	18-3
18.11	Special Definitions and Tables	18-3
18.12	Special Effective Dates	18-4
18.13	Plan Administrator and Sponsor	18-4
18.14	2001 Increase in Annuity Benefits	18-4
18.15	Non-Qualified Excess Benefit Plan	18-5
SIGNATURE PAGE		S-1
Table 1 - Single Sum Payment Factors		T-1
Table 2 - Early Commencement Reduction Factors		T-3

iv

BROADWING PENSION PLAN

(Amending and restating the Cincinnati Bell Management

Pension Plan effective as of January 1, 1997)

ARTICLE 1

NAME, PURPOSE, AND EFFECTIVE DATE

1.1 Name of Plan. The plan set forth herein shall be known as the “Broadwing Pension Plan.” It shall hereinafter be referred to in this document as the “Plan.”

1.2 Purpose of Plan. The Plan provides additional retirement income to persons who participate in the Plan. Except as is otherwise provided in Subsection 9.2.3 below and Section 18.15 below, it is intended that the Plan (together with the Trust used in conjunction with the Plan) qualify as a tax-favored plan and trust under sections 401(a) and 501(a) of the Code and shall be interpreted in a manner consistent with sections 401(a) and 501(a) of the Code.

1.3 Effective Date.

1.3.1 This document amends and restates the Plan effective as of the Effective Amendment Date (except as is otherwise provided herein) in order (a) to conform the Plan to the dictates of the Uniformed Services Employment and Reemployment Rights Act of 1994, the Uruguay Round Agreements Act, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, and applicable Internal Revenue Service regulations, (b) to collect all recent amendments to the Plan into one document, and (c) to make certain other changes in the Plan.

1.3.2 Prior to the adoption of this document, the Plan was named the Cincinnati Bell Management Pension Plan, and it has been renamed by this document. Further, this document replaces and supersedes all other documents both which amended the Plan effective as of any dates on or after the Effective Amendment Date and which were adopted prior to the date on which this document is signed.

1.3.3 Wherever the context permits, any reference to the Plan includes a reference to the provisions of the Plan as it was in effect for periods prior to the Effective Amendment Date.

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ARTICLE 2

GENERAL DEFINITIONS AND GENDER AND NUMBER

2.1 Defined Terms. For purposes of the Plan, the following terms shall have the meanings hereinafter set forth, unless a different meaning is plainly required by the context:

2.1.1 “Accrued Benefit” means, when applied to any Participant and his interest as of any specified date under this Plan or under any plan (for purposes of this Subsection 2.1.1, the “merged plan”) which merges into this Plan or has its assets and liabilities attributable to the Participant transferred to this Plan, the benefit to which the Participant would be entitled under the Plan or the merged plan, as the case may be: (a) if the Participant permanently ceased to be an employee who is eligible to accrue benefits under the Plan or the merged plan, as the case may be, as of such specified date (if he has not already done so); (b) if the Participant was fully vested in (i.e., had a nonforfeitable right to) his benefit under the Plan or the merged plan, as the case may be, as of the specified date (even if he is not yet fully vested in such benefit); and (c) if the Participant’s benefit under the Plan or the merged plan, as the case may be, is paid in the form of a Single Life Annuity commencing as of the Participant’s Normal Retirement Date (or, if such specified date is later than the Participant’s Normal Retirement Date, commencing as of such specified date). However, if any other provision of this Plan indicates that the Participant’s Accrued Benefit under this Plan or under any merged plan is to be determined as of age 65, then the reference to “the Participant’s Normal Retirement Date” contained in the immediately preceding sentence shall be deemed to be a reference to “the Participant’s 65^th birthday.”

2.1.2 “Affiliated Employer” means each of: the Company; each corporation which is (and only during the period it is) a member of a controlled group of corporations (within the meaning of section 414(b) of the Code as modified when applicable by section 415(h) of the Code) which includes the Company; each trade or business (whether or not incorporated) which is (and only during the period it is) under common control (as defined in section 414(c) of the Code as modified when applicable by section 415(h) of the Code) with the Company; each member (and only during the period it is such a member) of an affiliated service group (within the meaning of section 414(m) of the Code) which includes the Company; and each other entity required to be aggregated with the Company under section 414(o) of the Code (and only during the period it is required to be so aggregated).

2.1.3 “Approved Absence” means, with respect to any Employee, an absence of the Employee from active service with an Affiliated Employer by reason of a vacation or leave of absence approved by the Affiliated Employer, any absence of the Employee from active service with an Affiliated Employer while his employment rights with the Affiliated Employer are protected by law, and any other absence of the Employee 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.

2.1.4 “Board” means the Board of Directors of the Company.

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2.1.5 “Cash Balance Account” means, with respect to any Participant, the bookkeeping account established with respect to the Participant under Article 5 below.

2.1.6 “Code” means the Internal Revenue Code of 1986 and the sections thereof, as it and they exist as of the Effective Amendment Date or may thereafter be amended or renumbered.

2.1.7 “Committee” means the Employees’ Benefit Committee which is appointed by the Company to administer the Plan (and to perform certain other duties with respect to the Plan) in accordance with the provisions of Article 13 below and the other provisions of the Plan.

2.1.8 “Company” means Broadwing Inc. (which prior to April 27, 2000 was named Cincinnati Bell Inc.), or any corporate successor thereto. The Company is the sponsor of the Plan.

2.1.9 “Covered Employee” generally refers to an individual who is eligible to be a Participant in the Plan if and after he meets all of the participation requirements set forth in Article 4 below (including certain minimum age and minimum service requirements set forth in Article 4 below). In addition, service while a “Covered Employee” is often required in order to accrue certain benefit amounts under the Plan. For these and all other purposes of the Plan, a “Covered Employee” means an individual who meets the following criteria:

(a) Subject to the other provisions of this Subsection 2.1.9, a person shall be considered a “Covered Employee” for any period during which he is or was an Employee of a Participating Company.

(b) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” for any period during which he is or was an hourly employee. For purposes of the Plan, an “hourly employee” refers to an individual who is an Employee of a Participating Company and either who is a collectively bargained employee (within the meaning of Treas. Reg. section 1.410(b)-6(d)(2)) or whose position is subject to automatic wage progression. In addition, for purposes of the Plan, a person shall still be considered an “hourly employee” for any period during which he is or was temporarily promoted from an hourly employee position to a position as a non-hourly employee for one year or less.

(c) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” for any period during which he is not or was not on the employee payroll of a Participating Company or during which he is or was a Leased Employee. In particular, it is expressly intended that any person not treated as an employee by a Participating Company on its employee payroll records shall not be considered a Covered Employee for purposes of this Plan even if a court or administrative agency determines that such individual is a common law employee of a Participating Company.

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(d) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” for any period during which he is or was classified by a Participating Company as a contingency employee or a job bank employee. However, it is also provided that: (i) if and once such a contingency employee becomes or became a Covered Employee on or after January 1, 1989 and prior to January 1, 2002, his prior service as a contingency employee shall be deemed to have been service as a Covered Employee; and (ii) if and once such a job bank employee becomes or became a Covered Employee on or after January 1, 1991 and prior to January 1, 2002, his prior service as a job bank employee shall be deemed to have been service as a Covered Employee.

(e) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” for any period during which he is or was a co-op or intern first hired by an Affiliated Employer after April 30, 1994; provided that if an Employee who is or was a co-op or intern later, but in any event prior to January 1, 2002, becomes or became a Covered Employee, his prior service as a co-op or intern Employee shall be deemed to have been service as a Covered Employee.

(f) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” (i) when he is or was employed on or after March 1, 1996 at a location which is not within one of the States of the United States (other than as an Employee who is a foreign service employee) or (ii) when he on or after October 1, 1996 is or was a rotational employee. For purposes of this paragraph (f), a “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 and a “rotational employee” means an Employee who is a nonresident alien of the United States and who is employed by a Participating Company within one of the States of the United States for a period not expected to exceed three years.

(g) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee”: (i) for any period prior to April 1, 1987 during which he was on the Participating Company payroll known as the Cellular Business Systems—Chicago Payroll; (ii) for any period prior to January 1, 1988 during which he was classified as an employee of the CMS Department of Cincinnati Bell Information Systems Inc., or (iii) for any period prior to July 1, 1988 during which he was classified as an employee of the Comptech Department of the CBS Division of Cincinnati Bell Information Systems Inc.

(h) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” for any period prior to January 1, 1988 during which he was classified as an employee of Auxton Computer Enterprises, Inc.; provided however, that, in the case of an Employee who performs or performed an Hour of Service for an Affiliated Employer on or after November 1, 1991, his prior service with Auxton Computer Enterprises, Inc. shall be deemed to have been service as a Covered Employee.

(i) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” for any period after December 31,

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1991 and prior to December 31, 1993 during which either (i) he was classified as an employee of a CBIS Company (unless either he was during such period employed as a salaried employee and first performed an Hour of Service for a CBIS Company or CBIS Federal Inc. prior to January 1, 1992 or he was in a class of Employees eligible to participate in the Plan on the day preceding the date on which he first performed an Hour of Service for a CBIS Company) or (ii) he was classified as an employee of CBIS Federal Inc. but not a transferred employee. It is provided, however, that if a person is not considered a Covered Employee during any period after December 31, 1991 and prior to December 31, 1993 solely by reason of the provisions of the immediately preceding sentence but he later becomes or became a Covered Employee, his service when he would have been considered a Covered Employee but for the provisions of the immediately preceding sentence shall be considered to be service as a Covered Employee. For purposes of this paragraph (i), a “CBIS Company” shall mean any of Cincinnati Bell Information Systems Inc., CBIS International Inc., and CBIS International Services Inc. Also for purposes of this paragraph (i), a “transferred employee” means an Employee who was transferred to CBIS Federal Inc. from the employee payroll of another Participating Company after December 31, 1990 and prior to November 1, 1994 and who was in a class of Employees eligible to participate in the Plan immediately prior to transferring to CBIS Federal Inc.

(j) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” for any period on or after January 1, 1994 during which he is or was considered a substantial service employee (within the meaning of Treas. Reg. section 1.414(r)-11(b)(2)) with respect to MATRIXX Marketing Inc. or any direct or indirect subsidiary of MATRIXX Marketing Inc.

2.1.10 “Effective Amendment Date” refers to the effective date of the amendment and restatement of the Plan that is reflected in this document and means January 1, 1997.

2.1.11 “Employee” means any person who either (a) is employed as a common law employee of an Affiliated Employer (i.e., a person whose work procedures are subject to control by an Affiliated Employer), including any such person who is absent from active service with an Affiliated Employer by reason of an Approved Absence, or (b) is a Leased Employee. A person who is an Employee shall no longer be considered an Employee when he both is no longer providing services to any Affiliated Employer and is no longer treated as an Employee by an Affiliated Employer (and is not then in a position where applicable law requires him to be treated as an employee of an Affiliated Employer).

2.1.12 “ERISA” means the Employee Retirement Income Security Act of 1974 and the sections thereof, as it and they exist as of the Effective Amendment Date or may thereafter be amended or renumbered.

2.1.13 “Leased Employee” means any person who is a leased employee (within the meaning of section 414(n) of the Code) of an Affiliated Employer. Under Code section 414(n), effective as of the Effective Amendment Date but subject to any subsequent changes to such Code section, a leased employee is an individual who provides services to an Affiliated Employer, in a capacity other than as a common law employee of the Affiliated Employer, in

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accordance with each of the following three requirements: (a) the services are provided pursuant to an agreement between the Affiliated Employer and one or more leasing organizations; (b) the individual has performed such services for the Affiliated Employer on a substantially full-time basis for a period of at least one year; and (c) such services are performed under the primary direction or control by the Affiliated Employer. The determination of who is a Leased Employee shall be consistent with any regulations issued under section 414(n) of the Code.

2.1.14 “Mandatory Portability Agreement” means that agreement, which was originally effective January 1, 1985, between and among Cincinnati Bell Telephone Company and certain other companies to comply with the mandatory portability provisions of the Deficit Reduction Act of 1984 and which provides for the portability of benefits with respect to certain employees who terminate employment with one company subject to the agreement and subsequently commence employment with another company subject to the agreement.

2.1.15 “Normal Retirement Age” means: (a) in the case of an Employee who first became a Participant in the Plan prior to January 1, 1988, the Employee’s 65th birthday; and (b) in the case of an Employee who first became or becomes a Participant in the Plan on or after January 1, 1988, the later of (i) the Employee’s 65th birthday or (ii) the fifth anniversary of the date the Employee first became or becomes a Participant in the Plan.

2.1.16 “Normal Retirement Date” means, with respect to any Participant, the first day after the date on which the Participant first attains his Normal Retirement Age.

2.1.17 “Plan Year” refers to the annual period on which Plan records are kept and means a calendar year.

2.1.18 “Participant” means a person who becomes a Participant in the Plan in accordance with the provisions of Article 4 below, so long as he remains a Participant under the provisions of Article 4 below.

2.1.19 “Participating Company” refers to the employers that participate in the Plan, as determined under the following provisions of this Subsection 2.1.19:

(a) Subject to the provisions of paragraph (b) below, on and after January 1, 2001, each of the Company, each corporation which is (and only during the period it is) a member of a controlled group of corporations (within the meaning of section 414(b) of the Code) which includes the Company, and each other trade or business (whether or not incorporated) which is (and only during the period it is) under common control (as defined in section 414(c) of the Code) with the Company shall be considered a “Participating Company.”

(b) Any corporation, partnership, or other organization (for purposes of this paragraph (b), the “acquired company”) that first becomes a member of a controlled group of corporations (within the meaning of section 414(b) of the Code) which includes the Company or a part of a group of trades or businesses under common control (within the meaning of section 414(c) of the Code) with the Company after January 1, 2001, as a result of the acquisition by any

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Participating Company (for purposes of this paragraph (b), the “acquiring company”) of the stock or interests of the acquired company or substantially all of the assets of a trade or business previously operated by another organization shall not be considered a Participating Company unless and until the first date as of which both (i) the agreements by which such stock, interests, or assets were acquired by the acquiring company do not require that the employees of the acquired company be eligible to actively participate in another defined benefit plan (within the meaning of section 414(j) of the Code) maintained by the acquired company or another Affiliated Employer (and do not otherwise prohibit the employees of the acquired company from participating in the Plan) and (ii) the Company has taken such actions (such as, but not necessarily limited to, the providing of notices) so as to clearly indicate that employees of the acquired company are to begin participating in the Plan as of such date.

(c) Further, during the period that begins on the Effective Amendment Date and that ends on December 31, 2000, each of the following corporations (or trades or businesses) shall be considered a “Participating Company”: the Company; Cincinnati Bell Telephone Company; Cincinnati Bell Information Systems Inc.; CBIS International Services Inc.; CBIS International Inc.; Cincinnati Bell Telecommunication Services Inc.; effective as of November 2, 1997, Cincinnati Bell Wireless Company; effective as of January 1, 1998, MATRTXX Marketing Inc.; effective as of January 1, 1998, Cincinnati Bell Supply, Inc.; effective as of January 1, 1998, Cincinnati Bell Network Solutions Inc.; effective as of September 29, 1998, Cincinnati Bell Software Solutions LLC; effective as of December 20, 1998, Cincinnati Bell Wireless LLC; effective as of February 24, 1999, ZoomTown.com Inc.; effective as of March 2, 1999, EnterpriseWise IT Consulting LLC (which employer is the successor to Cincinnati Bell Network Solutions Inc. and Cincinnati Bell Software Solutions LLC); and effective as of August 16, 1999, Cincinnati Bell Public Communications Inc.

(d) Notwithstanding the foregoing provisions of this Subsection 2.1.19, any of the employers identified as a “Participating Company” under any of such foregoing provisions shall no longer be a “Participating Company” for purposes of this Plan once it no longer is an Affiliated Employer. (For example, pursuant to the terms of this paragraph (d) and with respect to the corporations or trades or businesses identified in paragraph (c) above as Participating Companies during the period that begins on the Effective Amendment Date and that ends on December 31, 2000: CBIS Federal Inc. is no longer a Participating Company as of November 1, 1994; Cincinnati Bell Information Systems Inc., CBIS International Services Inc., CBIS International Inc., and MATRIXX Marketing Inc. are no longer Participating Companies as of January 1, 1999; Cincinnati Bell Network Solutions Inc. and Cincinnati Bell Software Solutions LLC are no longer Participating Companies as of March 2, 1999; and Cincinnati Bell Supply, Inc. is no longer a Participating Company as of May 23, 2000.)

2.1.20 “Prior Pension Plan” means the part of the Plan as in effect on December 30, 1993 (or, to the extent indicated in the other provisions of this Plan, at any earlier date) which dealt with service, disability, and deferred vested pensions. Where the context requires, any reference to the Plan that concerns benefits accrued for periods prior to January 1, 1994 shall be deemed to include a reference to the Prior Pension Plan.

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2.1.21 “Qualified Joint and Survivor Annuity” means an annuity (i.e., a form of benefit without life insurance which provides for equal payments at regular installments over more than a one year period) payable as follows. Monthly payments are made to a Participant for his life, and after his death monthly survivor payments continue to the person who is the spouse of the Participant on the date as of which the annuity commences to be paid to the Participant (provided that such spouse survives the Participant) for such spouse’s life. Each monthly survivor payment to such spouse shall be equal in amount to 50% of the monthly payment amount made during the life of the Participant under the same annuity. The monthly amount of a Qualified Joint and Survivor Annuity that is paid while the Participant is living is determined under the provisions of Subsection 7.2.2 below and certain other provisions of the Plan. A Qualified Joint and Survivor Annuity shall end with the payment due for the calendar month in which the date of death of the survivor of the Participant and such spouse occurs.

2.1.22 “Required Beginning Date” means, with respect to any Participant, a date determined by the Committee for administrative reasons to be the date as of which the Participant’s nonforfeitable benefit (if any such benefit would then exist and not yet have begun to be paid) is to commence in order to meet the requirements of section 401(a)(9) of the Code (or, for any Participant who attains age 70- ¹/2 prior to January 1, 2002, in order to meet the requirements of Code section 401(a)(9) as in effect before the effect of the Small Business Job Protection Act of 1996 is taken into account), which date shall be subject to the following parameters:

(a) Subject to paragraph (e) below, for a Participant who attains age 70- ¹/2 on or after January 1, 1987 and prior to January 1, 2002, his Required Beginning Date must be no later than, and no earlier than six months prior to, the April 1 of the calendar year next following the calendar year in which he attains age 70- ¹/2.

(b) Subject to paragraph (e) below, for a Participant who both attains age 70- ¹/2 prior to January 1, 1987 or on or after January 1, 2002 and is not a 5% owner of an Affiliated Employer, his Required Beginning Date must be no later than, and no earlier than six months prior to, the April 1 of the calendar year next following the later of: (i) the calendar year in which he attains age 70- ¹/2; or (ii) the calendar year in which he terminates employment with the Affiliated Employers.

(c) Subject to paragraph (e) below, for a Participant who both attains age 70- ¹/2 prior to January 1, 1987 or on or after January 1, 2002 and is a 5% owner of an Affiliated Employer, his Required Beginning Date must be no later than, and no earlier than six months prior to, the April 1 of the calendar year next following the later of: (i) the calendar year in which he attains age 70- ¹/2; or (ii) the earlier of the calendar year with or within which ends the Plan Year in which he becomes a 5% owner of an Affiliated Employer or the calendar year in which he terminates employment with the Affiliated Employers.

(d) A Participant is deemed to be a 5% owner of an Affiliated Employer for purposes hereof if he is a 5% owner of the Affiliated Employer (as determined under section 416(i)(l)(B) of the Code) at any time during the Plan Year ending with or within

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the calendar year in which he attains age 66- ¹/2 or any subsequent Plan Year. Once a Participant meets these criteria, he shall be deemed a 5% owner of the Affiliated Employer even if he ceases to own 5% of the Affiliated Employer in a later Plan Year.

(e) Notwithstanding the foregoing, if a Participant first earns a nonforfeitable retirement benefit under the Plan after the date which would otherwise be his Required Beginning Date under the foregoing provisions of this Subsection 2.1.22, then his Required Beginning Date shall not be determined under such foregoing provisions but rather must be a date within the calendar year next following the calendar year in which he first earns a nonforfeitable retirement benefit under the Plan.

2.1.23 “Single Life Annuity” means an annuity (i.e., a form of benefit without life insurance which provides for equal payments at regular installments over more than a one year period) payable as follows. Monthly payments are made to a Participant for his life and end with the last payment due for the calendar month in which the date of the Participant’s death occurs. The monthly amount of a Single Life Annuity is determined under the provisions of Subsection 7.2.1 below and certain other provisions of the Plan.

2.1.24 “Trust” means the Cincinnati Bell Pension Plans Trust, which trust was created by the Company to serve as the funding media for the Plan, as such trust exists as of the Effective Amendment Date or is subsequently amended. The Trust is hereby incorporated by reference and made a part of the Plan.

2.1.25 “Trustee” means the person or entity serving at any time as trustee of the Trust.

2.1.26 “Vested Participant” means a Participant who is (or, if he ceased to be an Employee immediately, would be) entitled under the provisions of the Plan to some nonforfeitable benefit under the Plan.

2.2 Gender and Number. For purposes of this Plan, words used in any gender shall include all other genders, the singular shall include the plural, and the plural shall include the singular, as the context may require.

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ARTICLE 3

SERVICE

3.1 Hour of Service. An Employee’s “Hours of Service” to be counted for purposes of the Plan shall be computed as follows, subject to the rules contained in U.S. Department of Labor Regulation section 2530.200b-2(b) and (c) (which is incorporated herein by reference):

3.1.1 One Hour of Service shall be credited for each hour for which the Employee is paid, or entitled to payment, by an Affiliated Employer for the performance of duties. Hours of Service credited under this Subsection 3.1.1 shall be allocated to the computation period or periods during which the duties are performed.

3.1.2 One Hour of Service shall be credited for each hour for which the 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. Hours of Service credited under this Subsection 3.1.2 shall be allocated to computation periods in accordance with the rules of U.S. Department of Labor Regulation section 2530.200b-2(b) and (c). Notwithstanding the foregoing provisions of this Subsection 3.1.2:

(a) No more than 501 Hours of Service shall be credited under this Subsection 3.1.2 to the 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 the 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 workers’ compensation, unemployment compensation, or disability insurance laws; and

(c) Hours of Service shall not be credited for a payment which solely reimburses the Employee for medical or medically related expenses incurred by the Employee.

For purposes of this Subsection 3.1.2, 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.

3.1.3 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 with respect to the Employee. Hours of Service credited under this Subsection 3.1.3 shall be allocated to

3-1

the computation period or periods to which the agreement or award relates. The same Hours of Service shall not be credited both under Subsection 3.1.1 or 3.1.2, as the case may be, and under this Subsection 3.1.3. Crediting of Hours of Service for back pay awarded or agreed to with respect to periods described in Subsection 3.1.2 above shall be subject to the limitations set forth in that provision.

3.1.4 To the extent required by applicable federal law, Hours of Service shall be credited for service in the armed forces of the United States and for any leave taken pursuant to the requirements of the federal Family and Medical Leave Act of 1993, as amended.

3.1.5 For purposes only of determining whether the Employee has incurred a Break in Service, if the Employee is absent from active service with an Affiliated Employer (1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the placement of a child with the Employee in connection with the adoption of such child by the Employee, or (4) 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 shall 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 immediately preceding sentence:

(a) No more than 501 Hours of Service shall be credited under this Subsection 3.1.5 to the Employee on account of any single continuous period of such an absence;

(b) Any Hours of Service which are to be credited to the Employee under this Subsection 3.1.5 by reason of a single continuous period of absence shall be credited for the calendar year in which such absence begins if the Employee would be prevented from incurring a Break in Service with respect to such calendar year solely because of such crediting. Otherwise, such Hours of Service shall be credited for the calendar year next following the calendar year in which such absence begins; and

(c) No Hours of Service shall be credited under this Subsection 3.1.5 to the 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 Subsection 3.1.5 and the number of days for which there was such an absence.

3.1.6 For purposes of the Plan, the Employee shall be deemed to have completed 45 Hours of Service for each week in which he would otherwise be credited with one or more Hours of Service under the foregoing provisions of this Section 3.1; except that, in the case of (a) any Employee who is classified by the Affiliated Employer which employs him as a part-time Employee or (b) any Employee who is hired for a period not exceeding three consecutive weeks and who is not employed for more than 30 days in a year, such Employee shall be deemed to have completed 10 Hours of Service for each day in which he would otherwise be credited with one or more Hours of Service under the foregoing provisions of this Section 3.1. However, the provisions of this

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Subsection 3.1.6 shall not apply: (a) for any period occurring prior to January 1, 2002 and after December 31, 2000 with respect to Employees of Cincinnati Bell Wireless Company or Cincinnati Bell Wireless LLC; or (b) for any period occurring prior to January 1, 2001 with respect to Employees of any Participating Companies other than the Company, Cincinnati Bell Telephone Company, Cincinnati Bell Information Systems Inc., CBIS International Services Inc., CBIS International Inc., CBIS Federal Inc., or Cincinnati Bell Public Communications Inc.

3.2 Break in Service. An Employee shall be deemed to have incurred a “Break in Service” in any calendar year during which he is credited with not more than 500 Hours of Service.

3.3 Employment and Reemployment Commencement Dates. An Employee’s “Employment Commencement Date” shall be the date on which he first performs an Hour of Service as an Employee for which he is paid, or entitled to payment, by any Affiliated Employer. Further, if the Employee incurs a Break in Service in any calendar year that commences after his Employment Commencement Date but that ends prior to his completion of at least 1,000 Hours of Service in any Eligibility Computation Period, then the first day that occurs after the end of such calendar year and on which he performs an Hour of Service as an Employee for which he is paid, or entitled to be paid, by any Affiliated Employer shall be considered his “Reemployment Commencement Date.”

3.4 Eligibility Service. An Employee shall be credited with one year of “Eligibility Service” as of the last day of the first Eligibility Computation Period during which he completes at least 1,000 Hours of Service.

3.5 Eligibility Computation Period. An Employee’s “Eligibility Computation Period” shall be the twelve-month period commencing on the Employee’s Employment Commencement Date and each calendar year commencing after his Employment Commencement Date. However, notwithstanding the foregoing, if the Employee incurs a Break in Service in any calendar year that commences after his Employment Commencement Date but that ends prior to his completion of at least 1,000 Hours of Service in an Eligibility Computation Period, then his “Eligibility Computation Period” after such calendar year shall mean the twelve-month period commencing on his first Reemployment Commencement Date that occurs after the end of such calendar year and each calendar year commencing after such Reemployment Commencement Date.

3.6 Vesting Service. An Employee’s years of “Vesting Service” shall be computed as follows:

3.6.1 The Employee shall be credited with years of Vesting Service equal to the number of his years of service counted for purposes of determining eligibility for a vested pension under the Prior Pension Plan as of December 31, 1993 (as calculated under the provisions of the Prior Pension Plan).

3.6.2 The Employee shall also be credited with one year of Vesting Service for each calendar year ending after December 31, 1993 and during which he is credited with at least

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1,000 Hours of Service; provided that service prior to the calendar year in which the Employee attained age 18 shall not be counted for purposes of this Subsection 3.6.2.

3.7 Mandatory Portability Agreement. To the extent required under the Mandatory Portability Agreement, service of Employees with former Bell System companies (and their successors) shall be recognized under this Plan. In this regard, Employees of certain Participating Companies, including but not necessarily limited to Broadwing Communications Inc., are not subject to or affected by the Mandatory Portability Agreement while employed by any such companies, and this Section 3.7 shall not give any rights under the Mandatory Portability Agreement to such Employees while employed by any such companies.

3.8 Service With Predecessor Entities. The following provisions of this Section 3.8 shall apply for purposes of the Plan.

3.8.1 Service prior to January 1, 1996 with Information Systems Development Partnership (or its predecessor, Information Systems Development, Inc.) shall be deemed to be service with an Affiliated Employer which is not a Participating Company.

3.8.2 In the case of an employee of AccuStaff Incorporated or People Systems Inc. (for purposes of this Subsection 3.8.2, collectively referred to as “AccuStaff”) who becomes an Employee of MATRIXX Marketing Inc. (for purposes of this Subsection 3.8.2 and Subsection 3.8.3 below, “MATRIXX”) during 1998 and who was supporting MATRIXX immediately prior to the date on which he becomes an Employee of MATRIXX, his service with AccuStaff prior to the date on which he becomes an Employee of MATRIXX shall be deemed to be service with an Affiliated Employer which is not a Participating Company.

3.8.3 In the case of an employee of American Transtech, Inc. or AT&T Corp. (for purposes of this Subsection 3.8.3, collectively referred to as “ATI”) who becomes an Employee of MATRIXX on March 1, 1998, his service with ATI prior to the date on which he becomes an Employee of MATRIXX shall be deemed to be service with an Affiliated Employer which is not a Participating Company.

3.8.4 Service with KSM Consulting, LLC (“KSMC”), or with its affiliate Katz, Sapper & Miller, L.L.P., that is completed prior to the acquisition by an Affiliated Employer of substantially all of the assets of KSMC (which acquisition occurred on October 1, 1998) shall be deemed to be service with an Affiliated Employer which is not a Participating Company with respect to any person who becomes an Employee upon or in connection with such acquisition.

3.8.5 In the case of any person who becomes a Covered Employee of a Participating Company on or after January 1, 2001, any service he completed prior to November 9, 1999 with IXC Communications, Inc. (the predecessor to Broadwing Communications Inc.) or any subsidiary thereof shall be deemed to be service with an Affiliated Employer which is not a Participating Company. For purposes of this Subsection 3.8.5, a “subsidiary” of IXC Communications, Inc. means any corporation (or other trade or business) other than IXC Communications, Inc. which is both in a chain of corporations (and/or other trades or businesses)

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that begins with IXC Communications, Inc. and in which at least 80% of the voting interests in such corporation (or other trade or business) in such chain (other than IXC Communications, Inc.) is owned by IXC Communications, Inc. or another corporation (or other trade or business) in such chain.

3.8.6 The service credited to any person under the foregoing provisions of this Section 3.8 shall be determined by the Committee (or any other party to whom these administrative duties are delegated under procedures authorized by the Plan) based on the best records that it receives as to such service. Since the service credited to any person under the foregoing provisions of this Section 3.8 is deemed to be service with an Affiliated Employer which is not a Participating Company, such service shall be used in determining the person’s Eligibility Service and Vesting Service under this Plan but shall not be used in any manner in calculating the amount of the person’s benefits under the benefit formulas of this Plan, if any.

3.8.7 Except as is otherwise provided in this Section 3.8, service with a corporation or other organization which becomes an Affiliated Employer (or substantially all of whose assets are acquired by an Affiliated Employer) that is completed prior to the date on which such corporation or other organization so becomes an Affiliated Employer (or prior to the date on which substantially all of the assets of such corporation or organization are so acquired by an Affiliated Employer) shall not be deemed to be service with an Affiliated Employer for purposes of this Plan.

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ARTICLE 4

ELIGIBILITY AND PARTICIPATION

4.1 Eligibility. Each person (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 in accordance with the provisions of Section 4.2 below.

4.2 Participation. Each Employee who satisfies all of the eligibility requirements of Section 4.1 above on the Effective Amendment Date shall become a Participant in the Plan on the Effective Amendment Date. Each other Employee shall become a Participant in the Plan on the first date subsequent to the Effective Amendment Date on which he satisfies all of the eligibility requirements of Section 4.1 above. Each Employee who becomes a Participant in the Plan shall continue to be a Participant so long as he remains an Employee and until he ceases to have any nonforfeitable right to an Accrued Benefit under the Plan.

4.3 Reemployment of Former Participants. If a former Participant is reemployed as a Covered Employee on or after the Effective Amendment Date, he shall become a Participant as of the date on which he is reemployed as a Covered Employee.

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ARTICLE 5

MONTHLY BENEFIT FORMULA AMOUNT RULES

5.1 General Rules for Monthly Benefit Formula Amounts.

5.1.1 In determining any retirement benefit of a Participant under a provision of this Plan, such provision may refer to a “Monthly Benefit Formula Amount.” For all purposes of the Plan, and subject to the other provisions of the Plan, a Participant’s “Monthly Benefit Formula Amount” determined as of any date (for purposes of this Subsection 5.1.1, the “subject date”) that occurs on or after the Effective Amendment Date refers to the monthly amount of the retirement benefit that would be paid to the Participant under the Plan if his retirement benefit under the Plan were to be paid in the form of a Single Life Annuity that commences as of the subject date. The Participant’s “Monthly Benefit Formula Amount” determined as of the subject date is an amount equal to the result that is produced by dividing (a) by (b) and then multiplying such quotient by (c) (i.e., ((a) ÷ (b)) x (c)), where (a), (b), and (c) are as follows: (a) is the amount that as of the subject date is credited to the Participant’s Cash Balance Account, divided by 12; (b) is the factor identified in Table 1 to this Plan as applicable to a payment age that is the Participant’s attained age (in whole years and months) as of the subject date; and (c) is the factor identified in Table 2 to this Plan as applicable to a payment age that is the Participant’s attained age (in whole years and months) as of the subject date.

5.1.2 Further, in determining the single sum amount of a retirement benefit under a provision of the Plan, such provision may refer to an “Assumed Monthly Normal Retirement Benefit Formula Amount.” For all purposes of the Plan, and subject to the other provisions of the Plan, a Participant’s “Assumed Monthly Normal Retirement Benefit Formula Amount” determined as of any date (for purposes of this Subsection 5.1.2, the “subject date”) that occurs on or after the Effective Amendment Date refers to the monthly amount of the retirement benefit that would be paid to the Participant under the Plan if he ceased to be an Employee no later than the subject date (if he had not already done so) and if his retirement benefit under the Plan were to be paid in the form of a Single Life Annuity that commences as of the later of the Participant’s Normal Retirement Date or the subject date. The Participant’s Assumed Monthly Normal Retirement Benefit Formula Amount determined as of the subject date is an amount equal to the result that is produced by dividing (a) by (b) (i.e., (a) ÷ (b)), where (a) and (b) are as follows: (a) is the amount that as of the subject date is credited to the Participant’s Cash Balance Account, divided by 12; and (b) is the factor identified in Table 1 to this Plan as applicable to a payment age that is the Participant’s attained age (in whole years and months) as of the subject date.

5.2 Cash Balance Accounts for Participants. A bookkeeping account, known as a “Cash Balance Account” in this Plan, shall be established under the Plan with respect to each Participant. As is indicated in the provisions of Section 5.1 above, the Participant’s Monthly Benefit Formula Amount is based largely on the basis of the dollar amount credited to the Participant’s Cash Balance Account. A Participant’s Cash Balance Account does not represent an actual funded account under which the Participant has a specific right to assets under the Trust

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or an account which reflects a specific part of the Trust; instead, it represents only a bookkeeping account to which bookkeeping amounts are credited and which is generally used to help determine the amount of the Participant’s retirement benefit, if any, which exists under the Plan. The Cash Balance Account of a Participant is credited with (a) an initial cash balance amount to the extent provided in Section 5.3 below, (b) pension credit amounts to the extent provided in Section 5.4 below, (c) interest credit amounts to the extent provided in Section 5.5 below, and (d) special credit amounts to the extent provided in the provisions of this Article 5 that follow Section 5.5 below. No other amounts are credited to a Participant’s Cash Balance Account.

5.3 Initial Cash Balance Amount Credited to Cash Balance Account.

5.3.1 In the case of a Participant who was a Covered Employee on December 31, 1993 and who was a Participant in the Prior Pension Plan on December 30, 1993, there shall be credited to his Cash Balance Account, as of December 30, 1993, an amount equal to the amount that would make the single sum payment of such amount as of December 30, 1993 actuarially equivalent to his Accrued Benefit under the Prior Pension Plan as of December 30, 1993 (expressed as a Single Life Annuity commencing on the Participant’s 65th birthday), based upon the Participant’s attained age, in whole years and months, on December 30, 1993 and with the actuarial assumptions to be used in determining such amount being the assumptions described in Subsection 11.5.2 below.

5.3.2 In the case of a Participant who was a Participant in the Prior Pension Plan on December 30, 1993, who was not a Covered Employee on December 31, 1993, and who thereafter became or becomes a Covered Employee, there shall be credited to his Cash Balance Account, as of the first date after December 31, 1993 on which he became or becomes a Covered Employee (for purposes of this Subsection 5.3.2, the Participant’s “rehire date”), an amount equal to the amount that would make the single sum payment of such amount as of the Participant’s rehire date actuarially equivalent to his Accrued Benefit under the Plan as of his rehire date (expressed as a Single Life Annuity commencing on the Participant’s 65th birthday), based upon his attained age, in whole years and months, on such date, but disregarding any amendments to the Plan adopted effective March 31, 1995 when determining such Accrued Benefit. The actuarial assumptions to be used in determining such amount shall be the assumptions described in Subsection 11.5.2 below.

5.3.3 In the case of a Participant who first became or becomes a Participant on or after December 31, 1993, there shall be credited to his Cash Balance Account, as of the date on which he first became or becomes a Participant, an amount equal to the amount which would have been credited to his Cash Balance Account on such date if the Plan did not require attainment of age 21 and completion of one year of Eligibility Service as conditions of becoming a Participant. Notwithstanding the foregoing, the provisions of this Subsection 5.3.3 does not provide for an amount to be credited to the Cash Balance Account of any Participant prior to the date on which the Participant first became or becomes a Covered Employee and met or meets any other conditions (not related to the Plan’s minimum age and service conditions) for becoming a Participant in the Plan.

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5.3.4 In the case of a Participant for whom an Accrued Benefit is transferred to the Plan from a Related Plan on or after December 31, 1993, there shall be credited to his Cash Balance Account, as of the date on which such Accrued Benefit is transferred to the Plan (for purposes of this Subsection 5.3.4, the “transfer date”), an amount equal to: (a) in the case of a transfer on or after January 1, 1997 from the Cincinnati Bell Pension Plan (as such plan exists as of January 1, 1997 or is subsequently amended), the amount credited to his Cash Balance Account under that plan as of the transfer date; or (b) in the case of any other transfer from a Related Plan, the amount that would make the single sum payment of such amount as of the transfer date actuarially equivalent to such Accrued Benefit (expressed as a Single Life Annuity commencing on the Participant’s 65th birthday), based upon his attained age, in whole years and months, on such date and with the actuarial assumptions to be used in determining such amount being the assumptions described in Subsection 11.5.2 below. For purposes of the Plan, a “Related Plan” means the Cincinnati Bell Pension Plan (as such plan exists as of the Effective Amendment Date or is subsequently amended) and each Former Affiliate Plan (within the meaning of the Mandatory Portability Agreement).

5.3.5 In the case of an employee of American Transtech, Inc. or AT&T Corp. (for purposes of this Subsection 5.3.5, collectively referred to as “ATI”) who becomes an Employee of MATRIXX Marketing Inc. (for purposes of this Subsection 5.3.5, “MATRIXX”) on March 1, 1998 (for purposes of this Subsection 5.3.5, such an employee being referred to as an “ATI Employee”):

(a) If such ATI Employee had a cash balance account under the AT&T Management Pension Plan (for purposes of this Subsection 5.3.5, the “ATTMPP”) which was not vested on February 28, 1998, his Cash Balance Account under this Plan shall be credited, on March 1, 1998, with an amount equal to the amount credited to his cash balance account under the ATTMPP immediately prior to that date. If such ATI Employee had an accrued benefit under the AT&T Pension Plan (for purposes of this Subsection 5.3.5, the “ATTPP”) which was not vested on February 28, 1998, his Cash Balance Account under this Plan shall be credited, on March 1, 1998, with an amount equal to the amount that would make the single sum payment of such amount actuarially equivalent to his accrued benefit under (and as determined pursuant to the terms of) the ATTPP immediately prior to that date and with the actuarial assumptions to be used in determining such amount being the assumptions described in Subsection 11.5.2 below. For purposes of this Subsection 5.3.5, if such ATI Employee was not a participant in the ATTMPP or the ATTPP on February 28, 1998 solely by reason of not satisfying the minimum age and/or service conditions for such plan, then, if and when he becomes a Participant in this Plan, he shall be deemed to have been a participant in the ATTMPP or the ATTPP, as the case may be, on February 28, 1998 and shall be treated as having the cash balance account balance under the ATTMPP or the accrued benefit under the ATTPP, as the case may be, that would have existed if neither such plan had contained minimum age and/or service conditions to becoming a participant thereunder.

(b) If such ATI Employee had completed at least 29 years of net credited service under the ATTMPP or the ATTPP as of March 1, 1998, and if such ATI Employee would not have attained age 55 prior to completing 30 years of such net credited

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service (assuming that his net credited service had continued uninterrupted after February 28, 1998), his Cash Balance Account under this Plan shall be credited with an additional amount, as of March 1, 1998, equal to the amount “E” determined under the formula: E = (A - B) × C × D. For purposes of such formula, “A” is equal to the monthly accrued benefit which would be payable to such ATI Employee under the ATTMPP or the ATTPP, as the case may be, on the date on which such ATI Employee would have completed 30 years of net credited service with ATI (for purposes of this paragraph (b), the “30 Year Date”) if his net credited service had continued uninterrupted after February 28, 1998 and if such benefit was paid in the form of a Single Life Annuity; “B” is equal to the monthly accrued benefit which would be payable to such ATI Employee under the ATTMPP or the ATTPP, as the case may be, on the 30 Year Date if his net credited service had continued uninterrupted after February 28, 1998, if such benefit was paid in the form of a Single Life Annuity, and if the monthly amount of such benefit were reduced by .005 a month for each month by which the 30 Year Date would precede his 55^th birthday; “C” is a fraction having a numerator equal to the factor identified in Table 1 to this Plan as applicable to a payment age that is the Participant’s attained age (in whole years and months) as of the 30 Year Date and a denominator equal to the factor identified in Table 2 to the Plan as applicable to the same payment age; and “D” is a discount factor based on this Plan’s active employee interest crediting rate for Cash Balance Account purposes.

5.4 Pension Credit Amounts Credited to Cash Balance Account.

5.4.1 As of December 31, 1993, there shall be credited to the Cash Balance Account of each Participant who was a Covered Employee on that date an amount equal to the product obtained by multiplying the Participant’s Covered Compensation Rate times the Participant’s Applicable Percentage from the table set forth in Subsection 5.4.2 below, based upon his attained age, in completed years, as of December 31, 1993. For purposes of this Subsection 5.4.1, a Participant’s “Covered Compensation Rate” means the quotient obtained by dividing the Participant’s annualized rate of Covered Compensation as of December 31, 1993 by 261.

5.4.2 As of the last day of each calendar year subsequent to 1993 (or, in the case of a Participant who ceases to be an Employee during any such calendar year, as of the date on which he was last employed as an Employee), there shall be credited to the Cash Balance Account of each Participant who received Covered Compensation during the calendar year an amount equal to the product obtained by multiplying (a) the sum of (i) an amount equal to such Covered Compensation plus (ii) an amount equal to that portion of such Covered Compensation in excess of the Social Security Wage Base for such year by (b) the Participant’s Applicable Percentage for the applicable calendar year as determined from the tables set forth below in this Subsection 5.4.2, based upon his attained age, in whole years, on such December 31 (or, if he ceased to be an Employee during the year, his attained age as of the date on which he was last employed as an Employee). For purposes of this Subsection 5.4.2, the “Social Security Wage Base” means, with respect to any calendar year, the contribution and benefit base for old-age retirement benefits that is in effect for such year under section 230 of the federal Social Security Act, as amended.

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Participant’s Attained Age	Applicable Percentage for any calendar year beginning before January 1, 2001
Less than 30 years	2.50%
30 but less than 35 years	2.75%
35 but less than 40 years	3.25%
40 but less than 45 years	4.00%
45 but less than 50 years	5.25%
50 but less than 55 years	6.50%
55 or more years	8.00%

Participant’s Attained Age	Applicable Percentage for any calendar year beginning on or after January 1, 2001
Less than 30 years	3.00%
30 but less than 35 years	3.25%
35 but less than 40 years	3.75%
40 but less than 45 years	4.50%
45 but less than 50 years	5.25%
50 but less than 55 years	6.50%
55 or more years	8.00%

5.5 Interest Credit Amounts Credited to Cash Balance Account.

5.5.1 As of December 31, 1993, there shall be credited to the Cash Balance Account of each Participant who has a Cash Balance Account balance under the Plan on December 30, 1993 an amount equal to 0.02191% of such balance.

5.5.2 On each day subsequent to December 31, 1993 and prior to January 1, 2003, there shall be credited to the Cash Balance Account of each Participant who has a Cash Balance Account balance under the Plan on the December 31 immediately preceding such day assumed interest on such balance at an annualized rate (without compounding) of: for days occurring during calendar years 1994 through 1996, 8%; for days occurring during calendar years 1997 and 1998, 8.125%; for days occurring during calendar years 1999 through 2001, 7.75%; and for days occurring during calendar year 2002, 6.50%.

5.5.3 On each day subsequent to December 31, 2002, there shall be credited to the Cash Balance Account of each Participant who has a Cash Balance Account balance under the Plan on the December 31 immediately preceding such day assumed interest on such balance at an annualized rate (without compounding) of 4%.

5.5.4 For the calendar year in which a Participant has an amount credited to his Cash Balance Account under Section 5.3 above, on each day that occurs in such calendar year and

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that is subsequent to the date on which such amount is credited to his Cash Balance Account under the Plan, there also shall be credited to his Cash Balance Account the product obtained by multiplying such amount times the applicable assumed interest rate that is determined for such day under Subsection 5.5.2 above or Subsection 5.5.3 above, as the case may be.

5.5.5 Notwithstanding any of the foregoing provisions of this Section 5.5 but subject to the final sentence of this Subsection 5.5.5, (a) the assumed annualized interest rate to be applied on any day prior to January 1, 1998 under Subsection 5.5.2, 5.5.3, or 5.5.4 above, as the case may be, shall be 3.5% (instead of its assumed interest rate otherwise provided under Subsection 5.5.2, 5.5.3 or 5.5.4 above) unless the Participant is either employed as a Covered Employee on such day or is employed as an Employee (other than a leased, contingency, or job bank employee) both on such day and on December 31, 1997 and (b) the assumed annualized interest rate to be applied on any day subsequent to December 31, 1997 under Subsection 5.5.2, 5.5.3, or 5.5.4 above, as the case may be, shall be 3.5% unless the Participant is employed as an Employee (other than a leased, contingency, or job bank employee) on such day. However, the assumed annualized interest rate to be applied under either clause (a) or clause (b) of the immediately preceding sentence shall be deemed to be 4.0% for each day on which both (a) such assumed annualized interest rate would otherwise be 3.5% under clause (a) or clause (b) of the immediately preceding sentence and (b) a waiver by the Participant to the death benefit otherwise applicable to him under Section 8.1 or 8.2 below is in effect for him pursuant to the provisions of Section 8.3 below.

5.6 Special Cash Balance Account Credit for Broadwing Communications Employees. Each person who is an Eligible BCI Employee (as defined in Subsection 5.6.1 below) shall have an amount equal to 6.3875% of the Eligible BCI Employee’s Special Credit Compensation (as defined in Subsection 5.6.2 below) credited on March 1, 2001 (or, if earlier, the later of the date on which he ceases to be an Employee or January 1, 2001) to a Cash Balance Account established for his benefit under this Plan.

5.6.1 For purposes of this Section 5.6, an “Eligible BCI Employee” means a person who was an Employee on the payroll of Broadwing Communications Inc. (for purposes of this Section 5.6, “BCI”) on BCI’s last business day of 2000 and who had become eligible by October 1, 2000 to participate in the Broadwing Communications Inc. 401 (k) Plan (for purposes of this Section 5.6, the “BCI Plan”) then maintained by BCI.

5.6.2 Also for purposes of this Section 5.6, the “Special Credit Compensation” of any Eligible BCI Employee means the sum of the base pay and commissions that were payable to the Eligible BCI Employee by BCI during 2000 (regardless of the extent to which the Eligible BCI Employee elected to reduce such base pay or commissions on a pre-tax basis through any plan of BCI); except that, if the Eligible BCI Employee first became eligible to participate in the BCI Plan after January 1, 2000, his “Special Credit Compensation” means the product obtained by multiplying (a) the sum of the base pay and sales commissions that were payable to the Eligible BCI Employee by BCI during 2000 (regardless of the extent to which the Eligible BCI Employee elected to reduce such base pay or sales commissions on a pre-tax basis through any plan of BCI) by (b) a fraction having a numerator equal to the number of calendar months included in the period that began on the day in 2000 on which the Eligible BCI

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Employee first became eligible to participate in the BCI Plan and that ended on December 31, 2000 and having a denominator of 12.

5.6.3 For purposes of the provisions of Subsections 5.6.1 and 5.6.2 above, under the provisions of the BCI Plan in effect during 2000, an Employee on the payroll of BCI generally became first eligible to participate in the BCI Plan as of the first day of the first calendar quarter that began after he both completed at least six months of service with BCI (and any employers affiliated to BCI under Section 414(b), (c), (m), or (o) of the Code) and attained at least age 20- ¹/2.

5.6.4 In the event an Eligible BCI Employee is not otherwise a Participant in the Plan on the date that he has an amount credited to his Cash Balance Account under this Section 5.6, he shall be considered a Participant for all purposes of the Plan beginning on such date except that he shall not in any event be entitled to receive any credit to his Cash Balance Account pursuant to the provisions of either Section 5.3 above or Section 5.4 above unless and until he qualifies as a Participant in the Plan other than solely because of the provisions of this Section 5.6.

5.7 Covered Compensation. For purposes of the Plan, a Participant’s “Covered Compensation” means, with respect to any calendar year, the base pay plus differentials and commissions received by the Participant during the calendar year for services rendered as a Covered Employee, subject to the following:

5.7.1 In the case of the Company and Cincinnati Bell Telephone Company, a Participant’s “Covered Compensation” shall not include team awards or bonuses paid to him prior to 1997 (provided that 1993 team awards and bonuses, paid in 1994, shall be used to compute the December 30, 1993 Cash Balance Account initial amounts) or overtime but shall include, for purposes other than computing the “transition” benefits described in Section 9.2 below, team awards and bonuses paid after 1996.

5.7.2 In the case of remuneration provided to the Participant by Cincinnati Bell Information Systems Inc., CBIS International Inc., CBIS International Services Inc., and CBIS Federal Inc., “Covered Compensation” shall not include overtime or vacation buy back but shall include, for purposes other than computing the “transition” benefits described in Section 9.2 below, team awards and bonuses, provided that 1993 team awards and bonuses (paid in 1994) shall be used only to compute the December 30, 1993 Cash Balance Account initial amounts.

5.7.3 In the case of remuneration provided to the Participant by any Participating Company other than the Company, Cincinnati Bell Telephone Company, Cincinnati Bell Information Systems Inc., CBIS International Inc., CBIS International Services Inc., or CBIS Federal Inc., “Covered Compensation” shall not include overtime but shall include, for purposes other than computing the “transition” benefits described in Section 9.2 below, team awards and bonuses.

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5.7.4 For purposes of the Plan, “team awards and bonuses” refer to discretionary awards and bonuses that are considered on a recurring annual or other periodic basis in connection with the normal and integral operations of the applicable employer (but do not, for example, include awards that are made for a special performance outside the normal job of an Employee or which are considered by an applicable employer on an ad hoc or non-regular schedule).

5.7.5 A Participant’s “Covered Compensation” for any calendar year shall include amounts which would have been paid in such calendar year to the Participant (and considered as Covered Compensation for such calendar year under the foregoing provisions of this Section 5.7) if (to the extent applicable) the Participant had not entered into a cash or deferred arrangement described in section 401(k) of the Code, the Participant had not elected nontaxable benefits under a cafeteria plan described in section 125 of the Code, and/or, effective on and after January 1, 2000, the Participant had not elected nontaxable benefits under a plan that provides qualified parking within the meaning of section 132(f) of the Code. A Participant’s “Covered Compensation” for any calendar year also shall include amounts which would have been paid in such calendar year to the Participant (and considered as Covered Compensation for such calendar year under the foregoing provisions of this Section 5.7) if the Participant had not elected to participate in the Cincinnati Bell Inc. Executive Deferred Compensation Plan as amended over time (or, during the period that MATRIXX Marketing Inc. is an Affiliated Employer, the MATRIXX Marketing Inc. Executive Deferred Compensation Plan), provided that such amounts shall be deemed to be compensation in excess of the limitations contained in Subsection 10.4.4 below for all purposes of calculating the Participant’s benefits under the Plan.

5.7.6 A Participant’s “Covered Compensation” for any calendar year shall include any amounts that would be treated as part of his Covered Compensation for such calendar year under the foregoing provisions of this Section 5.7 but for the fact that they are received by the Participant after the end of such calendar year in the case when the Participant ceases to be a Covered Employee by the end of such calendar year and such amounts are paid to the Participant by reason of his employment as a Covered Employee in the last pay period that begins in such calendar year.

5.7.7 Notwithstanding any of the foregoing provisions of this Section 5.7, the “Covered Compensation” of a Participant which is taken into account for any calendar year under the Plan shall be subject to the provisions of Subsection 10.4.4 below.

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ARTICLE 6

RETIREMENT BENEFITS AND VESTED PERCENTAGE

6.1 Normal Retirement. A Participant who ceases to be an Employee (other than by reason of his death) on the date he first attains his Normal Retirement Age (and prior to his Required Beginning Date) shall be entitled to a retirement benefit under the Plan (unless he dies before the commencement date of the benefit). The date as of which such benefit will commence and the form in which such benefit will be paid shall be determined under the provisions of Article 7 below.

6.2 Late Retirement. A Participant who continues to be an Employee following the date on which he first attains his Normal Retirement Age (or is still an Employee on his Required Beginning Date in the limited circumstances when such date occurs prior to the date he first attains his Normal Retirement Age) shall also be entitled to a retirement benefit under the Plan (unless he dies before the commencement date of the benefit). The date as of which such benefit will commence and the form in which such benefit will be paid shall be determined under the provisions of Article 7 below.

6.3 Vested Retirement. A Participant who ceases to be an Employee (other than by reason of his death) prior to becoming eligible for any normal or late retirement benefit under the foregoing provisions of this Article 6, but after completing at least five years of Vesting Service (or, for any Participant who so ceases to be an Employee on or after January 1, 2001 and after completing at least one Hour of Service on or after such date, after completing at least one year of Vesting Service), shall also be entitled to a retirement benefit under the Plan (unless he dies before the commencement date of the benefit). The date as of which such benefit will commence and the form in which such benefit will be paid shall be determined under the provisions of Article 7 below.

6.4 Vested Percentage. If a Participant is entitled to a retirement benefit under any of the foregoing provisions of this Article 6, then the Participant’s vested percentage shall be used in part in determining the amount of each payment of such benefit under the provisions of Article 7 below. For purposes of the provisions of Article 7 below and all other provisions of the Plan, as of any date (for purposes of this Section 6.4, the “subject date”), the “vested percentage” of any Participant shall be:

6.4.1 100% if the subject date occurs on or after the date on which Participant first attains his Normal Retirement Age and the Participant is an Employee on such date.

6.4.2 If Subsection 6.4.1 above does not apply to the Participant and both the subject date occurs on or after January 1, 2001 and the Participant completes at least one Hour of Service on or after January 1, 2001, 20% if the Participant has completed one but not two years of Vesting Service by the subject date, 40% if the Participant has completed at least two but not three years of Vesting Service by the subject date, 60% if the Participant has completed at least three but not four years of Vesting Service by the subject date, 80% if the Participant has

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completed at least four but not five years of Vesting Service by the subject date, or 100% if the Participant has completed at least five years of Vesting Service by the subject date.

6.4.3 If Subsection 6.4.1 above does not apply to the Participant and either the subject date occurs prior to January 1, 2001 or the Participant fails to complete at least one Hour of Service on or after January 1, 2001, 0% if the Participant has not completed at least five years of Vesting Service by the subject date or 100% if the Participant has completed at least five years of Vesting Service by the subject date.

6.5 Other Cessation of Employment. Except as otherwise provided in Article 8 below, if a Participant dies prior to the commencement date of any retirement benefit to which he is entitled under any of the foregoing provisions of this Article 6 or under Section 17.2 below, or if the Participant ceases to be an Employee for any reason at a time when he is not entitled to a retirement benefit under one of the foregoing provisions of this Article 6 or under Section 17.2 below, neither he nor any person claiming by or through him shall be entitled to receive a benefit under the Plan. In such case, his prior interest under this Plan (including his prior interest in his Accrued Benefit) shall be forfeited pursuant to the provisions of Section 11.7 below.

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ARTICLE 7

PAYMENT OF RETIREMENT BENEFITS

7.1 Commencement Date of Retirement Benefit.

7.1.1 If a Participant is entitled to a retirement benefit under the Plan pursuant to any of the provisions of Article 6 above, then, subject to the provisions of Section 7.5 below, he may, by filing with a Plan representative a claim for his retirement benefit under and in accordance with the provisions of Section 7.4 below, elect that such retirement benefit commence to be paid (in which case the commencement date of such retirement benefit shall be set by a Plan representative under and in accordance with the provisions of Subsection 7.1.2 below). Such retirement benefit shall not commence without the Participant filing a claim for his retirement benefit; except that, notwithstanding the foregoing or any other provision of the Plan, such retirement benefit shall commence no later than the Participant’s Required Beginning Date.

7.1.2 If a Participant entitled to a retirement benefit under the Plan pursuant to any of the provisions of Article 6 above makes a claim for such retirement benefit under and in accordance with the provisions of Section 7.4 below, then the specific commencement date of such retirement benefit shall be set by a Plan representative to be relatively near the date on which the Participant files such claim and shall meet all of the following conditions:

(a) Such commencement date shall not occur prior to the earlier of (i) the date on which the Participant ceases to be an Employee or (ii) the Participant’s Required Beginning Date;

(b) Such commencement date shall occur after, but no more than 90 days after, the date on which the latest written explanation as to the Participant’s benefit form options and other benefit payment rules described in Subsection 7.4.5 below is provided to the Participant (for purposes of this Subsection 7.1.2, the Participant’s “written explanation date”); and

(c) Such commencement date shall not occur prior to the date on which the Participant makes a claim for his retirement benefit under the Plan unless the actual payment of the Participant’s retirement benefit under the Plan begins to be paid within 90 days after the Participant’s written explanation date (or the actual payment of the Participant’s retirement benefit begins to be paid after the end of such 90-day period solely due to administrative reasons).

7.2 Normal Form of Benefit.

7.2.1 Subject to the other terms of the Plan, if a Participant is not married as of the date a retirement benefit under the Plan commences to be paid to him, such retirement benefit shall be paid in the form of a Single Life Annuity. The monthly amount of such annuity shall be equal to the product produced by multiplying the Participant’s Monthly Benefit Formula Amount

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determined as of the commencement date of such retirement benefit by the Participant’s vested percentage determined as of the same date.

7.2.2 Subject to the other terms of the Plan, if a Participant is married as of the date a retirement benefit under the Plan commences to be paid to him, such retirement benefit shall be paid in the form of a Qualified Joint and Survivor Annuity. The following provisions shall determine the monthly amount of such annuity while the Participant is living.

(a) The monthly amount of the Qualified Joint and Survivor Annuity that is payable to the Participant during the joint lives of the Participant and the person who is his spouse on the date as of which the annuity commences to be paid to the Participant (for purposes of this Subsection 7.2.2, the Participant’s “spouse”) shall be equal to a percentage of the monthly amount that would otherwise have applied to the retirement benefit if it was paid in the form of a Single Life Annuity beginning as of the same commencement date as applies to such Qualified Joint and Survivor Annuity. Such percentage shall be based upon the Participant’s attained age on the commencement date of his retirement benefit and in accordance with the following rules: (a) less than 30 years of age, 97%; (b) at least 30 but less than 40 years of age, 95%; (c) at least 40 but less than 50 years of age, 92%; and (d) at least 50 years of age, 90%.

(b) Further, if the Participant’s spouse predeceases the Participant, the monthly amount of the Qualified Joint and Survivor Annuity that is payable to the Participant after the death of his spouse shall be equal to the same monthly amount that would otherwise have applied to the Participant’s retirement benefit if it had been paid in the form of a Single Life Annuity beginning as of the same commencement date as applies to such Qualified Joint and Survivor Annuity.

7.3 Optional Forms of Benefit. A Participant entitled to any retirement benefit under the Plan may elect to receive such benefit, in lieu of the normal form of benefit otherwise payable under Section 7.2 above and provided all of the election provisions of Section 7.4 below are met, in either of the following forms: (a) a Single Life Annuity (which is an optional form only for a Participant who is married as of the date as of which his retirement benefit commences); or (b) a single sum cash payment.

7.3.1 If the Participant elects to receive such retirement benefit in the optional form of a Single Life Annuity, then the monthly amount of such annuity shall be equal to the product produced by multiplying the Participant’s Monthly Benefit Formula Amount determined as of the commencement date of such retirement benefit by the Participant’s vested percentage determined as of the same date.

7.3.2 If the Participant elects to receive such retirement benefit in the optional form of a single sum payment, then the single sum amount of such optional form shall be equal to the greater of:

(a) The amount that would make the optional single sum payment form actuarially equivalent to the Participant’s retirement benefit if such benefit were paid in a

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Single Life Annuity form which commences as of the later of the Participant’s Normal Retirement Date or the same date as of which the optional single sum form is paid and which has a monthly amount equal to the product produced by multiplying (i) the Participant’s Assumed Monthly Normal Retirement Benefit Formula Amount determined as of the date as of which the optional single sum form is paid by (ii) the Participant’s vested percentage determined as of the same date, with the actuarial assumptions to be used in determining such amount being the applicable interest rate and applicable mortality assumption that apply under Section 11.5 below as of the date as of which the optional single sum form is paid; or

(b) The amount produced by multiplying (i) the amount credited to the Participant’s Cash Balance Account as of the date as of which the optional single sum form is paid by (ii) the Participant’s vested percentage determined as of the same date.

7.4 Claim for Benefit.

7.4.1 A Participant entitled to a retirement benefit under the Plan may, in a writing filed with a Plan representative (on a form prepared or accepted by the Committee), file a claim that such benefit commence and elect to receive his retirement benefit in the normal form that otherwise applies to him under Section 7.2 above or to waive such normal form and instead to have such benefit paid in any optional form permitted him under Section 7.3 above. The period in which the Participant may make such claim and election (and within which such claim and election can be put into effect if administratively possible) shall be a period that is set by the Committee to end within a reasonable number of days or months after the latest written explanation as to the Participant’s benefit form options and other benefit payment rules that is provided to the Participant under the provisions of Subsection 7.4.5 below is so provided and which, except as is otherwise provided below, (a) shall not begin more than 90 days before the date as of which such benefit commences and (b) shall not end prior to the expiration of the 30- day period beginning on the date that immediately follows the date on which such latest written explanation is provided to the Participant; except that, if the conditions of Subsection 7.4.6 below are met with respect to the Participant’s benefit, the Participant may elect to waive the 30- day requirement set forth above.

7.4.2 In addition, and notwithstanding the provisions of Subsection 7.4.1 above, a Participant who is married on the date as of which his retirement benefit commences may not have his election to receive his retirement benefit under the Plan in any optional form permitted him under Section 7.3 above become effective unless the person who is the spouse of the Participant as of the date the retirement benefit commences consents, in a writing filed with a Plan representative (on a form prepared or accepted by the Committee), to such election of the named optional form within the same period in which the Participant has to make his election, with the spouse’s consent acknowledging the effect of such consent and being witnessed by a notary public or a Plan representative. Any such spouse’s consent shall be irrevocable once received by a Plan representative.

7.4.3 Notwithstanding the provisions of Subsection 7.4.2 above, a consent of a Participant’s spouse shall not be required for purposes of Subsection 7.4.2 above if it is

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established to the satisfaction of a Plan representative that the otherwise required consent cannot be obtained because no spouse exists, because the spouse cannot reasonably be located, or because of such other circumstances as the Secretary of the Treasury or his delegate allows in regulations.

7.4.4 A Participant may amend or revoke his election of a form of payment under Subsection 7.4.1 above by written notice filed with a Plan representative (on a form prepared or accepted by the Committee) at any time during the period in which he has to elect a form for his retirement benefit; provided that if the Participant attempts upon such an amendment to elect another form of payment different than the normal form applicable to him under the provisions of Section 7.2 above, the conditions of Subsections 7.4.1 through 7.4.3 above, including any requirements that the new optional form be named in the election and that spousal consent for the new benefit form be obtained, must be satisfied as if such amendment were a new election.

7.4.5 The Committee shall provide each Participant who is entitled to a retirement benefit under the Plan with a written explanation that describes or indicates (1) the terms and conditions of the normal form in which such benefit shall be paid in the absence of the Participant electing out of such form and the other benefit form options available to the Participant, (2) the Participant’s rights to make and the effect of an election out of the normal form, (3) the requirement, if applicable, that the Participant’s spouse consent to any such election out of the normal form, (4) the right of the Participant to revoke such an election out of the normal form, and (5) the Participant’s right to elect the time when his retirement benefit will commence to be paid. In addition, the following provisions shall also apply to such written explanation.

(a) Such written explanation shall be provided to the Participant at any time deemed appropriate by the Committee and in any event within a reasonable administrative period after the Participant notifies the Committee that he desires to commence payment of his benefit within a reasonably short period (if he is then eligible, or if it is anticipated that he shall soon be eligible, to commence such benefit) and, to the extent the Participant has not yet elected the form in which his benefit is to be paid, within a reasonable administrative period prior to the latest date as of which such benefit must commence under the other provisions of the Plan.

(b) For purposes of this Plan, the Committee shall be deemed to have provided the Participant with such written explanation on the date such written explanation either is personally delivered (through interoffice mail or otherwise) to the Participant or is deposited in the mail (first class or certified mail, postage prepaid) by the Committee or a Plan representative.

7.4.6 A claim of a Participant to commence the payment of his retirement benefit and the Participant’s election of the form in which his retirement benefit under the Plan is to be made may be made and put into effect less than 30 days after the latest written explanation as to the Participant’s benefit form options and other benefit rules that is provided to the Participant under the provisions of Subsection 7.4.5 above is so provided, so long as all of the following requirements are met:

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(a) Such latest written explanation clearly indicates that the Participant has a right to at least 30 days to consider the form in which his retirement benefit is to be paid and elect a permitted form of benefit;

(b) The Participant affirmatively elects the form in which he wants his retirement benefit to be paid prior to the expiration of the 30-day period beginning on the date that immediately follows the date on which such latest written explanation is provided to him;

(c) The Participant is permitted to revoke an affirmative election he makes for payment of his benefit in any form at least until the later of the date as of which the Participant’s retirement benefit under the Plan will commence based on such election or the expiration of the seven-day period that begins on the date that immediately follows the date on which such latest written explanation is provided to the Participant; and

(d) The actual distribution of the retirement benefit in accordance with the Participant’s affirmative election does not begin before the expiration of the seven-day period that begins on the date that immediately follows the date on which such latest written explanation is provided to the Participant.

7.5 Automatic Single Sum Payment.

7.5.1 Notwithstanding any other provision of the Plan to the contrary, if any retirement benefit payable under the Plan to a Participant has a present value of $3,500 or less (effective as of January 1, 1998, $5,000 or less) as of the first date after the Participant ceases to be an Employee on which the Plan is administratively able to determine the amount of such benefit in preparation for its distribution (or, if earlier, as of his Required Beginning Date), and if such benefit has not commenced to be paid to the Participant under the other provisions of the Plan prior to such date, then such benefit shall automatically be paid as a single sum cash payment as of such date (with the amount of such payment equal to the present value of such benefit as of such date).

7.5.2 For purposes of this Section 7.5, the present value as of any date (for purposes of this Subsection 7.5.2, the “subject date”) of a Participant’s retirement benefit shall be equal to the greater of:

(a) The amount that would make the single sum payment of such amount as of the subject date actuarially equivalent to the Participant’s retirement benefit if such benefit were paid in a Single Life Annuity form which commences as of the later of the Participant’s Normal Retirement Date or the subject date and which has a monthly amount equal to the product produced by multiplying (i) the Participant’s Assumed Monthly Normal Retirement Benefit Formula Amount determined as of the subject date by (ii) the Participant’s vested percentage determined as of the same date, with the actuarial assumptions to be used in determining such amount being the applicable interest rate and applicable mortality assumption

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that apply under Section 11.5 below as of the date as of which the optional single sum form is paid; or

(b) The amount produced by multiplying (i) the amount credited to the Participant’s Cash Balance Account as of the subject date by (ii) the Participant’s vested percentage determined as of the same date.

7.6 Reemployment of Participant Prior to Required Beginning Date. If a Participant ceases to be an Employee, thereby becomes entitled to the distribution of a retirement benefit under the Plan that is attributable to his service prior to such termination of employment (for purposes of this Section 7.6, the Participant’s “prior retirement benefit”), and later resumes employment as an Employee, then the following provisions shall apply to such situation.

7.6.1 If payment of the Participant’s prior retirement benefit has not been made or begun in any form by the time of the Participant’s reemployment and can under reasonable administrative procedures be stopped by the Committee before such payment is made or begins, no payment of his prior retirement benefit shall be made and neither he nor anyone claiming by or through him shall be entitled to receive any Plan benefit solely by reason of his earlier termination of employment.

7.6.2 If payment of the Participant’s prior retirement benefit has been made or begun in any form by the time of the Participant’s reemployment or cannot in any event be stopped from being made or beginning by the Committee, then: (a) if the Participant’s prior retirement benefit was being paid in the form of an annuity and the Participant’s earlier termination of employment occurred prior to December 31, 1993, the annuity payments of such benefit shall be suspended during any period after his reemployment when he is a Covered Employee; but (b) the payment of his prior retirement benefit shall not be suspended or changed in any manner or at any time in any other case.

7.6.3 The Participant shall be entitled to a new retirement benefit (for purposes of this Subsection 7.6.3, the Participant’s “new retirement benefit”) after the earlier of the first date after his reemployment on which the Participant next ceases to be an Employee or his Required Beginning Date. The form and commencement date of the Participant’s new retirement benefit shall be determined under the provisions of the foregoing sections of this Article 7 without regard to whether his prior retirement benefit had ever actually been paid or started being paid before the commencement date of his new retirement benefit; except that the monthly or single sum amount of the Participant’s new retirement benefit, when it is paid or begins to be paid, shall be determined to be the amount that would apply to the Participant’s retirement benefit under the Plan if his prior retirement benefit never had been paid or begun to be paid before the commencement date of his new retirement benefit and if he had never elected under the provisions of Section 8.3 below to waive the death benefit otherwise applicable to him under Section 8.1 or 8.2 below (with such amount being referred to as the “initially determined amount” in this Subsection 7.6.3), subject to the following adjustments:

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(a) If the payment of the Participant’s prior retirement benefit was paid in the form of a single sum payment or was paid in the form of an annuity that was suspended pursuant to the provisions of clause (a) of Subsection 7.6.2 above, then the initially determined amount shall be reduced by the sum of each payment actually made to the Participant of his prior retirement benefit before the commencement date of the Participant’s new retirement benefit, together with interest on such payment, compounded annually, from the original date as of which such payment was made to the date the Participant is reemployed as an Employee at the rate or rates of interest determined for purposes of section 411(c)(2)(C) of the Code for such period and from such reemployment date to the commencement date of the Participant’s new retirement benefit at the rate or rates used for determining interest credit amounts to Cash Balance Accounts for Employees under Section 5.5 above for such period.

(b) If the Participant’s prior retirement benefit was paid in the form of an annuity that was not suspended upon the Participant’s reemployment as an Employee by reason of the provisions of clause (b) of Subsection 7.6.2 above, then the initially determined amount shall be reduced by an amount equal to the monthly or single sum amount that would apply to the Participant’s new retirement benefit if he had performed no services and received no Covered Compensation as a Covered Employee after his reemployment (and if such new retirement benefit commenced as of the commencement date that applies to such new retirement benefit without regard to this paragraph (b)).

(c) Notwithstanding the provisions of paragraph (a) above, no reduction shall be made in the initially determined amount by reason of the provisions of paragraph (a) if (i) the Participant had received his prior retirement benefit in the form of a single sum payment prior to both the commencement date of the Participant’s new retirement benefit or January 1, 2003, (ii) the Participant is a Covered Employee after his reemployment, and (iii) the Participant repays, before the earlier of (A) five years after the first date on which he is reemployed as a Covered Employee or (B) the date he incurs five consecutive Breaks in Service following the original date as of which the single sum payment of his prior retirement benefit was made, the full amount of such single sum payment, plus interest thereon, compounded annually, from the original date as of which such payment was made to the date the Participant is reemployed as an Employee at the rate or rates of interest determined for purposes of section 411(c)(2)(C) of the Code for such period and from such reemployment date to the repayment date of such payment at the rate or rates used for determining interest credit amounts to Cash Balance Accounts for Employees under Section 5.5 above for such period.

7.7 Employment After Age 65.

7.7.1 Notwithstanding any other provision hereof to the contrary, if a Participant who has attained age 65 remains an Employee but completes less than 40 Hours of Service in any calendar month that begins after he has attained age 65 (and prior to his Required Beginning Date) and in which he is employed as an Employee, he shall be entitled to elect under this Subsection 7.7.1 to commence, as of the first day of any calendar month beginning after such less-than-40 Hour of Service month, the payment of the retirement benefit (if any) he has then accrued and become vested in under the Plan, with such election to be made in accordance with

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(and subject to) the other provisions of this Plan in the same manner as such provisions would be applied if the Participant had ceased to be an Employee at the end of such less-than-40 Hour of Service month. However, such retirement benefit shall, if it is being paid in the form of an annuity, cease to be paid beginning with the first calendar month subsequent to such less-than-40 Hour of Service month in which the Participant completes 40 or more Hours of Service, unless either the Participant’s Required Beginning Date occurs in such subsequent month or both the Participant has by the end of such subsequent month reached his Normal Retirement Age and he elects in a writing filed with the Committee that such benefit shall continue to be paid without interruption (which election to continue the payment of his retirement benefit shall be irrevocable).

7.7.2 In the event a Participant’s retirement benefit under the Plan is paid or begins to be paid by reason of the provisions of Subsection 7.7.1 above, then the provisions of Section 7.6 above and Section 7.8 below shall both be applied in the same manner as if the Participant had ceased to be an Employee, but had then been reemployed as an Employee immediately thereafter, at the end of the latest calendar month which precedes the calendar month in which the Participant’s retirement benefit under the Plan commences pursuant to the provisions of this Subsection 7.7.1.

7.8 Requirements of Code Section 401(a)(9) and Additional Accruals After Required Beginning Date.

7.8.1 The requirements of section 401(a)(9) of the Code shall apply to the Plan, and such Code section is hereby incorporated into the Plan. Such Code section requires, among other things, that any Participant’s retirement benefit under the Plan must begin to be paid no later than the Participant’s Required Beginning Date.

7.8.2 Subject to the other provisions of this Section 7.8, if a Participant continues to be employed or is reemployed as an Employee after his Required Beginning Date, any prior distribution of the Participant’s retirement benefit under the Plan shall not be suspended (or adjusted in amount or form) merely by reason of such continued employment or reemployment until the Participant next ceases to be an Employee.

7.8.3 Upon the first date after the Participant’s Required Beginning Date on which the Participant ceases to be an Employee, his latest retirement benefit under the Plan that began being paid prior to his Required Beginning Date shall be redetermined.

(a) Any such redetermined retirement benefit shall be paid in the same form as the form in which his latest retirement benefit under the Plan was made to the Participant prior to the applicable redetermination date if such form of prior Plan benefit payments was an annuity form, and any such redetermined retirement benefit shall commence as of the first date after the Participant ceases to be an Employee (following his Required Beginning Date). If the form of his latest retirement benefit under the Plan was not an annuity form, then the form and commencement date of such redetermined retirement benefit shall be determined under the

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provisions of the foregoing sections of this Article 7 as if no Plan benefit payments prior to the applicable redetermination date had occurred.

(b) The monthly or single sum amount of his redetermined retirement benefit, when it is paid or begins to be paid as of such redetermination date, shall be the amount that would apply to the Participant’s retirement benefit under the Plan if such retirement benefit never had been paid or begun to be paid before the redetermination date but was reduced by the sum of each payment made of such retirement benefit, together with interest on such payment, compounded annually, from the original date as of which such payment was made to such redetermination date at the rate or rates used for determining interest credit amounts to Cash Balance Accounts for Employees under Section 5.5 above for such period (or, for any portion of such period in which the Participant is not an Employee, at the rate or rates determined under section 411(c)(2)(C) of the Code for such portion); except that, if the form of the Participant’s latest retirement benefit under the Plan as of such redetermination date had been an annuity form, the monthly amount of the Participant’s redetermined retirement benefit as of such redetermination date shall not be less than the monthly amount of such annuity as in effect immediately prior to such redetermination date.

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ARTICLE 8

DEATH BENEFITS

8.1 Unmarried Participants. If an unmarried Vested Participant dies while an Employee or after ceasing to be an Employee but prior to his benefit commencement date, then, unless waived under the provisions of Section 8.3 below, a death benefit shall be paid to his estate. Such death benefit shall be paid in the form of a single sum cash payment that is made as of the first date after the Participant’s death that the Plan is administratively able to determine the amount of such benefit in preparation for its distribution. The amount of such single sum payment shall be equal to the product produced by multiplying the amount credited to the Participant’s Cash Balance Account on such date by the Participant’s vested percentage determined as of the date of his death.

8.2 Married Participants. If a married Vested Participant dies while an Employee or after ceasing to be an Employee but prior to his benefit commencement date, then, unless waived under the provisions of Section 8.3 below and subject to the following provisions of this Section 8.2, the Participant’s surviving spouse shall be entitled to a death benefit that is described in and payable under the following provisions:

8.2.1 The Participant’s surviving spouse may, after the Participant’s death and in accordance with reasonable administrative procedures adopted by the Committee, elect to receive such death benefit in the form of a single sum cash payment that is paid as of the first date after such spouse’s election on which the Plan is administratively able to determine the amount of such benefit in preparation for its distribution. The amount of such single sum payment shall be equal to the product produced by multiplying (1) the amount credited to the Participant’s Cash Balance Account as of such date by (2) the Participant’s vested percentage determined as of the date of his death.

(a) It is provided, however, that if the Participant’s surviving spouse fails to elect in writing to have such death benefit paid in one single sum under the foregoing provisions of this Subsection 8.2.1, such death benefit shall be paid to the Participant’s spouse in the form of a monthly annuity that is payable for the life of the Participant’s spouse and that commences as of the later of the date which would be the Participant’s Normal Retirement Date if he had not died or the first date following the Participant’s death on which the Plan is administratively able to determine the amount of such benefit in preparation for its distribution. Notwithstanding the foregoing, if the Participant dies before his Normal Retirement Date, the Participant’s surviving spouse may elect, after the Participant’s death and prior to the date which would have been the Participant’s Normal Retirement Date if he had not died and in accordance with reasonable administrative procedures adopted by the Committee, to commence such monthly annuity prior to the date which would have been the Participant’s Normal Retirement Date if he had not died. If such election is made, such annuity shall commence as of a date (set by the Committee) that is within a reasonable administrative period after such spouse’s election and prior to the date which would have been the Participant’s Normal Retirement Date if he had not died.

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(b) The monthly amount of any annuity described in paragraph (a) above shall be the amount that makes such annuity actuarially equivalent to such death benefit if such benefit had been paid in the form of a single sum payment that is made as of the date as of which the annuity commences to be paid and that has an amount equal to the product produced by multiplying (i) the amount credited to the Participant’s Cash Balance Account as of the date as of which the annuity commences to be paid by (ii) the Participant’s vested percentage determined as of the date of his death. The actuarial assumptions to be used in determining such monthly amount shall be the applicable interest rate and applicable mortality assumption that apply under Section 11.5 below as of the commencement date of such annuity.

8.2.2 Notwithstanding the provisions of Subsection 8.2.1 above, if the death benefit payable under this Section 8.2 to the surviving spouse of a Vested Participant has a present value of $3,500 or less (effective of as January 1, 1998, $5,000 or less) as of the first date after the Participant dies on which the Plan is administratively able to determine the amount of such benefit in preparation for its distribution (for purposes of this Subsection 8.2.3, the “subject date”), and if such benefit has not commenced to be paid to the spouse under the other provisions of the Plan prior to the subject date, then such benefit shall automatically be paid in the form of a single sum cash payment that is paid as of the subject date (and shall be equal to the present value of such benefit as of the subject date). For purposes of this Subsection 8.2.3, the present value as of the subject date of such spouse’s death benefit shall be equal to the product produced by multiplying (a) the amount credited to the Participant’s Cash Balance Account as of the subject date by (b) the Participant’s vested percentage determined as of the date of his death.

8.2.3 Notwithstanding the provisions of Subsections 8.2.1 and 8.2.2 above, in no event shall the monthly amount or single sum amount of the death benefit payable to the married Vested Participant’s surviving spouse under Subsection 8.2.1 or 8.2.2 above be less than the monthly or single sum amount (as appropriate) that makes such benefit actuarially equivalent to the survivor benefit that would otherwise have been paid to such spouse if such Participant had ceased to be an Employee prior to his death (if he had not already done so) and had begun the payment of the retirement benefit to which he was entitled in the form of a Qualified Joint and Survivor Annuity commencing immediately prior to the date as of which the death benefit payable to his surviving spouse under this Section 8.2 commences or is paid. The actuarial assumptions to be used in determining such monthly or single sum amount shall be the applicable interest rate and the applicable mortality assumption that apply under Section 11.5 below as of the commencement date of such benefit.

8.2.4 Further, notwithstanding the foregoing provisions of this Section 8.2, if the surviving spouse of a Vested Participant is entitled to a death benefit under the foregoing provisions of this Section 8.2 but the spouse dies before the date as of which such death benefit is to be paid or begin to be paid under the foregoing provisions of this Section 8.2, then such death benefit shall be paid to the estate of the spouse in the form of a single sum cash payment that is equal to the product produced by multiplying (a) the amount credited to the Participant’s Cash Balance Account as of the date of the spouse’s death by (b) the Participant’s vested

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percentage determined as of the date of his death and is paid as of the day next following the date of the spouse’s death.

8.3 Waiver of Death Benefit. If a Participant ceases to be a Covered Employee but remains a Participant, he may elect to waive the death benefit otherwise applicable to him under Section 8.1 or 8.2 above. In the event of such a waiver, then, notwithstanding any of the provisions of Subsection 5.5.5 above to the contrary, the assumed annualized interest rate applicable to his Cash Balance Account under Subsection 5.5.5 above shall be 4% (instead of 3.5%) while the waiver is in effect. The waiver referred to in this Section 8.3 shall also be subject to the following provisions:

8.3.1 In the case of an unmarried Participant: (a) such waiver may be elected or revoked in a writing filed with a Plan representative (on a form prepared or accepted by the Committee) at any time prior to his death; and (b) such waiver shall be automatically revoked if the Participant marries and fails to make the election called for under Subsection 8.3.2 below.

8.3.2 In the case of a married Participant: (a) such waiver may be elected or revoked in a writing filed with a Plan representative (on a form prepared or accepted by the Committee) at any time prior to his death; (b) the Participant’s spouse must consent in a writing filed with a Plan representative (on a form prepared or accepted by the Committee) to the election of the waiver (with such consent acknowledging the effect of the election and being witnessed by a Plan representative or notary public); (c) in the case of a waiver made before the Plan Year in which the Participant attains age 35, such waiver shall be automatically revoked on the first day of the Plan Year in which the Participant attains age 35 (and must be reelected on or after such date in order to become again effective); and (d) within the applicable period, the Participant shall be provided a written explanation of the death benefit under Section 8.2 above in a manner comparable to the explanation that is provided under Subsection 7.4.4 above. The “applicable period” for giving the written explanation under clause (d) of the immediately preceding sentence shall be whichever of the following periods ends later: (a) the first day of the three-year period ending on the last day of the Plan Year in which the Participant attains age 35; or (b) the two-year period ending one year after the date on which the Participant becomes a Participant. Notwithstanding the foregoing, in the case of a Participant who ceases to be an Employee prior to the Plan Year in which he attains age 35, such explanation also must be provided within the three-year period ending on the first anniversary of the date on which he ceases to be an Employee.

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ARTICLE 9

SPECIAL MINIMUM, EARLY RETIREMENT

WINDOW, AND TRANSITION BENEFITS

9.1 Minimum Benefit. Notwithstanding any other provision hereof to the contrary, if a Participant has his Cash Balance Account include an amount (for purposes of this Section 9.1, the “prior plan amount”) that derives from an Accrued Benefit under the Prior Pension Plan (or an accrued benefit under another plan) by reason of the provisions of Section 5.3 above, then, when determined as of any date (for purposes of this Section 9.1, the “subject date”):

9.1.1 His Monthly Benefit Formula Amount (as otherwise is generally calculated under the provisions of Subsection 5.1.1 above) shall not be less than the product produced by multiplying (a) the monthly amount that would have applied to the Participant’s retirement benefit under the terms of the plan from which the prior plan amount derives (as determined as of the date that immediately precedes the date as of which the prior plan amount is credited to the Participant’s Cash Balance Account and as if the Participant had ceased accruing any further benefits under such plan as of such date) if such benefit were paid in the form of a Single Life Annuity that commences as of the later of the Participant’s 65^th birthday or the subject date by (b) a factor derived from Table 2 under the Plan as in effect immediately prior to January 1, 1997 (or, if the prior plan amount derives from a plan other than the Prior Pension Plan, the corresponding early commencement table of such other plan) that applies to non-cash balance benefits and a payment age that is the Participant’s attained age (in whole years and months) as of the subject date; and

9.1.2 His Assumed Monthly Normal Retirement Benefit Formula Amount (as otherwise is generally calculated under the provisions of Subsection 5.1.2 above) shall not be less than the monthly amount that would have applied to the Participant’s retirement benefit under the terms of the plan from which the prior plan amount derives (as determined as of the date that immediately precedes the date as of which the prior plan amount is credited to the Participant’s Cash Balance Account and as if the Participant had ceased accruing any further benefits under such plan as of such date) if such benefit were paid in the form of a Single Life Annuity that commences as of the later of the Participant’s 65^th birthday or the subject date.

9.2 Transition Retirement Benefits. The provisions of this Section 9.2 shall apply notwithstanding any other provision of the Plan.

9.2.1 When determined as of any date (for purposes of this Subsection 9.2.1, the “subject date”), the Monthly Benefit Formula Amount (as is otherwise generally calculated under the provisions of Subsection 5.1.1 above) of a Transition Group Participant (as defined in Subsection 9.2.4(d) below) shall not be less than: (a) if the subject date occurs on or after the Transition Group Participant’s Normal Retirement Date or in any event is a date as of which a retirement benefit could have commenced to the Transition Group Participant under the terms of the Prior Pension Plan had the Prior Pension Plan continued in effect unamended, the Transition Group Participant’s Prior Pension Plan Amount determined as of the subject date under the

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provisions of Subsection 9.2.4(a) below; or (b) if the subject date occurs prior to the Transition Group Participant’s Normal Retirement Date and is not a date as of which a retirement benefit could have commenced to the Transition Group Participant under the terms of the Prior Pension Plan had the Prior Pension Plan continued in effect unamended, the product produced by multiplying (i) the Transition Group Participant’s Prior Pension Plan Amount determined as of his 65^th birthday under the provisions of Subsection 9.2.4(a) below by (ii) a factor derived from Table 2 to the Plan as in effect immediately prior to January 1, 1997 that applies to non-cash balance benefits and a payment age that is the Participant’s attained age (in whole years and months) as of the subject date. In addition, when determined as of the subject date, the Transition Group Participant’s Assumed Monthly Normal Retirement Benefit Formula Amount (as is otherwise generally calculated under the provisions of Subsection 5.1.2 above) shall not be less than the Transition Group Participant’s Prior Pension Plan Amount determined as of the later of his 65^th birthday or the subject date under the provisions of Subsection 9.2.4(a) below.

9.2.2 In no event shall the monthly amount of any death benefit provided under Article 8 of the Plan to a surviving spouse of a Transition Group Participant (as defined in Subsection 9.2.4(d) below), determined as if such benefit were paid in the form of a monthly annuity for the life of the surviving spouse that commences as of the date as of which such death benefit commences to be paid, be less than the surviving spouse’s Prior Pension Plan Survivor Amount (as defined in Subsection 9.2.4(b) below) when determined as of the applicable determination date.

9.2.3 If a Transition Group Participant (as defined in Subsection 9.2.4(d) below) whose Term of Employment (as defined in the Prior Pension Plan) at the time he ceases to be an Employee is 15 or more years and who is not a Service Pension Eligible Participant (as defined in Subsection 9.2.4(c) below) becomes totally disabled (i.e., unable to perform the requirements of his job with the Participating Companies) as a result of sickness or injury (other than by accidental injury arising out of and in the course of employment as a Covered Employee) and, as a consequence of such disability, ceases to be an Employee, he shall be entitled to receive a monthly disability benefit that commences on the day next following the date he ceases to be an Employee by reason of his total disability and is payable until the earliest of (1) the date on which he is no longer disabled, (2) the date on which he attains age 65, (3) the date as of which his retirement benefit under the Plan is paid or begins to be paid, or (4) the date of his death.

(a) The monthly amount of the disability benefit provided under this Subsection 9.2.3 to the Transition Group Participant shall be equal to the monthly amount of the retirement benefit that he accrues under the Plan to the date he ceases to be an Employee (determined as if such retirement benefit were paid in the form of a Single Life Annuity that commences as of the Participant’s 65^th birthday).

(b) Any payment of the monthly disability benefit provided under this Subsection 9.2.3 that is made prior to October 1, 2001 shall be paid from the general assets of the Participating Company which last employs the Transition Group Participant prior to such payment, but all payments of such benefit that are to be made as of dates occurring on or after October 1, 2001 shall be paid from the Trust. Because of this, prior to October 1, 2001 this Subsection 9.2.3

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shall be deemed to be a provision that is not part of a plan that is qualified under section 401(a) of the Code, and any reference in any other section of this Plan to a benefit or a payment shall not be deemed to be referring to a benefit or payment made under this Subsection 9.2.3 prior to October 1, 2001. Further, any payments provided by this Subsection 9.2.3 prior to October 1, 2001 shall be separate from the benefits provided by the remainder of this Plan and are being described in this Plan only for the convenience of using the Plan’s terms in determining the terms and benefits of this Subsection 9.2.3.

9.2.4 For purposes of this Section 9.2, the following terms shall have the meanings set forth below:

(a) “Prior Pension Plan Amount” means, with respect to any Transition Group Participant and as of any date (for purposes of this paragraph (a), the “subject date”), the monthly amount of the pension benefit to which the Transition Group Participant would have been entitled under the Prior Pension Plan, determined as if such benefit were paid in the form of a Single Life Annuity that commences as of the subject date, if, subject to the adjustments set forth below (and except as is otherwise noted below), (1) he had permanently ceased to be an Employee on (and received no compensation and completed no service after) the earlier of the latest date he ceased to be an Employee before the subject date or December 31, 1998 and (2) the Prior Pension Plan had continued in effect unamended except that the applicable “averaging period” used to compute the Transition Group Participant’s Adjusted Career Income under such plan shall be deemed to be the 60-month period ending on the earlier of the date he ceased to be an Employee or December 31, 1998 and the Transition Group Participant’s “compensation” used under the Prior Pension Plan for any period after December 30, 1993 shall be deemed to be his Covered Compensation. Notwithstanding the foregoing, the following adjustments shall apply in determining the Transition Group Participant’s Prior Pension Plan Amount:

(i) The Transition Group Participant’s Prior Pension Plan Amount shall in no event be deemed to be less than if it had been determined under the foregoing provisions of this paragraph (a) except that the Transition Group Participant is treated as permanently ceasing to be an Employee on (and as if he received no compensation and completed no service after) January 31,1992.

(ii) If the Transition Group Participant was a Special Eligibility Participant (as defined in the Plan as in effect immediately prior to January 1, 1997 and reflecting a Participant who was eligible for an early retirement “window” benefit that was offered in 1995 under the Plan), then his Prior Pension Plan Amount shall in no event be deemed to be less than if it had been determined under the foregoing provisions of this paragraph (a) but modified to the extent provided under the terms of the Plan as in effect immediately prior to January 1, 1997 by reason of the Participant being such a Special Eligibility Participant.

(b) “Prior Pension Plan Survivor Amount” means, with respect to a surviving spouse of any Transition Group Participant and as of any date (for purposes of this paragraph (b), the “subject date”), the monthly amount of the survivor pension benefit to which the surviving spouse would have been entitled under the Prior Pension Plan, determined as if such

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benefit were paid in the form of a monthly annuity for the life of the surviving spouse that commences as of the subject date, if: (i) the Transition Group Participant had died before the commencement date of the Transition Group Participant’s pension benefit that had accrued under the Prior Pension Plan; and (ii) the monthly amount of the Transition Group Participant’s pension benefit that had accrued under the Prior Pension Plan immediately prior to the date of his death, determined as if such benefit were paid in the form of a Single Life Annuity that commenced immediately prior to the subject date, had been equal to his Prior Pension Plan Amount (determined as of the subject date).

(c) “Service Pension Eligible Participant” means a Transition Group Participant who either (i) has attained at least age 60 and has a Term of Employment of at least 10 years, (ii) has attained at least age 55 and has a Term of Employment of at least 20 years, (iii) has attained at least age 50 and has a Term of Employment of at least 25 years, or (iv) has a Term of Employment of at least 30 years (regardless of his age). Such Term of Employment shall, for purposes of this paragraph (c), be determined under the terms of the Prior Pension Plan except that section 4.1.8 of such plan shall be disregarded.

(d) “Transition Group Participant” means a Participant who meets either the conditions of subparagraph (i) below or the conditions of subparagraph (ii) below:

(i) A Participant meets the conditions of this subparagraph (i) if (A) he on December 31, 1993 was a Covered Employee, (B) he had completed by December 31, 1993 at least five full years of Vesting Service, and (C) either his Term of Employment (as defined in the Prior Pension Plan) on December 31,1993 was at least 20 full years or the sum of his attained age and Term of Employment on December 31, 1993 (in actual years, months, and days) totaled at least 65 full years.

(ii) A Participant meets the conditions of this subparagraph (ii) if (A) he on December 31, 1993 was an Employee and was then a participant in the defined benefit pension plan sponsored by the Company that was then named the Cincinnati Bell Pension Plan (for purposes of this subparagraph (ii), the “CBPP”), (B) he had completed by December 31, 1993 at least five full years of vesting service under the CBPP, and (C) either his Term of Employment (as defined in the CBPP as in effect on December 31, 1993) on December 31, 1993 was at least 20 full years or the sum of his attained age and Term of Employment on December 31, 1993 (in actual years, months, and days) totaled at least 65 full years.

9.3 Transition Death Benefits.

9.3.1 Subject to the terms of the following provisions of this Section 9.3, in the event of the death of a Participant who was a Participant in the Prior Death Benefit Plan on December 30, 1993, such Participant’s beneficiaries shall be entitled to receive the same death benefit, and in the same form and amount, which they would have been entitled to receive if the Prior Death Benefit Plan had continued in effect unamended, except that (a) no burial expenses or other expenses incident to the death of the Participant shall be paid and (b) the payment of such death benefit shall only be made in the form of a single sum cash payment.

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9.3.2 For purposes of this Section 9.3, except as provided below, the “Prior Death Benefit Plan” means those provisions of the Prior Pension Plan which dealt with the death benefits provided under section 5 of the Prior Pension Plan. However, for purposes of determining the amount of death benefit payable under the Prior Death Benefit Plan, a Participant’s “Wages” shall be deemed to be:

(a) If the Participant was on an active payroll of a Participating Company on December 31, 1993, his rate of base pay plus differentials from the Participating Companies as in effect on such date (or, if the Participant on such date was on a disability or other leave of absence, the rate of base pay plus differentials which would have been in effect on such date if he had returned from such leave on such date) plus the commissions, team awards, and bonuses paid the Participant by the Participating Companies during 1993, but excluding any overtime or vacation buy back of the Participant; or

(b) If the Participant was not on an active payroll of a Participating Company on December 31, 1993, his rate of base pay plus differentials from the Participating Companies as in effect on the latest date prior to December 31, 1993 on which he was on such an active payroll (or, if the Participant on such pre-December 31, 1993 date was on a disability or other leave of absence, the rate of base pay plus differentials which would have been in effect on such pre-December 31, 1993 date if he had returned from such leave on such date) plus the commissions, team awards, and bonuses paid the Participant by the Participating Companies during the twelve consecutive month period ending on the latest date prior to December 31, 1993 on which the Participant was on such an active payroll, but excluding any overtime or vacation buy back of the Participant.

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ARTICLE 10

MAXIMUM RETIREMENT BENEFIT LIMITATIONS

10.1 Maximum Plan Benefit — Separate Limitation as to This Plan.

10.1.1 General Rules. Subject to the other provisions of this Section 10.1 but notwithstanding any other provision of this Plan to the contrary, in no event shall the annual amount of a Participant’s retirement benefit under this Plan exceed the lesser of:

(a) $90,000, multiplied by the adjustment factor; or

(b) 100% of the Participant’s average annual compensation received during the period of the three consecutive calendar years which produces the highest dollar result.

10.1.2 Necessary Terms. For purposes of the rules set forth in this Section 10.1, the following terms shall apply:

(a) The “adjustment factor” shall mean the cost of living adjustment factor prescribed by the Secretary of the Treasury or his delegate under Code section 415(d) for limitation years beginning after December 31, 1987, applied to such items and in such manner as the Secretary or his delegate shall prescribe;

(b) A Participant’s “compensation” shall, for purposes of the restrictions of this Section 10.1, refer to his Compensation as defined in Section 10.4 below; except that, for purposes of this Section 10.1, Subsection 10.4.3 below shall not apply with respect to any limitation year which begins prior to January 1, 1998;

(c) The “limitation year” for purposes of the restrictions under this Section 10.1 shall be the Plan Year;

(d) An “annual benefit” means a benefit payable in the form of a Single Life Annuity; and

(e) A Participant’s “Social Security Retirement Age” means the age used as the Participant’s retirement age under section 216(1) of the federal Social Security Act, as amended, except that such section shall be applied without regard to the age increase factor and as if the early retirement age under such section were age 62. Accordingly, as of the Effective Amendment Date, the Social Security Retirement Age for purposes of the Plan is: (i) age 65 for a Participant who is born before January 1, 1938; (ii) age 66 for a Participant who is born after December 31, 1937 and before January 1, 1955; and (iii) age 67 for a Participant who is born after December 31, 1954.

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10.1.3 Adjustment for Form of Benefit.

(a) If a Participant’s retirement benefit is paid in any form other than a Single Life Annuity, the determination as to whether the limitations set forth in this Section 10.1 are satisfied shall be made by adjusting the retirement benefit (for this purpose only) to an actuarially equivalent retirement benefit payable in the form of a Single Life Annuity. For purposes of this Subsection 10.1.3, however, no such adjustment shall apply when the retirement benefit is paid in the form of a Qualified Joint and Survivor Annuity.

(b) The actuarial assumptions or factors to be used under the provisions of paragraph (a) above in adjusting a Participant’s retirement benefit paid in the form of a single sum payment (which is the only form of benefit other than a Single Life Annuity or Qualified Joint and Survivor Annuity available under the Plan) to an actuarially equivalent retirement benefit payable in the form of a Single Life Annuity shall be (i) the factor derived by dividing the highest available single sum amount of the Participant’s retirement benefit under the Plan if paid as of the commencement date of the Participant’s retirement benefit under the Plan by the highest monthly amount of the Participant’s retirement benefit if paid in a Single Life Annuity that commences as of the commencement date of the Participant’s retirement benefit under the Plan (with both such amounts determined without regard to the provisions of this Article 10 or the requirements of section 415 of the Code) or (ii) the combination of the applicable interest rate and the applicable mortality assumption (as such terms are defined in Section 11.5 below with respect to the commencement date of the Participant’s retirement benefit under the Plan), whichever produces the greater amount.

10.1.4 Adjustment to Dollar Limit Where Benefit Begins Before Social Security Retirement Age.

(a) If a Participant’s retirement benefit begins before his Social Security Retirement Age and after he attains age 62, the dollar limitation set forth in Subsection 10.1.1(a) above shall be reduced by: (a) when the Participant’s Social Security Retirement Age is age 65, 5/9 of 1% for each month by which the benefit commences before the month in which the Participant attains age 65; or (b) when the Participant’s Social Security Retirement Age is greater than age 65, 5/9 of 1% for each of the first 36 months, and 5/12 of 1% for each of the additional months (up to 24), by which the benefit commences before the month in which the Participant attains his Social Security Retirement Age. If the Participant’s retirement benefit begins before the Participant attains age 62, the benefit must be limited to the actuarial equivalent of the dollar limitation which would apply to the Participant’s benefit if it commenced upon the Participant’s attainment of age 62, with the reduced dollar limitation for such benefit reduced for each month by which the benefit commences before the month in which the Participant attains age 62.

(b) The actuarial assumptions or factors to be used under the provisions of paragraph (a) above in adjusting the dollar limitation that otherwise applies to a Participant’s retirement benefit that begins before the Participant attains age 62 so that it is the actuarial equivalent of the dollar limitation which would apply to the benefit if it commenced

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upon the Participant’s attainment of age 62 shall be (i) the factor derived by dividing the highest monthly amount of the Participant’s retirement benefit under the Plan if paid in a Single Life Annuity that commences as of the commencement date of the Participant’s retirement benefit under the Plan by the highest monthly amount of the Participant’s retirement benefit under the Plan if paid in a Single Life Annuity that commences upon the Participant’s attainment of age 62 (with both such amounts determined without regard to the provisions of this Article 10 or the requirements of section 415 of the Code) or (ii) the combination of an interest rate assumption of 5% per annum and the applicable mortality assumption (as such term is defined in Section 11.5 below with respect to the commencement date of the Participant’s retirement benefit under the Plan), whichever produces the greater amount.

(c) Notwithstanding the foregoing provisions of this Subsection 10.1.4, any adjustment in the dollar limitation otherwise required to apply to a Participant’s retirement benefit under the provisions of this Subsection 10.1.4 shall not reflect any mortality decrement to the extent that the benefit will not be forfeited upon the death of the Participant.

10.1.5 Adjustment to Dollar Limit Where Benefit Begins After Social Security Retirement Age.

(a) If a Participant’s retirement benefit begins after his Social Security Retirement Age, the determination as to whether the dollar limitation set forth in Subsection 10.1.1 (a) above has been satisfied shall be made by increasing such dollar limitation so that an annual benefit of such dollar limitation as so increased and beginning when the Participant’s retirement benefit begins is actuarially equivalent to an annual benefit of such dollar limitation if it were not so increased and began at the Participant’s Social Security Retirement Age.

(b) The actuarial assumptions or factors to be used under the provisions of paragraph (a) above in adjusting the dollar limitation that otherwise applies to a Participant’s retirement benefit that begins after the Participant attains his Social Security Retirement Age so that it is the actuarial equivalent of the dollar limitation which would apply to the benefit if it commenced upon the Participant’s attainment of his Social Security Retirement Age shall be (i) the factor derived by dividing the highest monthly amount of the Participant’s retirement benefit under the Plan if paid in a Single Life Annuity that commences as of the commencement date of the Participant’s retirement benefit under the Plan by the highest monthly amount of the Participant’s retirement benefit under the Plan if paid in a Single Life Annuity that commences upon the Participant’s attainment of his Social Security Retirement Age (with both such amounts determined without regard to the provisions of this Article 10 or the requirements of section 415 of the Code) or (ii) the combination of an interest rate assumption of 5% per annum and the applicable mortality assumption (as such term is defined in Section 11.5 below with respect to the commencement date of the Participant’s retirement benefit under the Plan), whichever produces the lesser amount.

(c) Notwithstanding the foregoing provisions of this Subsection 10.1.5, any adjustment in the dollar limitation otherwise required to apply to a Participant’s retirement benefit under the provisions of this Subsection 10.1.5 shall not reflect any mortality

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decrement to the extent that the benefit will not be forfeited upon the death of the Participant between the Participant’s Social Security Retirement Age and the actual commencement of the Participant’s benefit.

10.1.6 Reduction for Participation or Service of Less Than Ten Years.

(a) In the case of a Participant who has less than ten years of participation in this Plan when his retirement benefit commences, the dollar limitation referred to in Subsection 10.1.1(a) above shall be adjusted so as to be equal to such dollar limitation (determined without regard to this Subsection 10.1.6) multiplied by a fraction. The numerator of such fraction is the Participant’s years (or fraction thereof) of participation in the Plan at the time his benefit commences, and its denominator is ten.

(b) Further, in the case of a Participant who has less than ten years of Vesting Service, the limitation referred to in Subsection 10.1.1(b) above shall be adjusted so as to be equal to such limitation (determined without regard to this Subsection 10.1.6) multiplied by a fraction. The numerator of such fraction is the Participant’s years of Vesting Service, and its denominator is ten.

(c) In no event shall the provisions of paragraph (a) or (b) above reduce the limitations referred to in Subsection 10.1.1 above to an amount less than 1/10 of such limitations (determined without regard to this Subsection 10.1.6).

10.1.7 Preservation of Current Accrued Benefit. If a Participant’s current accrued benefit as of the first day of the first limitation year beginning on or after January 1, 1987 exceeds the benefit limits set forth in the foregoing provisions of this Section 10.1, then the dollar limitation referred to in Subsection 10.1.1(a) above shall be deemed to be not less than such current accrued benefit. For purposes hereof, the Participant’s “current accrued benefit” means his Accrued Benefit, determined as of the close of the last limitation year beginning before January 1, 1987 but disregarding any change in the terms and conditions of the Plan after May 5, 1986 and any cost of living adjustment occurring after May 5, 1986.

10.1.8 Combining of Plans. If any other defined benefit plans (as defined in section 414(j) of the Code) in addition to this Plan are maintained by any Affiliated Employer, then the limitations set forth in this Section 10.1 shall be applied as if this Plan and such other defined benefit plans are a single plan. If any adjustment in a Participant’s retirement benefit is required by this Section 10.1, such adjustment shall when necessary be made to the extent possible under the other defined benefit plan or plans in which the Participant actively participated (i.e., performed service which is taken into consideration in determining the amount of his benefit under the benefit formulas of the other plan or plans) at a later point in time in the applicable limitation year than he actively participated in this Plan (provided such other plan or plans provide for such adjustment in such situation). To the extent still necessary, such adjustment shall be made under this Plan.

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10.1.9 Regulations. Certain of the foregoing provisions of this Section 10.1 refer to regulations prescribed by the Secretary of the Treasury or his delegate. Prior to the issuance of any such regulation, the Plan may be construed in accordance with any other notice provided by the Internal Revenue Service which provides guidance as to the matter with which such regulation shall be concerned.

10.2 Maximum Plan Benefit — Combined Limitation for This Plan and Other Defined Contribution Plans.

10.2.1 General Rule. Subject to the other provisions of this Section 10.2 but notwithstanding any other provision of this Plan to the contrary, if a Participant in this Plan also participates or has participated in a defined contribution plan (as defined in section 414(i) of the Code) which is maintained by any Affiliated Employer, then in no event shall the sum of such 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 this Plan shall be reduced or frozen so that this limitation is not exceeded.

10.2.2 Defined Benefit Plan Fraction. For purposes of this Section 10.2, 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 benefit under the Plan (determined as of the close of the subject limitation year); and

(b) The denominator of which is the lesser of (i) 1.25 multiplied by the dollar limitation in effect under Code section 415(b)(l)(A) (and Subsection 10.1.1(a) above) for such limitation year or (ii) 1.4 multiplied by the amount which may be taken into account for the Participant under Code section 415(b)(l)(B) (and Subsection 10.1.1(b) above) by the close of such limitation year.

10.2.3 Defined Contribution Plan Fraction. For purposes of this Section 10.2, 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 the Affiliated Employers 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 any Affiliated Employer: (i) 1.25 multiplied by the dollar limitation in effect under Code section 415(c)(l)(A) for the applicable limitation year (determined without regard to Code section 415(c)(6)), or (ii) 1.4 multiplied by the amount which may be taken into account for the Participant under Code section 415(c)(l)(B) for the applicable limitation year. (In general, for limitation years beginning after December 31, 1986,

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the dollar limitation in effect under Code section 415(c)(l)(A) for a limitation year is $30,000, as adjusted by the Secretary of the Treasury or his delegate for such limitation year, and the amount which may be taken into account under Code section 415(c)(l)(B) for a limitation year is 25% of the Participant’s annual compensation received in such limitation year.)

10.2.4 Other Necessary Terms. For purposes of the rules set forth in this Section 10.2, 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 this Plan if (i) 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 Age (or, if he has already attained such age by the close of the subject limitation year, he immediately terminated his employment), (ii) the Participant’s annual compensation for the subject limitation year remains the same each later limitation year until he terminates employment, and (iii) all other relevant factors used to determine benefits under this Plan for the subject limitation year remain constant for all future limitation years.

(b) The “annual addition” to the Participant’s accounts under all applicable defined contribution plans for a limitation year shall be determined under the provisions of the Code (mainly Code section 415(c)(2)) in effect for such limitation year. In general, for any limitation year beginning after December 31, 1986, the annual addition is generally the sum of employer contributions, employee contributions, and forfeitures allocated to the Participant’s defined contribution plan accounts for such limitation year, plus any contributions made on behalf of the Participant for such limitation year under Code section 415(1) or Code section 419A(d) (e.g., contributions to a defined benefit plan for medical benefits or contributions to a welfare benefit fund for funding for post-retirement medical benefits). (It is noted that for any limitation year beginning before January 1, 1987, not all employee contributions were included in the annual addition; instead, only the lesser of the amount of the employee contributions made for such limitation year in excess of 6% of the Participant’s annual compensation for such limitation year or one-half of the employee contributions made for such limitation year were counted as part of the annual addition. This determination need not be recalculated for any such pre-1987 limitation year.)

(c) A Participant’s “compensation,” the “limitation year,” and an “annual benefit” shall all have the same meanings as are given to those terms in Subsection 10.1.2 above.

10.2.5 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.

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10.2.6 Combining of Plans. If any other defined benefit plans (as defined in section 414(j) of the Code) in addition to this Plan are maintained by any Affiliated Employer, then the limitation set forth in this Section 10.2 shall be applied as if this Plan and such other defined benefit plans are a single plan. If any adjustment in a Participant’s benefit that is projected or payable is required by this Section 10.2, such adjustment shall be made to the extent possible under the other defined benefit plan or plans in which the Participant actively participated (i.e., performed service which is taken into consideration in determining the amount of his benefit under the benefit formulas of the other plan or plans) at a later point in time in the applicable limitation year than he actively participated in this Plan (provided such other plan or plans provide for such adjustment in such situation). To the extent still necessary, such adjustment shall be made under this Plan.

10.2.7 Termination of Limitation. Notwithstanding any other provision of the Plan to the contrary, the provisions of this Section 10.2 shall not apply, and shall no longer be effective, for any limitation year which begins after December 31, 1999, with respect to any benefit that commences to be paid after December 31, 1999 to or with respect to a Participant who completes at least one Hour of Service at any time after December 31, 1999.

10.3 Restrictions on Benefits Payable to Certain Highly Compensated Participants. The provisions set forth in this Section 10.3 shall apply notwithstanding any other provisions of this Plan.

10.3.1 In the event of the termination of the Plan, the benefit otherwise payable under the Plan to any Participant who is a Highly Compensated Employee (or a Former Highly Compensated Employee) with respect to the Plan Year in which such Plan termination occurs shall be limited to a benefit which is nondiscriminatory under section 401(a)(4) of the Code. To the extent necessary, any assets otherwise allocable upon the Plan’s termination under Section 16.3 below to a Participant who is a Highly Compensated Employee (or Former Highly Compensated Employee) for the Plan Year in which the Plan’s termination occurs shall be reallocated to other Participants so that this provision is not violated. For purposes hereof, however, a benefit applicable to such a Highly Compensated Employee (or Former Highly Compensated Employee) upon the Plan’s termination shall be considered to be nondiscriminatory under section 401(a)(4) of the Code if each Participant who is not a Highly Compensated Employee (or Former Highly Compensated Employee) with respect to the Plan Year in which the Plan’s termination occurs and who is entitled to a benefit under the Plan upon the Plan’s termination has such benefit based on a proportion of his Accrued Benefit under the Plan which is at least equal to the proportion of the Accrued Benefit upon which the benefit receivable upon the Plan’s termination by such Highly Compensated Employee (or Former Highly Compensated Employee) is based.

10.3.2 Subject to the provisions of Subsections 10.3.3 and 10.3.4 below, prior to the complete termination of the Plan and distribution of all Plan assets, the payments made during any Plan Year to a Participant who is a Restricted Participant (as defined in Subsection 10.3.5 below) for such Plan Year shall be restricted to the extent necessary so that such payments

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do not exceed the payments that would be made for such Plan Year if the Participant’s remaining Accrued Benefit under the Plan was being paid in the form of a Single Life Annuity.

10.3.3 Subject to the provisions of Subsection 10.3.4 below but notwithstanding the provisions of Subsection 10.3.2 above, prior to the complete termination of the Plan and distribution of all Plan assets, the retirement benefit payments made during any Plan Year to a Participant who is a Restricted Participant (as defined in Subsection 10.3.5 below) for such Plan Year may exceed the limit set forth in Subsection 10.3.2 above to the extent the method under which the Participant’s retirement benefit is being paid calls for such payments, provided that the Plan and the Participant establish an agreement which meets the following provisions of this Subsection 10.3.3 in order to secure repayment to the Plan of any amount necessary for the distribution of assets upon the Plan’s termination required to satisfy section 401(a)(4) of the Code.

(a) During any such Plan Year, the amount that may be required to be repaid to the Plan by the Participant is the restricted amount. For this purpose, the “restricted amount” means the excess of the accumulated amount of the retirement benefit payments made to the Participant under the Plan over the accumulated amount of the Participant’s nonrestricted limit. The Participant’s “nonrestricted limit” for this purpose means the retirement benefit payments that could have been made to the Participant under the Plan, commencing when retirement benefit payments initially commenced to the Participant under the Plan, had the Participant received his retirement benefit in the form of a Single Life Annuity. Further, an “accumulated amount” means, with respect to any payment, the amount of such payment plus interest thereon from the date of such payment (or the date such payment would have been made) to the date of the determination of the restricted amount, compounded annually from the date of such payment (or the date such payment would have been made), at the rate determined under section 411(c)(2)(C) of the Code in effect on the date of the determination of the restricted amount.

(b) In order to secure the Participant’s repayment obligation to the Plan of the restricted amount, prior to receipt of a distribution from the Plan the Participant must agree that upon distribution the Participant shall promptly deposit in escrow with an acceptable depositary property having a fair market value equal to at least 125% of the restricted amount. The obligation of the Participant under the repayment agreement alternatively can be secured or collateralized by posting a bond equal to at least 100% of the restricted amount. For this purpose, the bond must be furnished by an insurance company, bonding company, or other surety approved by the U.S. Treasury Department as an acceptable surety for federal bonds. As another alternative, the Participant’s obligation under the repayment agreement can be secured by a bank letter of credit in an amount equal to at least 100% of the restricted amount.

(c) Amounts in the escrow account in excess of 125% of the restricted amount may be withdrawn for the Participant. Similar rules apply to the release of any liability in excess of 100% of the restricted amount where the repayment obligation has been secured by a bond or a letter of credit. If, however, the market value of the property in the escrow account falls below 110% of the restricted amount, the Participant is obligated to deposit additional

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property to bring the value of the property held by the depositary up to 125% of the restricted amount. In addition, the Participant may be given the right to receive any income from the property placed in escrow, subject to the obligation to maintain the value of the property as described.

(d) A depositary may not redeliver to the Participant (or any other party claiming through the Participant) any property held under such an agreement, other than amounts in excess of 125% of the restricted amount, and a surety or bank may not release any liability on such a bond or letter of credit, unless the Committee certifies to the depositary, surety, or bank that the Participant (or the Participant’s estate) is no longer obligated to repay to the Plan any amount under the agreement. The Committee shall make such a certification if at any time after the distribution commences either that any of the conditions of Subsection 10.3.4 below are met or that the Plan has terminated and the benefit received by the Participant is nondiscriminatory under section 401(a)(4) of the Code. Such a certification by the Committee terminates the agreement between the Participant and the Plan.

10.3.4 The restrictions set forth in Subsections 10.3.2 and 10.3.3 above shall not apply to any Participant if either: (a) after payment to such Participant of all benefits payable to him under the Plan, the value of all assets of the Plan equals or exceeds 110% of the then value of the Plan’s current liabilities (as defined in section 412(1)(7) of the Code); (b) the entire value of such Participant’s retirement benefit under the Plan is less than 1% of the then value of the Plan’s current liabilities (as defined in section 412(1)(7) of the Code) before the distribution; or (c) the entire value of such Participant’s retirement benefit under the Plan is $3,500 or less. The reference to “$3,500” contained in the immediately preceding sentence shall be deemed to be a reference to “$5,000” with respect to any Participant whose retirement benefit under the Plan does not begin to be paid as of any date prior to January 1, 1998.

10.3.5 For purposes of Subsections 10.3.2 through 10.3.4 above, a Participant shall be considered a “Restricted Participant” for any Plan Year if he is one of the 25 Highly Compensated and Former Highly Compensated Employees for such Plan Year with the greatest Compensation. In determining which of the Highly Compensated and Former Highly Compensated Employees for any Plan Year have the 25 greatest Compensations, the Compensation to be considered for any such Highly Compensated or Former Highly Compensated Employee shall be the highest Compensation he received in such Plan Year or any other Plan Year under which his Compensation and/or ownership in an Affiliated Employer made him a Highly Compensated or Former Highly Compensated Employee for the subject Plan Year.

10.4 Compensation.

10.4.1 The “Compensation” of an Employee, as defined in this Section 10.4, refers to the Employee’s compensation as used throughout the provisions of this Article 10, and to the Employee’s compensation or remuneration as referred to in any other provision of this Plan (or any other plan that is merged into this Plan or transfers assets and liabilities to this Plan) that otherwise fails to define such term, and means the Employee’s earned income, wages, salaries, and fees for

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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), and excluding the following: (a) contributions by an Affiliated Employer to a plan of deferred compensation which are not includible in the Employee’s gross income for the taxable year in which contributed or any distributions from a plan of deferred compensation; (b) amounts realized from the exercise of a nonqualified 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 an incentive or other tax-qualified stock option; and (d) any other amounts which receive special tax benefits.

10.4.2 Further but subject to the provisions of Subsection 10.4.3 below, an Employee’s “Compensation,” as defined in this Section 10.4, for a Plan Year or other period is the Compensation (as defined in Subsection 10.4.1 above) actually paid or includible in his gross income for federal income tax purposes during such Plan Year or other period.

10.4.3 In addition to the amounts included in the Employee’s “Compensation” for any Plan Year or other period under Subsections 10.4.1 and 10.4.2 above, and notwithstanding the provisions of such subsections, the Employee’s “Compensation,” as defined in this Section 10.4, for any Plan Year or other period shall also include any amounts which are not treated as the Employee’s Compensation for such specified period under Subsections 10.4.1 and 10.4.2 above solely because such amounts are considered elective contributions that are made by an Affiliated Employer on behalf of the Employee and are not includible in the Employee’s gross income for federal income tax purposes by reason of section 125, 402(e)(3), 402(h), and/or 132(f)(4) of the Code (i.e., elective contributions under a cafeteria plan, a cash or deferred arrangement in a profit sharing plan, a simplified employee pension plan, or an arrangement under which qualified transportation fringes can be chosen) or any other types of deferred compensation described in Code section 414(s) or Treas. Reg. section 1.414(s)-l(c)(4); except that the treating of elective contributions that are not includible in gross income under Code section 132(f)(4) as part of the Participant’s Compensation shall only apply when the applicable Plan Year or other period begins on or after January 1, 2000.

10.4.4 Finally, notwithstanding any of the provisions of the foregoing subsections of this Section 10.4, the “Compensation” of an Employee as defined in this Section 10.4 (and the Employee’s compensation, or any amount that is based on all or part of the Employee’s compensation, as defined by any other provision of this Plan or any plan that is merged into this Plan or transfers assets and liabilities to this Plan) which is taken into account for any Plan Year or any other twelve-month period shall not exceed $160,000 (or any higher amount to which this figure is adjusted under section 401(a)(17) of the Code by the Secretary of the Treasury or his delegate for the calendar year in which such Plan Year or other twelve-month period begins).

(a) Notwithstanding the foregoing, for purposes of determining any benefit accrued for a period ending prior to the Effective Amendment Date under the benefit formula provisions of the Plan (or any other plan that either is merged into this Plan or has assets

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and liabilities transferred to this Plan) that were in effect before such date, the “Compensation” of the Employee as defined in this Section 10.4 (and the Employee’s compensation as defined by any other provisions of this plan or any plan that is merged into this Plan or transfers assets and liabilities to this Plan) which is taken into account for any Plan Year or another twelve-month period ending prior to the Effective Amendment Date shall not be subject to the first sentence of this Subsection 10.4.4 but, instead, shall not exceed the compensation limit, or otherwise violate, the provisions in effect under section 401(a)(17) of the Code for the calendar year in which such Plan Year or other twelve-month period begins, as adjusted by the Secretary of the Treasury or his delegate for such calendar year.

(b) In general, the compensation limit under section 401(a)(17) of the Code: (i) was, for any calendar year ending prior to January 1, 1994, $200,000 (or such higher amount to which such figure was adjusted under section 401(a)(17) of the Code by the Secretary of the Treasury or his delegate for such calendar year); or (ii) was, for any calendar year beginning on or after January 1, 1994 and ending prior to the Effective Amendment Date, $150,000 (or such higher amount to which such figure was adjusted under section 401(a)(17) of the Code by the Secretary of the Treasury or his delegate).

10.5 Former Highly Compensated Employee. For purposes of this Article 10 (and any other provision of the Plan that expressly refers to a Former Highly Compensated Employee), a “Former Highly Compensated Employee” means, with respect to any Plan Year (for purposes of this Section 10.5, the “subject Plan Year”), any person (a) who is a former Employee at the start of the subject Plan Year (or who, while an Employee at the start of such year, performs no services for any Affiliated Employer during such year by reason of being on a leave of absence or for some other reason), (b) who had a separation year prior to the subject Plan Year, and (c) who was a Highly Compensated Employee for the person’s separation year or any other Plan Year which ended on or after the person’s 55th birthday. Except as otherwise provided in final regulations issued under section 414(q) of the Code, a person’s separation year refers to the Plan Year in which the person terminated employment with the Affiliated Employers. For purposes of this rule, an Employee who performs no services for the Affiliated Employers during the subject Plan Year shall be treated as having terminated employment with the Affiliated Employers in the Plan Year in which such Employee last performed services for the Affiliated Employers.

10.6 Highly Compensated Employee. For purposes of this Article 10 (and any other provision of the Plan that expressly refers to a Highly Compensated Employee), a “Highly Compensated Employee” means, with respect to any Plan Year (for purposes of this Section 10.6, the “subject Plan Year”), any person who is an Employee during at least part of the subject Plan Year and (a) was at any time a 5% owner (as defined in section 416(i)(l) of the Code) of any Affiliated Employer during the subject Plan Year or the immediately preceding Plan Year (for purposes of this Section 10.6, the “look-back Plan Year”) or (b) received Compensation in excess of $80,000 in the look-back Plan Year. The $80,000 amount set forth above shall be adjusted for each Plan Year in accordance with the adjustment to such amount made by the Secretary of the Treasury or his delegate under section 414(q)(l) of the Code.

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ARTICLE 11

ADDITIONAL RETIREMENT AND DEATH

BENEFIT PAYMENT PROVISIONS

11.1 Incompetency. Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally or legally competent and of age until the date on which the Committee receives written notice that such person is incompetent or a minor for whom a guardian or other person legally vested with the care of his person or estate has been appointed. If the Committee finds that any person to whom a benefit is payable under the Plan is unable to care for his affairs because he is incompetent or is a minor, any payment due (unless a prior claim therefor has been made by a duly appointed legal representative) may be paid to the spouse, a child, a parent, a brother, or a sister of such person or to any person or institution deemed by the Committee to have incurred expense for such person. If a guardian of the estate of any person receiving or claiming benefits under the Plan is appointed by a court of competent jurisdiction, benefit payments may be made to such guardian provided that proper proof of appointment and continuing qualification is furnished in a form and manner acceptable to the Committee. Any payment made pursuant to this Section 11.1 shall be a complete discharge of liability therefor under the Plan.

11.2 Commercial Annuity Contracts. Notwithstanding any other provision of the Plan to the contrary, in its sole discretion, the Committee may elect to distribute a retirement or death benefit by the purchase and delivery to the applicable Participant (or beneficiary) of a commercial annuity contract from an insurance company. In such an event, delivery to and acceptance by such Participant (or beneficiary) of such contract shall be in complete satisfaction of any claim the Participant (or beneficiary) or any person claiming by or through such Participant (or beneficiary) may have for benefits under this Plan. The use of an annuity contract shall not itself cause any optional benefit form otherwise available to the Participant (or, if a death benefit is involved, his beneficiary) under the Plan to be eliminated, however.

11.3 Timing of Benefit Distributions.

11.3.1 For purposes of the Plan, each benefit payment under the Plan shall be made “as of” a certain date specified in an appropriate section of the Plan, which means that the amount of the payment shall be determined as of such date (or, if determined to be appropriate for administrative purposes by the Committee, as of the first day of the first month that begins on or after such date) and the actual payment shall be made on or as soon as practical after such date (to allow the Plan time to ascertain the applicable person’s entitlement to a benefit and the amount of such benefit and to process and payout such benefit).

11.3.2 Further, the date “as of” which a benefit commences to be paid to a person under the Plan may sometimes be called such benefit’s “commencement date,” “benefit commencement date,” or “payment date” in the other provisions of this Plan. Any of such terms refer to the date as of which the applicable benefit commences (or, when the benefit is paid in a single sum, is paid).

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11.3.3 If a person entitled to a benefit hereunder dies subsequent to the date as of which such payment was to have been made but, because of administrative reasons, prior to the actual payment thereof, such benefit shall be paid to the person’s beneficiary who is appropriate to such benefit under the provisions of the Plan (or, if no such beneficiary exists, to his estate).

11.3.4 If, notwithstanding any of the foregoing provisions of this Section 11.3, a Participant (or person claiming through him) who is entitled to a benefit hereunder cannot reasonably be located, then such benefit shall thereupon be deemed forfeited. If, however, the lost Participant (or person claiming through him) thereafter makes a claim for the amount previously forfeited hereunder, such benefit shall be paid or commence, with any unpaid installments thereof which otherwise would have previously been paid also being paid (but without any interest credited on such unpaid installments), as soon as administratively possible.

11.4 Nonalienation of Benefits. To the extent permitted by law and other than for the exceptions to the general requirements that a benefit may not be assigned or alienated that are described in section 401(a)(13) of the Code and Treas. Reg. Section 1.401(a)-13, no benefit payable under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, whether voluntary or involuntary, 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. The Committee shall, however, adopt procedures as necessary so as to allow benefits to be assigned in connection with qualified domestic relations orders (as defined in and in accordance with the provisions of section 206(d) of ERISA and section 414(p) of the Code).

11.5 Actuarial Assumptions. This Section 11.5 provides certain rules that involve actuarial assumptions or factors used under other provisions of the Plan.

11.5.1 Under this Plan, except as is otherwise provided in this Plan, any reference to actuarial equivalent, actuarially equivalent, or actuarial equivalence means equality in value of the aggregate amounts of a benefit when determined to be received under different forms at the same time, the same form at different times, or different forms at different times, as the case may be, in accordance with actuarial assumptions or factors set forth in the Plan.

11.5.2 When the Plan requires the calculation under any provision of Section 5.3 above of the single sum amount that is actuarially equivalent to a Participant’s benefit when payable in the form of a Single Life Annuity, the actuarial assumptions to be used in making such calculation shall be (a) an interest rate assumption of 4% per annum and (b) mortality assumptions based on the UP-1984 Mortality Table.

11.5.3 When the commencement date of any benefit under the Plan precedes January 1, 2000, the “applicable interest rate” and “applicable mortality assumption” that apply to such benefit shall be deemed to mean the interest rate or rates and the mortality assumptions which would be used (as of the first day of the Plan Year in which occurs the commencement date of the benefit) by the Pension Benefit Guaranty Corporation for purposes of determining the

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present value of the benefit if the Plan terminated on the first day of such Plan Year with insufficient assets to provide benefits guaranteed by the Pension Benefit Guaranty Corporation on such date.

11.5.4 When the commencement date of any benefit under the Plan occurs on or after January 1, 2000: (a) the “applicable interest rate” that applies to such benefit shall be deemed to mean the annual interest rate on 30-year Treasury securities for the fifth calendar month which precedes the first calendar month included in the Plan Year in which the applicable benefit’s commencement date occurs (as specified by the Secretary of the Treasury or his delegate for that month in revenue rulings, notices, or other guidance); and (b) the “applicable mortality assumption” that applies to such benefit shall be deemed to mean an appropriate mortality assumption based on the mortality table prescribed by the Secretary of the Treasury or his delegate under section 417(e)(3) of the Code to apply as of the commencement date of the applicable benefit (which table shall be based on the prevailing commissioners’ standard table described in section 807(d)(5)(A) of the Code and used to determine reserves for group annuity contracts, without regard to any other subparagraph of section 807(d)(5) of the Code).

11.5.5 Except to the extent otherwise permitted by applicable law or Treasury regulations, if the Plan is amended to change any of the actuarial assumptions used in the Plan to determine actuarial equivalence, then the amount or value of any Plan benefit which is applicable to a Participant who is a Participant on the effective date of the amendment and which is determined in part by using the Plan’s actuarial assumptions shall be determined in accordance with the provisions of the Plan in effect as of the date the benefit is to commence or be paid; except that the amount or value of such benefit shall not in any event be deemed to be less than would apply if both: (a) such benefit were determined as if the applicable Participant had permanently ceased to be an Employee no later than as of the day next preceding the effective date of the amendment (and thus as if no service or compensation of the Participant were completed or received by him after such date), and (b) instead of and in substitution for the Plan’s actuarial assumptions in effect as of the date the benefit is to commence or be paid, the actuarial assumptions used in the Plan with respect to the determination of the amount or value of such benefit were the Plan’s actuarial assumptions which were in effect as of the day next preceding the effective date of the amendment.

11.6 Applicable Benefit Provisions.

11.6.1 Subject to Sections 7.6 through 7.8 above, any retirement benefit to which a Participant becomes entitled (or any death benefit to which such Participant’s spouse or other beneficiary becomes entitled) shall be determined on the basis of the provisions of the Plan in effect as of the earlier of the date the Participant last ceases to be an Employee or his Required Beginning Date notwithstanding any amendment to the Plan adopted subsequent to such date, except for subsequent amendments which are by their specific terms made applicable to such Participant (or his spouse or other beneficiary).

11.6.2 In addition, except as is otherwise specifically provided in this Plan, the provisions of this Plan only apply to persons who become Participants in this Plan under Article

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4 above on or after the Effective Amendment Date and to benefits which have not begun to be paid prior to the Effective Amendment Date. However, any person who was a participant in the Plan prior to the Effective Amendment Date and, while never becoming a Participant in this Plan under Article 4 above on or after the Effective Amendment Date, still had a nonforfeitable right to an unpaid benefit under the Plan as of the date immediately preceding the Effective Amendment Date shall be considered a participant in this Plan to the extent of his interest in such benefit. The amount of such benefit, the form in which such benefit is to be paid, and the conditions (if any) which may cause such benefit not to be paid shall, except as is otherwise specifically provided by the provisions of this Plan, be determined solely by the provisions of the Plan in effect at the time he retired or terminated employment with the Employer.

11.7 Forfeitures. Subject to the provisions of Sections 7.6 through 7.8 above, a Participant who terminates employment with the Affiliated Employers shall forfeit any portion of his Accrued Benefit which he is not entitled to receive as a retirement benefit under the provisions of the Plan (for purposes of this Section 11.7, his “nonvested Accrued Benefit”) as of the earlier of (a) the date he receives a complete distribution of the portion of his Accrued Benefit which he is entitled to receive as a retirement benefit under the provisions of the Plan (for purposes of this Section 11.7, his “vested Accrued Benefit”) or (b) the date he incurs five consecutive Breaks in Service commencing after such termination of employment. For purposes hereof, a Participant who terminates employment with an Affiliated Employer at a time when he has no vested Accrued Benefit at all shall be deemed to have received a complete distribution of his vested Accrued Benefit on the date of such termination of employment.

11.8 Direct Rollover Distributions.

11.8.1 Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this Section 11.8, a distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an eligible rollover distribution otherwise payable to him paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

11.8.2 For purposes of this Section 11.8, the following terms shall have the meanings indicated below:

(a) An “eligible rollover distribution” means, with respect to any distributee, any distribution of all or any portion of the entire benefit otherwise payable under the Plan to the distributee, except that an eligible rollover distribution does not include: (i) 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; (ii) any distribution to the extent such distribution is required to be made under section 401(a)(9) of the Code; or (iii) the portion of any distribution that is not includible in gross income of the distributee for purposes of federal income tax.

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(b) An “eligible retirement plan” means, with respect to any distributee’s eligible rollover distribution, 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 a distributee who is a distributee by reason of being the surviving spouse of a Participant, an “eligible retirement plan” means only an individual retirement account described in section 408(a) of the Code or an individual retirement annuity described in section 408(b) of the Code.

(c) A “distributee” means a Participant. In addition, a Participant’s surviving spouse, or a Participant’s spouse or former spouse who is the alternate payee under a qualified domestic relations order (as defined in section 206(d) of ERISA and section 414(p) of the Code), is a distributee with regard to any interest of the Participant which becomes payable under the Plan to such spouse or former spouse.

(d) A “direct rollover” means, with respect to any distributee, a payment by the Plan to an eligible retirement plan specified by the distributee.

11.8.3 The Committee may prescribe reasonable rules in order to provide for the Plan to meet the provisions of this Section 11.8. Any such rules shall comply with the provisions of Code section 401(a)(31) and any applicable Treasury regulations which are issued with respect to the direct rollover requirements. For example, subject to meeting the provisions of Code section 401(a)(31) and applicable Treasury regulations, the Committee may: (a) prescribe the specific manner in which a direct rollover shall be made by the Plan, whether by wire transfer to the eligible retirement plan, by mailing a check to the eligible retirement plan, by providing the distributee a check made payable to the eligible retirement plan and directing the distributee to deliver the check to the eligible retirement plan, and/or by some other method; (b) prohibit any direct rollover of any eligible rollover distributions payable during a calendar year to a distributee when the total of such distributions is less than $200; or (c) refuse to make a direct rollover of an eligible rollover distribution to more than one eligible retirement plan.

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ARTICLE 12

CONTRIBUTIONS

12.1 Contributions.

12.1.1 The Company has established a trust, referred to herein as the “Trust,” to serve as the funding media for the Plan, and the Trust is hereby incorporated by reference into and made a part of the Plan.

12.1.2 Any contribution to provide the benefits under the Plan shall be made by the Participating Companies at such times and in such amounts as the Participating Companies may determine and be paid to the Trust. In general, the Participating Companies intend to meet at least minimum funding requirements of section 412 of the Code, but, except to the extent otherwise required by applicable law, in no manner are the Participating Companies obligated to make further contributions to the Plan after the termination of the Plan or at any particular time during the period the Plan is in existence.

12.1.3 Further, subject to the minimum funding requirements of section 412 of the Code, contributions of the Participating Companies shall be conditioned on their deductibility under section 404(a)(l) of the Code for the tax year in which they are paid to the Trust (or are deemed to be paid to the Trust pursuant to the provisions of section 404(a)(6) of the Code).

12.1.4 No contributions shall be required or permitted of Participants.

12.1.5 Forfeitures arising under the Plan shall only be used to reduce Participating Company contributions otherwise payable hereunder.

12.2 Mistake of Fact. Participating Company contributions made upon the basis of a mistaken factual assumption shall be repaid by the Trustee of the Trust to the appropriate Participating Companies, upon receipt by such Trustee, within one year from the date of such contributions, of a certificate of the Participating Companies describing such mistaken factual assumption and requesting the return of such contributions.

12.3 Disallowance of Deductions. Unless not permitted by reason of the minimum funding requirements of section 412 of the Code, any Participating Company contributions which are determined by the Internal Revenue Service or by final judgment of a court of competent jurisdiction not to be deductible expenses under section 404(a)(l) of the Code for the tax year in which they are paid to the Trust (or are deemed to be paid to the Trust pursuant to the provisions of section 404(a)(6) of the Code) shall be repaid by the Trustee of the Trust to the appropriate Participating Companies, upon receipt by such Trustee of evidence of such determination, and a request of the Participating Companies requesting such repayment, within one year from the date of such determination or final judgment, as the case may be.

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ARTICLE 13

ADMINISTRATION OF THE PLAN

13.1 Plan Administration. The Company shall be the Plan Administrator (as that term is defined in ERISA), but, except as is otherwise noted elsewhere in this Article 13, the general administration of the Plan and the responsibility for carrying out its provisions shall be placed by the Company in a committee of not less than three persons who are appointed by and serve at the pleasure of the Company and which committee is named the Employees’ Benefit Committee of the Company, referred to herein as the “Committee.”

13.2 Committee Procedures. The Committee may elect such officers as it deems necessary. The Committee shall hold meetings upon such notice, at such place or places, and at such time or times as its members may from time to time determine. The Committee may adopt such bylaws and regulations as it deems desirable for the conduct of its affairs, and the provisions of any such bylaws or regulations shall apply under this Plan to the extent they are not inconsistent with the terms of this Plan.

13.3 Authority of Committee. The Committee shall be a named fiduciary of the Plan, and, except as is otherwise noted elsewhere in this Article 13, shall have authority to control and manage the operation and administration of the Plan.

13.3.1 The Committee shall have all powers and discretion necessary to exercise its authority and discharge its responsibilities, including, but not by way of limitation, the following:

(a) To construe and interpret the Plan and determine all questions relating to the eligibility of Employees to become Participants;

(b) To maintain all necessary records for the administration of the Plan other than those maintained by the Trustee of the Trust;

(c) To compute and certify to the Trustee of the Trust the amount and kind of benefits payable to Participants and their beneficiaries;

(d) To authorize all disbursements by the Trustee from the Trust;

(e) To make and publish rules for the administration of the Plan and the transaction of its business;

(f) To employ one or more persons to render advice with regard to any responsibility to be discharged by any person under the Plan;

(g) To prescribe procedures to be followed by Participants or their beneficiaries in obtaining benefits;

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(h) To receive from the Affiliated Employers and from Employees such information and prescribe the use of such forms as shall be necessary for the proper administration of the Plan;

(i) To prepare and distribute, in such manner as the Committee determines to be appropriate, information explaining the Plan;

(j) To delegate to one or more of the members of the Committee the right to act in its behalf in any or all matters connected with the administration of the Plan;

(k) To receive and review reports of the financial condition and of the receipts and disbursements of the Trust from the Trustee;

(1) To delegate any duty or power assigned to the Committee under the provisions of the Plan or the Trust (except duties provided in the Trust for the management or control of the assets of the Plan) to such person or persons as the Committee may choose, and to designate one or more of such persons as a named fiduciary (as such term is defined in ERISA) for purposes of the Plan. To the extent any such duty or power is so delegated, the person or persons to whom such duty or power is delegated may take actions that are within his or their scope of authority with the same force and effect as if the Committee had acted directly;

(m) To appoint or employ for the Plan agents it deems advisable, including, but not limited to, legal and actuarial counsel, to assist the Committee in discharging its duties hereunder, and to dismiss any such agents and engage another at any time; and

(n) To correct, by any reasonable method determined by the Committee, any errors in the administration or application of the Plan (or any delays in distributing benefits beyond a reasonable period) which it discovers, however arising and notwithstanding any other provision of the Plan to the contrary, and, as far as possible, adjust any benefit payments accordingly, provided only that the correction methods used by the Committee are not inconsistent with any revenue procedures or other guidance issued by the Internal Revenue Service as to the manner in which corrections of errors under employee benefit plans may be made. For example, the Committee may, when any single sum payment of a benefit is made after the date which is such benefit’s payment date under the other provisions of the Plan, add interest to the amount of such benefit payment (in order to reflect any administrative delay in making the payment) at a rate of 3-1/2% per annum (or such other rate as is determined by the Committee). Because of the much lesser percentage of a benefit that is encompassed by a monthly annuity payment, no interest will be credited for an administrative delay in making a monthly annuity payment (unless otherwise determined by the Committee based on special facts and circumstances).

13.3.2 Notwithstanding the foregoing provisions of this Section 13.3, if the Committee cannot reasonably and economically determine or verify, with respect to any Employee or a class of Employees, service, compensation, date of hire, date of termination, or

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any other pertinent factor in the administration of the Plan, the Committee shall adopt, with respect to such Employee or class of Employees, reasonable and uniform assumptions regarding the determination of such factor or factors, provided that no such assumption shall (a) discriminate in favor of Highly Compensated Employees, (b) reduce or eliminate a protected benefit (within the meaning of Treas. Reg. section 1.41l(d)-4), or (c) operate to the disadvantage of such Employee or class of Employees.

13.3.3 Unless otherwise provided in the Trust, the Committee may also establish guidelines with respect to the investment of all funds held by the Trustee under the Trust, direct investments of all or part of such funds, and/or appoint investment managers to direct investments of all or part of such funds.

13.3.4 For purposes hereof, any party which has been authorized by the Plan or under a procedure authorized under the Plan to perform fiduciary and/or nonfiduciary administrative duties hereunder, whether such party is the Committee, the Company, an agent appointed or permitted by the Committee to carry out its duties, or otherwise, shall, when properly acting within the scope of his authority, sometimes be referred to in the Plan as a “Plan representative.”

13.4 Reliance on Information and Effect of Decisions. When making a determination or calculation with respect to the Plan, the Committee shall be entitled to rely upon information furnished by any Participant, any beneficiary, any Participating Company, legal counsel of any Participating Company, an enrolled actuary appointed or employed by the Company or the Committee, the Trustee of the Trust, or an investment manager appointed under the Trust. The determination of the Committee as to the interpretation of the provisions of the Plan or any disputed questions shall be conclusive, subject only to applicable law and the provisions of Article 14 below for review of a decision denying a claim.

13.5 Appointment of Actuary. The Company or the Committee shall appoint an actuary to make all actuarial computations required in the operation and administration of the Plan and may dismiss the actuary and engage another at any time.

13.6 Funding Policy and Method. Pursuant to ERISA, the Committee from time to time shall establish a funding policy and method for carrying out the objectives of the Plan which is consistent with the requirements of the Plan and applicable law. In this connection, the Committee shall consider the Plan’s short and long term financial needs.

13.7 Participant Information Forms. At the discretion of the Committee, at any time an Employee may be furnished with a form or forms which shall be executed by him and returned to the Committee setting forth such information as the Committee deems necessary to the administration of the Plan. In addition, a Participant must keep current with the Plan his address and the address of his spouse or other beneficiary, if any, and any spouse or other beneficiary entitled to a future benefit under this Plan must continue to keep current the spouse’s or beneficiary’s address after the Participant’s death. All benefits payable under this Plan may be

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based on the latest address and information provided to the Committee by the Participant or his spouse or beneficiary.

13.8 Disbursement of Funds. The Committee shall determine the manner in which the funds of the Plan shall be disbursed, including the form of any voucher or warrant to be used in making disbursements, and the due qualification of persons authorized to approve and sign the same, but subject to the provisions of the Trust.

13.9 Insurance. The Participating Companies (but not the Plan) may, in their discretion, obtain, pay for, and keep current a policy or policies of insurance insuring the Committee members, the members of the Board, the members of the Review Committee (as described in Section 13.12 below), and other persons to whom any fiduciary responsibility with respect to the administration of the Plan is delegated, against any and all liabilities, costs, and expenses incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities, and obligations under the Plan and any applicable federal or state law.

13.10 Compensation of Committee and Payment of Plan Administrative and Investment Charges. Unless otherwise determined by the Company, the members of the Committee (and the members of the Review Committee, as described in Section 13.12 below) shall serve without compensation for their services as such. All expenses of the administration and investment of the Plan (excluding brokerage fees, expenses related to securities transactions, and any taxes on the assets held in the Trust Fund, which expenses shall only be payable out of the Trust Fund), including, without limitation, premiums due the Pension Benefit Guaranty Corporation and the fees and charges of the Trustee, any investment manager or other financial advisor, any actuary, any attorney, any accountant, any specialist, or any other person employed by the Committee or the Company in the administration of the Plan, shall be paid out of the Trust Fund (or, if the Participating Companies so elect, by the Participating Companies directly). In this regard, the Plan administrative and investment expenses which shall be paid out of the Trust Fund (unless the Participating Companies elect to pay them directly) shall also include compensation payable to any employees of the Affiliated Employers who perform administrative or investment services for the Plan to the extent such compensation would not have been sustained had such services not been provided, to the extent such compensation can be fairly allocated to such services, to the extent such compensation does not represent an allocable portion of overhead costs or compensation for performing “settlor” functions (such as services incurred in establishing or designing the Plan), and to the extent such compensation does not fail for some other reason to constitute a “direct expense” within the meaning of U.S. Department of Labor Regulation section 2550.408c-2(b)(3).

13.11 Indemnification. The Participating Companies shall indemnify each member of the Committee, the Review Committee (as described in Section 13.12 below), and the Board for all expenses and liabilities (including reasonable attorneys’ fees) arising out of the administration of the Plan, other than any expenses or liabilities resulting from the member’s own willful misconduct or lack of good faith.

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13.12 Employees’ Benefit Claim Review Committee. While the Committee generally handles all administrative matters involving the Plan, it shall not review or decide any appeal claims made by Participants whose initial claims for benefits or other relief have been denied, in whole or in part, by the Committee (or any delegate of the Committee). Instead, the Company shall appoint an Employees’ Benefit Claim Review Committee (for purposes of this Section 13.12 and Article 14 below, the “Review Committee”), consisting of one or more persons who are not members of the Committee. The Review Committee shall serve as the final review committee, under the Plan and ERISA, for the review of all appeal claims by Participants whose initial claims for benefits have been denied, in whole or part, by the Committee (or any delegate of the Committee). Such appeal review duties are described in Article 14 below. Further, the provisions of Section 13.2 above shall apply to the Review Committee in the same manner as if the Review Committee were the Committee.

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ARTICLE 14

CLAIMS PROCEDURE

14.1 Initial Claim. In general, benefits due under this Plan shall be paid only if the applicable Participant or beneficiary of a deceased Participant files a written notice with the Committee electing to receive such benefits, except to the extent otherwise required under the Plan. Further, if a Participant (or a person claiming through a Participant) has a dispute as to the failure of the Plan to pay or provide a benefit, as to the amount of benefit paid, or as to any other matter involving the Plan, the Participant (or such person) may file a claim for the benefit or relief believed by the Participant (or such person) to be due. Such claim must be provided by written notice to the Committee or any other person designated by the Committee for this purpose. The Committee (or any other person or committee designated by the Committee to perform this function) shall decide any claims made pursuant to this Section 14.1.

14.2 Actions in Event Initial Claim is Denied. If a claim made pursuant to Section 14.1 above is denied, in whole or in part, notice of the denial in writing shall be furnished by the Committee (or any other person or committee designated by the Committee to perform this function) to the claimant within 90 days after receipt of the claim by the Committee (or such other person or committee); except that if special circumstances require an extension of time for processing the claim, the period in which the Committee (or such other person or committee) is to furnish the claimant written notice of the denial shall be extended for up to an additional 90 days (and the Committee or such other person or committee shall provide the claimant within the initial 90-day period a written notice indicating the reasons for the extension and the date by which the final decision can be expected).

14.2.1 The final notice of denial shall be written in a manner designed to be understood by the claimant and set forth: (a) the specific reasons for the denial; (b) specific reference to pertinent Plan provisions on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) information as to the steps to be taken if the claimant wishes to appeal such denial of his claim (including, when the claim is made on or after January 1, 2002, the time limits applicable to making a request for an appeal and a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on appeal).

14.2.2 If no written notice is provided the claimant within the applicable 90-day period or 180-day period, as the case may be, the claimant may assume his claim has been denied and go immediately to the appeal process set forth in Section 14.3 below.

14.3 Appeal of Denial of Claim. Any claimant who has a claim denied under Sections 14.1 and 14.2 above may appeal the denied claim to the Review Committee (as defined in Section 13.12 above) or any other person or committee designated by the Review Committee to perform this review.

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14.3.1 Such an appeal must, in order to considered, be filed within 60 days of the receipt by the claimant of a written notice of the denial of his initial claim from the Committee or its delegate (unless it was not reasonably possible for the claimant to make such appeal within such 60-day period, in which case the claimant must file his appeal within 60 days after the time it becomes reasonable for him so to file an appeal.

14.3.2 If any appeal is filed in accordance with such rules, the claimant (a) shall be given, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the claim and (b) shall be provided the opportunity to submit written comments, documents, records, and other information relating to the claim. A formal hearing may be allowed in its discretion by the Review Committee (or such other person or committee) but is not required.

14.4 Decision on Appeal. Upon any appeal of a denied claim made pursuant to Section 14.3 above, the Review Committee (or such other person or committee with authority to decide the appeal) shall provide a full and fair review of the subject claim, taking into account all comments, documents, records, and other information submitted by the claimant (without regard to whether such information was submitted or considered in the initial benefit determination of the claim), and decide the appeal within 60 days after the filing of the appeal; except that if special circumstances require an extension of time for processing the appeal, the period in which the appeal is to be decided shall be extended for up to an additional 60 days (and the party deciding the appeal shall provide the claimant written notice of the extension prior to the end of the initial 60-day period). However, if the decision on the appeal is extended due to the claimant’s failure to submit information necessary to decide the appeal, the period for making the decision on the appeal shall be tolled from the date on which the notification of the extension is sent until the date on which the claimant responds to the request for additional information.

14.4.1 The decision on appeal shall be set forth in a writing designed to be understood by the claimant, specify the reasons for the decision and references to pertinent Plan provisions on which the decision is based, and, for a claim that is made on or after January 1, 2002, contain statements that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the claim and of the claimant’s right to bring a civil action under Section 502(a) of ERISA.

14.4.2 The decision on appeal shall be furnished to the claimant by the Review Committee (or such other person or committee with authority to decide the appeal) within the 60-day period or 120-day period, as is applicable, described above.

14.5 Additional Rules. A claimant may appoint a representative to act on his behalf in making or pursuing a claim or an appeal of a claim. In addition, the Committee may prescribe additional rules which are consistent with the other provisions of this Article 14 in order to carry out the Plan’s claim procedures.

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ARTICLE 15

CERTAIN RIGHTS AND OBLIGATIONS OF COMPANY RELATING

TO AMENDMENTS, PLAN TERMINATIONS, AND CONTRIBUTIONS

15.1 Authority to Amend Plan. The Company reserves the right, at any time, to modify and amend, in whole or in part, any or all of the provisions of the Plan.

15.1.1 It is provided, however, that no modification or amendment of the Plan shall decrease any Participant’s Accrued Benefit. In addition, except as otherwise provided in regulations issued under section 411(d)(6) of the Code or allowed by the Internal Revenue Service in any submission made to it, no amendment to the Plan which eliminates or reduces an early retirement benefit or a retirement-type subsidy or eliminates an optional form of retirement benefit shall be permitted with respect to any Participant who meets (either before or after the amendment) the pre-amendment conditions for such early retirement benefit, retirement-type subsidy, or optional form of benefit, to the extent such early retirement benefit, retirement-type subsidy, or optional form of benefit is based and calculated on the basis of the Participant’s Accrued Benefit determined as of the date of such amendment.

15.1.2 It is provided, further, that no modification or amendment of the Plan shall make it possible, at any time prior to the satisfaction of all liabilities with respect to the Participants, for any part of the assets of the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of such Participants (or their beneficiaries) or the payment of the costs or expenses of the Plan and the Trust.

15.1.3 Notwithstanding the foregoing restrictions on modifications or amendments of the Plan, however, any modification or amendment may be made to the Plan, even if retroactive in effect, if such modification or amendment is necessary to continue the qualification of the Plan under section 401(a) of the Code.

15.2 Amendment to Vesting Schedule.

15.2.1 Notwithstanding any other provision hereof to the contrary, no Plan amendment may be adopted changing any vesting schedule or affecting the computation of the nonforfeitable percentage of retirement benefits under the Plan unless the nonforfeitable percentage of each Participant’s benefit, as applicable and 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 under the Plan without regard to such amendment.

15.2.2 If a Plan amendment is adopted which changes any vesting schedule under the Plan or if the Plan is amended in any way which directly or indirectly affects the computation of a Participant’s nonforfeitable percentage, each Participant who has completed at least three years of Vesting Service may elect, within the election period, to have his nonforfeitable percentage computed under the Plan without regard to such amendment. For purposes hereof, the “election period” is a period which begins on the date the Plan amendment is adopted and

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ends on the date which is 60 days after the latest of the following days: (a) the day the Plan amendment is adopted; (b) the day the Plan amendment becomes effective; or (c) the day the Participant is issued a written notice of the Plan amendment by an Affiliated Employer or the Committee.

15.3 Authority to Terminate Plan. The Company shall have the right to partially or completely terminate the Plan at any time, subject to the provisions of Article 16 below.

15.4 Modification or Termination of Contributions. It is the intention of the Participating Companies to continue making contributions to the Plan regularly each Plan Year, but the Participating Companies may for any reason discontinue, suspend, or reduce below those deemed sufficient by the Committee its contributions to the Plan. If such discontinuance, suspension, or reduction of contributions constitutes, under all facts and circumstances, part of a complete or partial termination of the Plan, the resulting complete or partial termination of the Plan shall be subject to the provisions of Article 16 below.

15.5 Benefits Not Guaranteed. All contributions by the Participating Companies to the Plan are voluntary. The Participating Companies do not guarantee any of the benefits of the Plan.

15.6 Procedure for Amending or Terminating Plan.

15.6.1 Section 15.3 above authorizes the Company to terminate the Plan. The procedure for the Company to terminate this Plan is as follows. In order to terminate the Plan, the Board (or its Executive Committee) shall adopt resolutions, pursuant and subject to the regulations of the Company and any applicable law, and either at a duly called meeting of the Board (or its Executive Committee) or by a written consent in lieu of a meeting, to terminate the Plan. Such resolutions shall set forth therein the effective date of the Plan’s termination. Such Board (or Executive Committee) resolutions shall be incorporated herein by reference and considered a part of the Plan.

15.6.2 Further, Section 15.1 above authorizes the Company to amend the Plan, subject to certain limitations set forth in Sections 15.1 and 15.2 above. The procedure for the Company to amend the Plan is as follows. Subject to Subsections 15.6.3 and 15.6.4 below, in order to amend the Plan, the Board (or its Executive Committee) shall adopt resolutions, pursuant and subject to the regulations of the Company and any applicable law, and either at a duly called meeting of the Board (or, if applicable, its Executive Committee) or by written consent in lieu of a meeting, to amend this Plan. Such resolutions shall either (a) set forth the express terms of the Plan amendment or (b) simply set forth the nature of the amendment and direct an officer of the Company to have prepared and to sign on behalf of the Company the formal amendment to the Plan. In the latter case, such officer shall have prepared and shall sign on behalf of the Company an amendment to the Plan which is in accordance with such resolutions.

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15.6.3 In addition to the procedure for amending the Plan set forth in Subsection 15.6.2 above, the Board (or its Executive Committee) may also adopt resolutions, pursuant and subject to the regulations of the Company and any applicable law, and either at a duly called meeting of the Board (or, if applicable, its Executive Committee) or by a written consent in lieu of a meeting, to delegate to any officer of the Company authority to amend the Plan. Such Board (or, if applicable, Executive Committee) resolutions shall be incorporated herein by reference and considered a part of the Plan. Such resolutions may either grant to such designated party broad authority to amend the Plan in any manner such designated party deems necessary or advisable, but subject to the limitations set forth in Sections 15.1 and 15.2 above, or may limit the scope of amendments such designated party may adopt, such as by limiting such amendments to matters related to the administration of the Plan or to changes requested by the Internal Revenue Service. In the event of any such delegation to amend the Plan, the party to whom authority is delegated may amend the Plan by having prepared and signing on behalf of the Company in accordance with such resolutions an amendment to the Plan which is within the scope of amendments which such party has authority to adopt. Also, any such delegation to amend the Plan may be terminated at any time by later resolution adopted by the Board (or its Executive Committee).

15.6.4 Further, and in addition to the procedures for amending the Plan set forth in Subsections 15.6.2 and 15.6.3 above, the Committee shall, for and on behalf of the Company in connection with the Company’s position as the sponsor of the Plan, have the power to recommend to the Company any amendment to the Plan which the Committee believes is advisable, including but not limited to any amendment that is intended to improve the administration of the Plan, any amendment that is intended to further the purposes or understanding of the Plan, and any amendment that the Committee determines is necessary to maintain the tax-favored status of the Plan, but subject to the limitations set forth in Sections 15.1 and 15.2 above. When recommending any such amendment, the Committee shall not be acting in any fiduciary capacity with respect to the Plan but instead shall be acting solely as an agent and representative of the Company in its position as the sponsor of the Plan. Any amendment to the Plan that is recommended by the Committee shall become effective when (and shall not be effective unless and until) (a) it is consented to in writing by the Chief Executive Officer of the Company (or such other Company officer who is permitted to consent to such amendment by resolutions of the Board or the Board’s Executive Committee) and (b) it is approved by resolutions adopted by the Board or the Board’s Executive Committee (except that the approval by the Board or the Board’s Executive Committee shall not be required in the case of any amendment that the Committee has determined is necessary to maintain the tax-qualified status of the Plan under section 401(a) of the Code or any amendment that the Committee determines will not have a material cost impact on the Participating Companies).

15.6.5 Finally, in the event of any right of parties other than the Board or its Executive Committee to amend the Plan that is delegated or provided them under Subsection 15.6.3 or 15.6.4 above, and even while such right remains in effect, the Board (and its Executive Committee) shall continue to retain its own right to amend the Plan pursuant to the procedure set forth in Subsection 15.6.2 above.

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ARTICLE 16

TERMINATION OF PLAN

16.1 Full Vesting on Termination. Upon a complete or partial termination of the Plan, all interests of each Participant affected by the complete or partial termination in his Accrued Benefit, as applicable and determined as of the date of complete or partial termination, shall become nonforfeitable. In addition, if such an affected Participant has met the requirements for an early retirement or optional form of benefit as of the date of the complete or partial termination, he shall be deemed fully vested in such early or optional form of benefit to the extent based on his Accrued Benefit determined as of the date of the complete or partial termination. Notwithstanding any other provision herein to the contrary, no Participant (or person claiming through him) shall have any recourse towards satisfaction of his Accrued Benefit or any other Plan benefit from other than the assets of the Plan (or the Pension Benefit Guaranty Corporation).

16.2 Distribution Method on Termination. Upon a complete termination of the Plan, the Committee shall determine, and direct the appropriate parties accordingly, from among the following methods, the method of discharging and satisfying all obligations under the Plan on behalf of Participants affected by the complete or partial termination: (a) by the continuation of the Trust and the payment of benefits therefrom to affected Participants as they become due under the terms of the Plan, the benefits due any affected Participant to be equal to the assets allocated to the Participant upon the termination plus net earnings derived from such assets by the Trust; (b) by the purchase of a group or individual retirement annuity or annuities from any insurance company selected by the Committee; (c) by the liquidation and distribution of the assets of the Plan; or (d) by any combination of such methods. Any distribution made by reason of the termination of the Plan shall continue to meet the provisions of the Plan concerning the form in which distributions from the Plan must be made, however.

16.3 Allocation of Assets on Termination. Under whatever method is chosen by the Committee to discharge and satisfy the obligations on behalf of affected Participants, upon the termination of the Plan the assets of the Plan shall be allocated among the Participants in the Plan on the basis of their then Plan benefits, in accordance with the following provisions:

16.3.1 Subject to Subsections 16.3.2 through 16.3.6 below, the assets of the Plan shall, in the event of the termination of the Plan, be allocated among the Participants in the Plan on the basis of their then Plan benefits, in the following order of priority classes until such assets are exhausted:

Priority Class 1: First, equally to all benefits described in paragraphs (a) and (b) immediately below:

(a) In the case of all benefits which are in pay status three years or more prior to the date of termination, to each such benefit as determined under the provisions of

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the Plan in effect during the five-year period ending on the date of termination under which such benefit would be the least in amount; and

(b) In the case of all benefits which would have been in pay status three years prior to the date of termination had the applicable Participants been retired or terminated in employment prior to the three-year period ending on the date of termination, to each such benefit as determined under the provisions of the Plan in effect during the five-year period ending on the date of termination under which such benefit would be the least in amount.

Priority Class 2: Second, equally to the benefits described in paragraphs (a) and (b) immediately below:

(a) To all other benefits guaranteed by the Pension Benefit Guaranty Corporation under title IV of ERISA, determined without regard to section 4022B(a) of ERISA; and

(b) To the additional benefits, if any, which would be guaranteed by the Pension Benefit Guaranty Corporation under title IV of ERISA if section 4022(b)(5) of ERISA did not apply.

For purposes of this Priority Class 2, section 4021 of ERISA shall be applied without regard to subparagraph (c) thereof.

Priority Class 3: Third, to all other vested and nonforfeitable benefits (determined without regard to such benefits which become vested and nonforfeitable solely because of the termination of the Plan).

Priority Class 4: Fourth, to all other benefits.

16.3.2 For purposes of the order of priority classes described in Subsection 16.3.1 above:

(a) The amount allocated under any priority class in Subsection 16.3.1 above with respect to any benefit shall be properly adjusted for any allocation of assets with respect to that benefit under a prior priority class in such subsection.

(b) If the assets available for allocation under either Priority Class 1, 2, or 4 above are insufficient to satisfy in full the Plan benefits described in such priority class, then such assets shall be allocated pro rata on the basis of the present value of the benefits described in such priority class (such present value being determined as of the date of termination).

(c) This paragraph (c) applies if the assets available for allocation under Priority Class 3 above are insufficient to satisfy in full the Plan benefits described in Priority Class 3. In such event, the following provisions apply:

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(i) Such assets shall be allocated, except as provided in subparagraph (ii) immediately below, on a pro rata basis to the benefits which would have been described in Priority Class 3 if the provisions of the Plan as in effect at the beginning of the five-year period ending on the date of termination had never been changed.

(ii) If the assets available for allocation under Priority Class 3 are sufficient to satisfy in full the benefits described in subparagraph (i) immediately above, then such assets shall be allocated to the benefits which would have been described in Priority Class 3 if the provisions of the Plan as in effect at the latest point in time during the five-year period ending on the date of termination that such assets available for allocation are sufficient to satisfy in full such benefits had never been changed, with any such assets remaining to be allocated being allocated pro rata to the additional benefits which would have been described in Priority Class 3 if the provisions of the Plan as in effect under the next succeeding Plan amendment which modified any benefits had never been changed.

(d) If the allocations made pursuant to this Section 16.3 (without regard to this paragraph (d)) result in discrimination prohibited by section 401(a)(4) of the Code, then, to the extent required to prevent the disqualification of the Plan under section 401(a)(4) of the Code: (i) the assets allocated under paragraph (b) of Priority Class 2, Priority Class 3, and Priority Class 4 shall be reallocated to the extent necessary to avoid such discrimination, and, if still necessary to avoid such discrimination after such reallocation, (ii) the assets otherwise allocable to benefits which are limited or restricted under Section 10.3 above (and which are not otherwise allocated to paragraph (b) of Priority Class 2, to Priority Class 3, or to Priority Class 4 under clause (i) immediately above) shall also be reallocated to the extent necessary to avoid such discrimination.

16.3.3 Any allocations, determinations, distributions, or other actions taken pursuant to this Section 16.3 shall be subject to all required approvals and authorizations of the Pension Benefit Guaranty Corporation and the Internal Revenue Service.

16.3.4 Finally, in the case of a complete termination, any assets of the Plan remaining after all foregoing liabilities in the priority classes set forth in Subsection 16.3.1 above have been satisfied shall be paid to the Participating Companies, provided such payment does not violate any applicable federal law.

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ARTICLE 17

TOP HEAVY PROVISIONS

17.1 Determination of Whether Plan Is Top Heavy. For purposes of this Section 17, this Plan shall be considered a “Top Heavy Plan” for any Plan Year (for purposes of the first two sentences of this Section 17.1, the “subject Plan Year”) if, and only if, (a) this Plan is an Aggregation Group Plan during at least part of the subject Plan Year and (b) the ratio of the total Present Value of all accrued benefits of Key Employees under all Aggregation Group Plans to the total Present Value of all accrued benefits of both Key Employees and Non-Key Employees under all Aggregation Group Plans equals or exceeds 0.6. All calculations called for in clauses (a) and (b) of the immediately preceding sentence with respect to this Plan and with respect to the subject Plan Year shall be made as of the Determination Date which is applicable to the subject Plan Year, and all calculations called for under clause (b) of the immediately preceding sentence with respect to any Aggregation Group Plan other than this Plan and with respect to the subject Plan Year shall be made as of that plan’s Determination Date which is applicable to such plan’s plan year that has its Determination Date fall within the same calendar year as the Determination Date being used by this Plan for the subject Plan Year. For the purpose of this Article 17, the following terms shall have the meanings hereinafter set forth:

17.1.1 Aggregation Group Plan. “Aggregation Group Plan” refers, with respect to any plan year of such plan, to a plan (a) which qualifies under Code section 401(a), (b) which is maintained by any Affiliated Employer, and (c) which either includes a Key Employee as a participant (determined as of the Determination Date applicable to such plan year) or allows another plan qualified under Code section 401(a), maintained by any Affiliated Employer, and so including at least one Key Employee as a participant to meet the requirements of section 401(a)(4) or section 410(b) of the Code. In addition, if the Company so decides, any plan which meets clauses (a) and (b) but not (c) of the immediately preceding sentence shall be treated as an “Aggregation Group Plan” with respect to any plan year of such plan if the group of such plan and all Aggregation Group Plans will meet the requirements of sections 401(a)(4) and 410(b) of the Code with such plan being taken into account.

17.1.2 Determination Date. The “Determination Date” which is applicable to any plan year of an Aggregation Group Plan refers to the last day of the immediately preceding plan year (except that, for the first plan year of such a plan, the “Determination Date” applicable to such plan year shall be the last day of such first plan year).

17.1.3 Key Employee. With respect to any Aggregation Group Plan and as of any Determination Date that applies to a plan year of such plan, a “Key Employee” refers to a person who at any time during the five consecutive plan years ending on the subject Determination Date is an employee of an Affiliated Employer and:

(a) An officer (disregarding any person with the title but not the authority of an officer) of an Affiliated Employer, provided such person receives compensation from the Affiliated Employers of an amount greater than 50% of the amount in effect under

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section 415(b)(1)(A) of the Code (i.e., the maximum dollar limit for defined benefit plans) for an applicable plan year in which he is such an officer. For this purpose, no more than 50 employees (or, if less, the greater of three or 10% of the employees of all Affiliated Employers) shall be treated as officers;

(b) One of the ten employees directly owning (or considered as owning within the meaning of Code section 318, except that subparagraph (C) of Code section 318(a)(2) shall be applied by substituting “5%” for “50%”) the largest employee-held interests in any Affiliated Employer, provided such person owns (or is so considered as owning) at least 0.5% of such Affiliated Employer and receives compensation from the Affiliated Employers of an amount greater than the amount in effect under section 415(c)(1)(A) of the Code (i.e., the maximum dollar annual addition limit for defined contribution plans) for an applicable plan year in which he is such an employee. For this purpose, if two employees have the same interest in any Affiliated Employer, the employee having the greater annual compensation from the Affiliated Employers shall be treated as having a larger interest;

(c) A 5% or more owner of any Affiliated Employer; or

(d) A 1% or more owner of any Affiliated Employer who receives compensation of $150,000 or more from the Affiliated Employers for an applicable plan year in which he owns such interest.

For purposes of paragraphs (c) and (d) above, a person is considered to own 5% or 1%, as the case may be, of an Affiliated Employer if he owns (or is considered as owning within the meaning of Code section 318, except that subparagraph (C) of Code section 318(a)(2) shall be applied by substituting “5%” for “50%”) at least 5% or 1%, as the case may be, of either the outstanding stock or the voting power of all stock of the Affiliated Employer (or, if the Affiliated Employer is not a corporation, at least 5% or 1%, as the case may be, of the capital or profits interest in the Affiliated Employer). Further, for purposes of this Subsection 17.1.3, the term “Key Employee” includes any person who is deceased as of the subject Determination Date but who when alive had been a Key Employee at any time during the five consecutive plan years ending on the subject Determination Date, and any accrued benefit payable to his beneficiary shall be deemed to be the accrued benefit of such person.

17.1.4 Non-Key Employee. With respect to any Aggregation Group Plan and as of any Determination Date that applies to a plan year of such plan, a “Non-Key Employee” refers to a person who at any time during the five consecutive plan years ending on the subject Determination Date is an employee of an Affiliated Employer and who has never been considered a Key Employee as of such or any earlier Determination Date. Further, for purposes of this Subsection 17.1.4, the term “Non-Key Employee” includes any person who is deceased as of the subject Determination Date and who when alive had been an employee of an Affiliated Employer at any time during the five consecutive plan years ending on the subject Determination Date, but had not been a Key Employee as of the subject or any earlier Determination Date, and any accrued benefit payable to his beneficiary shall be deemed to be the accrued benefit of such person.

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17.1.5 Present Value of Accrued Benefits.

(a) For any Aggregation Group Plan which is a defined benefit plan (as defined in Code section 414(j)), including such a plan which has been terminated, the “Present Value” of a participant’s accrued benefit, as determined as of any Determination Date, refers to the single sum value (calculated as of the latest Valuation Date which coincides with or precedes such Determination Date and in accordance with the actuarial assumptions referred to in the next sentence) of the monthly retirement or termination benefit which the participant had accrued under such plan to such Valuation Date. For this purpose, the actuarial assumptions to be used shall be the same actuarial assumptions used under the Plan for valuing single sum forms of benefit which are in effect on the latest Valuation Date which coincides with or precedes such Determination Date. Also, for this purpose, such accrued monthly retirement or termination benefit is calculated as if it was to first commence as of the first day following the date the participant first attains his normal retirement age under such plan (or, if such normal retirement age had already been attained, as of the first day next following such Valuation Date) and as if it was to be paid in the form of a single life annuity. Further, the accrued benefit of any participant under such plan (other than a participant who is a Key Employee) shall be determined under the method which is used for accrual purposes for all defined benefit plans of the Affiliated Employers (or, if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rates permitted under the fractional rule of section 411(b)(1)(C) of the Code). In addition, the dollar amount of any distributions made from the plan (including the value of any annuity contract distributed from the plan) actually paid to such participant prior to the subject Valuation Date but still within the five consecutive plan years ending on the subject Distribution Date shall be added in calculating such “Present Value” of the participant’s accrued benefit.

(b) For any Aggregation Group Plan which is a defined contribution plan (as defined in Code section 414(i)), including such a plan which has been terminated, the “Present Value” of a participant’s accrued benefit, as determined as of any Determination Date, refers to the sum of (i) the total of the participant’s account balances under the plan (valued as of the latest Valuation Date which coincides with or precedes such Determination Date) and (ii) an adjustment for contributions due as of such Determination Date. In the case of a profit sharing or stock bonus plan, the adjustment in clause (ii) of the immediately preceding sentence shall be the amount of the contributions, if any, actually made after the subject Valuation Date but on or before such Determination Date (and, in the case of the first plan year, any amounts contributed to the plan after such Determination Date which are allocated as of a date in such first plan year). In the case of a money purchase pension or target benefit plan, the adjustment in clause (ii) of the first sentence of this paragraph (b) shall be the amount of the contributions, if any, which are either actually made or due to be made after the subject Valuation Date but before the expiration of the period allowed for meeting minimum funding requirements under Code section 412 for the plan year which includes the subject Determination Date. In addition, the value of any distributions made from the plan (including the value of any annuity contract distributed from the plan) actually paid to such participant prior to the subject Valuation Date but still within the five consecutive plan years ending on the subject Distribution Date shall be added in calculating such “Present Value” of the participant’s accrued benefit.

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(c) In the case of any rollover (as defined in the appropriate provisions of the Code) from a plan qualified under Code section 401(a) to a similarly qualified plan, or a direct qualified plan-to-qualified plan transfer, to or from a subject Aggregation Group Plan, which rollover or transfer is both initiated by a participant and made between a plan maintained by an Affiliated Employer and a plan maintained by an employer other than an Affiliated Employer, then (i) the Aggregation Group Plan, if it is the plan from which the rollover or transfer is made, shall count the amount of the rollover or transfer as a distribution made as of the date such amount is distributed by such plan in determining the “Present Value” of the participant’s accrued benefit under paragraph (a) or (b) of this Subsection 17.1.5, as applicable, and (ii) the Aggregation Group Plan, if it is the plan to which the rollover or transfer is made, shall not so consider the amount of the rollover or transfer as part of the participant’s accrued benefit in determining such “Present Value” if such rollover or transfer was accepted after December 31, 1983 and shall so consider such amount if such rollover or transfer was accepted prior to January 1, 1984.

(d) In the case of any rollover (as defined in the appropriate provisions of the Code) from a plan qualified under Code section 401(a) to a similarly qualified plan, or a direct qualified plan-to-qualified plan transfer, to or from a subject Aggregation Group Plan, which rollover or transfer is not described in paragraph (c) above, then (i) the subject Aggregation Group Plan, if it is the plan from which the rollover or transfer is made, shall not consider the amount of the rollover or transfer as part of the participant’s accrued benefit in determining the “Present Value” thereof under paragraph (a) or (b) of this Subsection 17.1.5, as applicable, and (ii) the subject Aggregation Group Plan, if it is the plan to which the rollover or transfer is made, shall consider the amount of the rollover or transfer when made as part of the participant’s accrued benefit in determining such “Present Value.”

(e) As is noted in paragraphs (a) and (b) above, the “Present Value” of any participant’s accrued benefit under any Aggregation Group Plan (that is either a defined benefit plan or a defined contribution plan) as of any Determination Date includes the value of any distribution from such a plan actually paid to such participant prior to the last Valuation Date which coincides with or precedes the subject Determination Date but still within the five consecutive plan years ending on the subject Determination Date. This rule shall also apply to any distribution under any terminated defined benefit or defined contribution plan which, if it had not been terminated, would have been required to be included as an Aggregation Group Plan.

(f) Notwithstanding the foregoing provisions, the “Present Value” of a participant’s accrued benefit under any Aggregation Group Plan (that is either a defined benefit plan or a defined contribution plan) as of any Determination Date shall be deemed to be zero if the participant has not performed services for any Affiliated Employer at any time during the five consecutive plan years ending on the subject Determination Date.

17.1.6 Valuation Date. A “Valuation Date” refers to: (a) in the case of an Aggregation Group Plan that is a defined benefit plan (as defined in Code section 414(j)), the

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date as of which the plan actuary computes plan costs for minimum funding requirements under Code section 412 (except that, for an Aggregation Group Plan that is a defined benefit plan which has terminated, a “Valuation Date” shall be deemed to be the same as a Determination Date); and (b) in the case of an Aggregation Group Plan that is a defined contribution plan (as defined in Code section 414(i)), the date as of which plan income, gains, and/or contributions are allocated to plan accounts of participants.

17.1.7 Compensation. For purposes hereof, a participant’s “compensation” shall refer to his Compensation as defined in Section 10.4 above; except that, for purposes of Section 17.3 below, Subsection 10.4.3 above shall not apply with respect to any Plan Year which begins prior to January 1, 1998.

17.2 Effect of Top Heavy Status on Vesting. If for any Plan Year this Plan is a Top Heavy Plan, then any Participant who is a Participant at some time during such Plan Year and who ceases to be an Employee during such or any later Plan Year prior to being entitled to any other retirement benefit under the Plan, but after completing at least three years of Vesting Service (not including any years of Vesting Service completed after the last Plan Year in which this Plan is considered a Top Heavy Plan), shall still be entitled to a retirement benefit under the Plan (unless he dies before the commencement date of the benefit). The provisions of Article 7 above (concerning, e.g., the commencement date and form of payment), Article 8 above (concerning certain death benefits), Article 9 above (concerning certain “transition” and other benefits), Article 10 above (concerning maximum benefit limits and restrictions on benefits for highly paid participants), and Article 11 above (concerning certain miscellaneous benefit matters) shall apply to the payment of any retirement benefit payable under this Section 17.2 as if such retirement benefit was described in Article 6 above.

17.3 Effect of Top Heavy Status on Benefit Amounts.

17.3.1 For any Plan Year in which this Plan is considered a Top Heavy Plan, the annual amount of any retirement benefit to which a Participant becomes entitled under the Plan shall not, if the retirement benefit would be paid in the form of a Single Life Annuity which commences as of the Participant’s Normal Retirement Date (or, if later, the date as of which the benefit is to commence under the applicable provisions of Article 7 above), be less than: (a) 2% of the Participant’s average annual compensation (as defined below), multiplied by (b) the Participant’s years of service (as defined below), up to but not exceeding ten such years.

17.3.2 For purposes of this Section 17.3, a Participant’s “average annual compensation” refers to the annual average of his compensation received from all Affiliated Employers for the five consecutive calendar years which produce the highest result (excluding from consideration, however, compensation received in any Plan Year which began prior to January 1, 1984, in any calendar year which begins after the end of the last Plan Year in which the Plan is considered a Top Heavy Plan, and in any calendar year which does not end during a year of service).

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17.3.3 For purposes of this Section 17.3, except as provided below, a Participant’s “years of service” shall include each period for which the Participant is credited with a year of Vesting Service, regardless of the Participant’s level of compensation during such period and regardless of whether the Participant is employed on any particular date during such period (such as the last day of such period). Notwithstanding the foregoing, a Participant’s “years of service” for purposes of this Section 17.3 shall not include any period which began prior to January 1, 1984 or any period which is not included at least in part in a Plan Year as of which the Plan is considered a Top Heavy Plan.

17.4 Effect of Top Heavy Status on Combined Maximum Plan Limits. For any Plan Year in which this Plan is considered a Top Heavy Plan, the references to “125%” contained in Subsection 10.2.2(b) above and in Subsection 10.2.3(b) above shall be changed to “100%.” Notwithstanding the foregoing, the provisions of this Section 17.4 shall not apply, and shall no longer be effective, after December 31, 1999.

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ARTICLE 18

MISCELLANEOUS

18.1 Exclusive Benefit of Participants. All assets of the Plan shall be held in the Trust for the benefit of the Participants. In no event shall it be possible, at any time prior to the satisfaction of all liabilities with respect to the Participants, for any part of the assets of the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants or their beneficiaries (except as may be otherwise provided in Sections 12.2 and 12.3 above) or for payment of proper administrative costs and expenses of the Plan and the Trust. No person shall have any interest in or right to any part of the Trust, or any rights in, to, or under the Trust, except as and to the extent expressly provided in the Plan.

18.2 Mergers, Consolidations, and Transfers of Assets.

18.2.1 Notwithstanding any other provision hereof to the contrary, in no event shall this Plan be merged or consolidated with any other plan and trust, nor shall any of the assets or liabilities of this Plan be transferred to any other plan or trust or vice versa, unless (1) the Committee consents to such merger, consolidation, or transfer of assets as consistent with the rules set forth herein and either the Plan is amended to provide for such action or the Committee determines that such action furthers the purposes of this Plan, (2) each Participant and beneficiary would (if this 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 this Plan had then terminated), and (3) such merger, consolidation, or transfer of assets does not cause any accrued benefit, early retirement benefit, retirement-type subsidy, or optional form of benefit of a person under this Plan or the applicable other plan to be eliminated or reduced except to the extent such elimination or reduction is permitted under section 411(d)(6) of the Code or in Treasury regulations issued thereunder. In the event of any such merger, consolidation, or transfer, the requirements of clause (2) set forth in the immediately preceding sentence shall be deemed to be satisfied if the merger, consolidation, or transfer conforms to and is in accordance with regulations issued under section 414(1) of the Code.

(a) In addition, in the case of any spin-off to this Plan from another plan which is maintained by an Affiliated Employer or of any spin-off from this Plan to another plan which is maintained by an Affiliated Employer, a percentage of the excess assets (as determined under section 414(1)(2) of the Code) held in the plan from which the spin-off is made (if any) shall be allocated to each of such plans to the extent required by section 414(1)(2) of the Code.

(b) Subject to the provisions of this Subsection 18.2.1, the Committee may take action to merge or consolidate this Plan and the Trust with any other plan and trust or permit the transfer of any assets and liabilities of this Plan and the Trust to any other plan and trust or vice versa.

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18.2.2 If an Employee who is participating in the Cincinnati Bell Pension Plan, as such plan exists as of the Effective Amendment Date or is subsequently amended or renamed (for purposes of this Subsection 18.2.2, the “CBPP”), becomes a Participant in this Plan, his accrued benefit under the CBPP (and the assets related thereto) shall be transferred to and assumed by this Plan. Further, if a Participant in this Plan becomes a Participant in the CBPP, his accrued benefit under the Plan (and the assets related thereto) shall be transferred to and assumed by the CBPP. Any transfer of benefits and assets provided under this Subsection 18.2.2 shall be subject to the provisions of Subsection 18.2.1 above.

18.2.3 To the extent required under the Mandatory Portability Agreement, accrued benefits (and related assets) shall be transferred to and from Former Affiliate Plans (as such term is defined in the Mandatory Portability Agreement), provided that no accrued benefit shall be transferred to and assumed by this Plan unless assets at least equal to such accrued benefits also are transferred to this Plan. Any transfer of benefits and assets provided under this Subsection 18.2.3 shall be subject to the provisions of Subsection 18.2.1 above.

18.2.4 Effective January 1, 1999, the Accrued Benefit of each Convergys Participant and Convergys Beneficiary under this Plan shall be transferred to and assumed by the Convergys Corporation Pension Plan (for purposes of this Subsection 18.2.4, the “Convergys Plan”). In accordance with the provisions of the Employee Benefits Agreement between the Company and Convergys Corporation (for purposes of this Subsection 18.2.4 “Convergys”) dated October 14, 1998, assets shall be transferred from the Trust to the trust established in conjunction with the Convergys Plan in order to reflect the transfer of Accrued Benefits referred to in the immediately preceding sentence. By reason of the transfer of such Accrued Benefits and assets, this Plan shall cease to have any further obligation with respect to the Accrued Benefit (determined as of January 1, 1999) of any Convergys Participant or Convergys Beneficiary. For purposes of this Subsection 18.2.4, (a) a “Convergys Participant” means a Participant who, on January 1, 1999, is an employee of Convergys or any direct or indirect subsidiary of Convergys or whose last employment as an Employee prior to January 1, 1999 was with Convergys, Cincinnati Bell Information Systems Inc., MATRIXX Marketing Inc., or any direct or indirect subsidiary of any of those corporations and (b) a “Convergys Beneficiary” means the beneficiary of a Participant who died prior to January 1, 1999 and whose last employment as an Employee was with Convergys, Cincinnati Bell Information Systems Inc., MATRIXX Marketing Inc., or any direct or indirect subsidiary of any of those corporations. The transfer of benefits and assets described in this Subsection 18.2.4 shall be subject to the provisions of Subsection 18.2.1 above.

18.3 Benefits and Service for Military Service. Notwithstanding any provision of this Plan to the contrary, contributions, benefits, and service credit with respect to qualified military service shall be provided in accordance with section 414(u) of the Code.

18.4 Actions Required by Mandatory Portability Agreement. This Plan shall comply with any requirements of the Mandatory Portability Agreement that apply to it. Thus, to the extent not addressed elsewhere in this Plan, any action shall be taken under or in connection with the Plan if it is required to comply with the Mandatory Portability Agreement. However, as is

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indicated in Section 3.7 above, Employees of certain Participating Companies, including but not necessarily limited to Broadwing Communications Inc., are not subject to or affected by the Mandatory Portability Agreement while employed by any such company, and this Section 18.4 shall not give any rights under the Mandatory Portability Agreement to such Employees while employed by any such company.

18.5 Authority to Act for Company. Except as is otherwise expressly provided elsewhere in this Plan, any matter or thing to be done by the Company shall be done by the Board or the Board’s Executive Committee, except that the Board or the Board’s Executive Committee may, by resolution, delegate in writing to any officer of any Affiliated Employer any or all of its rights or duties hereunder (and any such delegation shall be deemed incorporated into and made a part of this Plan). Any such delegation shall be valid and binding upon all persons, and the persons or committee to whom 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 resolution of the Board or the Board’s Executive Committee.

18.6 Relationship of Plan to Employment Rights. The adoption and maintenance of the Plan is purely voluntary on the part of the Participating Companies and neither the adoption nor the maintenance of the Plan shall be construed as conferring any legal or equitable rights to employment on any person.

18.7 Applicable Law. The provisions of the Plan shall be administered and enforced according to applicable federal law and, only to the extent not preempted by federal law, to the laws of the State of Ohio. The Company may at any time initiate any legal action or proceedings for the determination of any question of construction which arises or for instructions. Except as required by law, in any application to, or proceeding or action in, any court with regard to the Plan, only the Company shall be a necessary party, and no Participant, beneficiary, or other person having or claiming any interest in the Plan shall be entitled to any notice or service of process. The Company may include as parties defendant any other person or persons. Any judgment entered into in such a proceeding or action shall be conclusive upon all persons claiming under the Plan.

18.8 Separability 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.

18.9 Counterparts. The Plan may be executed in any number of counterparts, each of which shall be deemed an original. The counterparts shall constitute one and the same instrument, which shall be sufficiently evidenced by any one thereof.

18.10 Headings. Headings used throughout the Plan are for convenience only and shall not be given legal significance.

18.11 Special Definitions and Tables. Any terms which are defined by use of a parenthetical contained in any provision of the Plan shall apply only to the provision in which

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such parenthetical is contained, except where otherwise indicated in such parenthetical or the context otherwise requires. In addition, any tables attached to this Plan shall constitute a part of this Plan.

18.12 Special Effective Dates. Notwithstanding the fact that this document generally amends and restates the Plan effective as of the Effective Amendment Date: (a) pursuant to the requirements of the Uruguay Round Agreements Act (which included the Retirement Protection Act of 1994), the provisions of Subsections 10.1.3, 10.1.4, and 10.1.5 above shall be effective for the period beginning on January 1, 1995 and ending on the day immediately preceding the Effective Amendment Date as well as being effective on and after the Effective Amendment Date; and (b) pursuant to the provisions of the Small Business Job Protection Act of 1996, the provisions of Section 18.3 above shall be effective for the period beginning on December 12, 1994 and ending on the day immediately preceding the Effective Amendment Date as well as being effective on and after the Effective Amendment Date.

18.13 Plan Administrator and Sponsor. The Company shall be the plan administrator and sponsor of the Plan as those terms are used in ERISA.

18.14 2001 Increase in Annuity Benefits.

18.14.1 Subject to the following provisions of this Section 18.14, the amount of each monthly payment of each retirement, disability, or death benefit that has begun being paid pursuant to this Plan in an annuity form prior to June 30, 2001 (and is still payable in an annuity form as of such date) to a Retired Participant, or to a surviving spouse of a deceased Retired Participant, shall be increased by 4% (above what the amount of such monthly payment would have been if the provisions of this Section 18.14 did not apply) beginning with the first payment of such benefit that occurs on or after June 30, 2001.

18.14.2 Notwithstanding the foregoing, in no event shall the amount of each monthly payment that occurs on or after June 30, 2001 of any benefit that is described in Subsection 18.14.1 above be less than (a) $500 when such payment is to be made to a Retired Participant or (b) $250 when such payment is to be made to a surviving spouse of a deceased Retired Participant.

18.14.3 For purposes of this Section 18.14, a “Retired Participant” means either:

(a) A Transition Group Participant (as defined in Subsection 9.2.4(d) above) who ceased to be an Employee after December 30, 1993 and prior to June 30, 2001 and who by the date he ceased to be an Employee either (i) had attained at least age 60 and had a Term of Employment of at least 10 years, (ii) had attained at least age 55 and had a Term of Employment of at least 20 years, (iii) had attained at least age 50 and had a Term of Employment of at least 25 years, or (iv) had a Term of Employment of at least 30 years (regardless of his age);

(b) A Participant (not described in paragraph (a) above) who ceased to be an Employee after December 30, 1993 and prior to June 30, 2001 and who by the date he ceased

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to be an Employee either (i) had attained at least age 60 and had a Term of Employment of at least 10 years or (ii) had a Term of Employment of at least 30 years (regardless of his age); or

(c) A Participant (not described in either paragraph (a) or (b) above) either (i) who ceased to be an Employee prior to December 31, 1993 with a service pension or a disability pension under (and as described in) the terms of the Prior Pension Plan as in effect when he ceased to be an Employee or (ii) who ceased to be an Employee after December 30, 1993 and prior to June 30, 2001 when eligible for a monthly disability benefit under Subsection 9.2.3 above.

18.14.4 Also for purposes of this Section 18.14, a Participant’s “Term of Employment” shall be determined based on the definition of such term that was contained in the Prior Pension Plan, as modified by any provision of the Plan as in effect after December 30, 1993 that granted the Participant additional years of his Term of Employment by reason of the Participant’s retirement during a specific window period described in such provision.

18.15 Non-Qualified Excess Benefit Plan. This Section 18.15 shall provide benefits separate from the benefits provided by the remainder of the Plan and is being set forth in this Plan only for the convenience of using the Plan’s terms in determining the terms and benefits of this Section 18.15. This Section 18.15 shall be deemed to be a plan that is not qualified under section 401(a) of the Code. Also, any reference in any other section in this Plan to a benefit or a payment shall not be deemed to be referring to a benefit or payment made under this Section 18.15.

18.15.1 To the extent that the benefits otherwise payable to a Participant under the Plan are limited became of a limitation contained in Subsection 5.7.5 above, Section 10.1, 10.2, or 10.3 above, or Subsection 10.4.4 above, the value of such excess amount shall be payable in fifteen annual installments (or, if less, a number of installments equal to the result, rounded up to the nearest whole number, obtained by dividing the present value of such excess benefit on the date preceding the date on which his excess benefit commences by $25,000) commencing on the earlier of (a) the day as of which the Participant’s retirement benefit under the Plan commences (or, if later, the day following the date on which the Participant ceases to be an Employee) or (b) the day following the date on which the Participant’s death occurs.

18.15.2 Notwithstanding the foregoing, if the present value of the Participant’s excess benefit under this Section 18.15 is in excess of $25,000, the amount of the first installment of such excess benefit shall be increased, and the amount of the last installment of such excess benefit shall be decreased, by the amount of the Participant’s FICA Liability (or, if less, by the amount by which the present value of the Participant’s excess benefit exceeds $25,000). For purposes of the preceding sentence, “FICA Liability” means the Participant’s share of the Social Security and Medicare taxes applicable to the Participant’s excess benefit.

18.15.3 Each excess benefit installment payable under this Section 18.15 after the first installment shall be credited with assumed interest, at the rate called for under Subsection 5.5.2 or 5.5.3 above, as the case may be, for the period from the date as of which his excess benefit commences to the installment payment date.

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18.15.4 If the Participant dies prior to receiving all installments of his excess benefit under this Section 18.15, the remaining installments shall be paid, when due, to his designated beneficiary (or, if none, to his estate).

18.15.5 All benefits under this Section 18.15 shall be paid from the general assets of the Participating Company which last employed the Participant.

18.15.6 Notwithstanding the foregoing, no benefits shall be payable under this Section 18.15 to or with respect to a Participant who is also participating in the Cincinnati Bell Inc. Pension Program (which is a retirement plan that is not qualified as a plan under section 401(a) of the Code), as such program exists as of the Effective Amendment Date or is thereafter amended or renamed.

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SIGNATURE PAGE

IN WITNESS WHEREOF, Broadwing Inc., the sponsor of the Plan, has hereunto caused its name to be subscribed to this complete amendment and restatement of the Plan on the 27^th day of February, 2002, but, except as is otherwise set forth in the Plan, effective for all purposes as of January 1, 1997.

BROADWING INC.
By:	/s/ Jeffery C. Smith
	Jeffery C. Smith
Title:	Chief Human Resources Officer
	General Counsel and Corporate Secretary

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TABLE 1

SINGLE SUM PAYMENT FACTORS

Payment Age	Single Sum Payment Factor*
20	1.660625
21	1.727050
22	1.796132
23	1.867977
24	1.942696
25	2.020404
26	2.101220
27	2.185269
28	2.272679
29	2.363587
30	2.458130
31	2.556455
32	2.658713
33	2.765062
34	2.875864
35	2.990691
36	3.110319
37	3.234731
38	3.364121
39	3.498686
40	3.638633
41	3.784178
42	3.935545
43	4.092967
44	4.256686
45	4.426953
46	4.604032
47	4.788193
48	4.979720
49	5.178909
50	5.386066
51	5.601508
52	5.825569
53	6.058591
54	6.300935
55	6.552972
56	6.815091
57	7.087695
58	7.371203
59	7.666051
60	7.972693
61	8.291601
62	8.623265
63	8.968195
64	9.326923
65 and over	9.700000

* The above table shows payment ages only in whole years. If, however, the applicable payment age of a Participant (in whole years and months) is not an age equal to a whole number of years shown in the table with zero remaining whole months, then the single sum payment factor

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applicable to such payment age shall be determined by interpolating between the factors applicable to the next higher and next lower ages set forth in the table.

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TABLE 2

EARLY COMMENCEMENT REDUCTION FACTORS

Payment Age	Early Commencement Reduction Factor*
20	0.102508
21	0.107604
22	0.112964
23	0.118602
24	0.124532
25	0.130770
26	0.137335
27	0.144242
28	0.151512
29	0.159164
30	0.167220
31	0.175701
32	0.184633
33	0.194039
34	0.203948
35	0.214386
36	0.225385
37	0.236977
38	0.249194
39	0.262074
40	0.275654
41	0.289975
42	0.305081
43	0.321017
44	0.337832
45	0.355579
46	0.374312
47	0.394090
48	0.414977
49	0.437039
50	0.460347
51	0.484979
52	0.511015
53	0.538541
54	0.567652
55	0.598445
56	0.631027
57	0.665511
58	0.702019
59	0.744277
60	0.789376
61	0.837535
62	0.888996
63	0.924556
64	0.961538
65	1.000000

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* The above table shows payment ages only in whole years. If, however, the applicable payment age of a Participant (in whole years and months) is not an age equal to a whole number of years shown in the table with zero remaining whole months, then the early commencement reduction factor applicable to such payment age shall be determined by interpolating between the factors applicable to the next higher and next lower ages set forth in the table.

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EX-10.III.A.17.1

Exhibit (10)(iii)(A)(17.1)

AMENDMENT TO

BROADWING PENSION PLAN

This document (“this Amendment” or “the Amendment”) amends the Broadwing Pension Plan (the “Plan”) in the manner and for the purposes that are described below.

Preamble

1. Adoption and Effective Date of Amendment. This Amendment is adopted to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) and Revenue Ruling 2001-62. This Amendment is intended as good faith compliance with the requirements of EGTRRA and Revenue Ruling 2001-62 and is to be construed in accordance with EGTRRA (and guidance issued thereunder) and Revenue Ruling 2001-62. Except as otherwise provided, this amendment shall be effective as of the first day of the Plan’s first plan year beginning after December 31, 2001.

2. Supersession of Inconsistent Provisions. This Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Amendment.

3. Definitions. Except as is otherwise provided in this Amendment or unless the context otherwise requires, any terms that are capitalized in this Amendment and that are defined in the Plan shall have the same meanings as they have under the Plan.

Section A. Limitations on Benefits

1. Effective Date. This section A, and the Plan changes made under this section A, shall be effective as of January 1, 2002 and for the Plan’s limitation years (as defined in Subsection 10.1.2 of the Plan) ending after December 31, 2001.

2. Effect on Participants. Benefit increases resulting from the increase in the limitations of section 415(b) of the Code, as are reflected in the Plan changes made under paragraph 3 of this section A, shall be provided to all Participants who have at least one Hour of Service on or after the first day of the first limitation year ending after December 31, 2001.

3. Plan Changes. In order to reflect the increase in the limitations of section 415(b) of the Code permitted by EGTRRA, Section 10.1 of the Plan is amended in its entirety to read as follows:

10.1 Maximum Plan Benefit – Separate Limitation as to This Plan.

10.1.1 General Rules. Subject to the other provisions of this Section 10.1 but notwithstanding any other provision of this Plan to the contrary, in no event shall the annual amount of a Participant’s retirement benefit under this

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Plan, when expressed in the form of a Single Life Annuity, exceed the maximum permissible benefit. For purposes of this Section 10.1 and subject to the adjustments set forth in the following provisions of this Section 10.1, the “maximum permissible benefit” is the lesser of:

(a) The defined benefit dollar limitation. For purposes of this Section 10.1, the “defined benefit dollar limitation” is $160,000, as adjusted, effective January 1 of each year, under section 415(d) of the Code in such manner as the Secretary of the Treasury or his delegate shall prescribe. A limitation as adjusted under Code section 415(d) shall apply to limitation years ending with or within the calendar year for which the adjustment applies; or

(b) The defined benefit compensation limitation. For purposes of this Section 10.1, the “defined benefit compensation limitation” is 100% of the Participant’s average annual compensation received during the three consecutive calendar years which produce the highest dollar result.

10.1.2 Necessary Terms. For purposes of the restrictions and rules set forth in this Section 10.1, the following terms shall apply:

(a) A Participant’s “compensation” shall refer to his Compensation as defined in Section 10.4 below, as modified pursuant to the provisions of Section 18.16 below; and

(b) The “limitation year” for purposes of the restrictions under this Section 10.1 shall be the Plan Year.

10.1.3 Procedures for Applying Limitation. The determination of whether a Participant’s retirement benefit under the Plan exceeds the maximum permissible benefit shall be made by comparing the annual amount of the equivalent Single Life Annuity determined in Step 1 below with the lesser of the age-adjusted defined benefit dollar limitation determined in Step 2 below and the defined benefit compensation limitation determined in Step 3 below.

(a) Step 1: This Step 1 determines the annual amount of a Single Life Annuity (for purposes of this Subsection 10.1.3, the “equivalent Single Life Annuity”) that, if it was paid to the Participant and commenced as of the commencement date of the Participant’s actual retirement benefit under the Plan (for purposes of this Subsection 10.1.3, the “actual commencement date”), would be: (1) when the form of the Participant’s actual retirement benefit under the Plan is a Single Life Annuity or a Qualified Joint and Survivor Annuity, equal to the annual amount that would apply to the Participant’s actual retirement benefit under the Plan if the provisions of this Section 10.1 were disregarded; or (2) when the form of the Participant’s actual retirement benefit under the Plan is a single sum payment (which is the only form of benefit other than a Single Life

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Annuity or Qualified Joint and Survivor Annuity available under the Plan), equal to the annual amount that makes the equivalent Single Life Annuity actuarially equivalent to the Participant’s actual retirement benefit under the Plan determined as if the provisions of this Section 10.1 did not apply. The actuarial assumptions used to determine actuarial equivalence for purposes of clause (2) of the immediately preceding sentence shall be either (1) the factor derived by dividing the highest available single sum amount of the Participant’s retirement benefit under the Plan if paid as of the actual commencement date by the highest monthly amount of the Participant’s retirement benefit if paid in a Single Life Annuity that commences as of the actual commencement date (with both such amounts determined without regard to the provisions of this Article 10 or the requirements of section 415 of the Code) or (2) the combination of the applicable interest rate and the applicable mortality assumption (as such terms are defined in Subsection 10.1.4 below), whichever combination of assumptions produces the greater annual amount for the equivalent Single Life Annuity.

(b) Step 2: This Step 2 determines the defined benefit dollar limitation that applies at the actual commencement date (for purposes of this Subsection 10.1.3, the “age-adjusted defined benefit dollar limitation”). In determining the age-adjusted defined benefit dollar limitation at any date under the following provisions of this Step 2, such age-adjusted defined benefit dollar limitation shall be deemed to reflect a hypothetical annual amount of the Participant’s retirement benefit under the Plan when paid in the form of a Single Life Annuity that commenced as of such date.

(i) If the actual commencement date occurs before the date the Participant first attains age 65 and on or after the date on which the Participant first attains age 62, the age-adjusted defined benefit dollar limitation is equal to the defined benefit dollar limitation set forth in Subsection 10.1.l(a) above (as adjusted for the limitation year that includes the actual commencement date).

(ii) If the actual commencement date occurs before the date on which the Participant first attains age 62, then the age-adjusted defined benefit dollar limitation is equal to the result obtained by reducing, on an actuarially equivalent basis, the age-adjusted defined benefit dollar limitation that would have applied had the actual commencement date been the date on which the Participant first attains age 62. The actuarially equivalent basis used to determine such reduced age-adjusted defined benefit dollar limitation shall be either (1) the factor derived by dividing the highest monthly amount of the Participant’s retirement benefit under the Plan if paid in a Single Life Annuity that commences as of the actual commencement date by the highest monthly amount of the Participant’s retirement benefit under the Plan if paid in a Single Life Annuity that commences upon the Participant’s attainment of age 62 (with both such amounts determined without regard to the provisions of this Article 10

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or the requirements of section 415 of the Code) or (2) the combination of an interest rate assumption of 5% per annum and the applicable mortality assumption (as such term is defined in Subsection 10.1.4 below), whichever combination of assumptions produces the lesser age-adjusted defined benefit dollar limitation. Notwithstanding the foregoing provisions of this subparagraph (ii), any adjustment in the dollar limitation otherwise required to apply to a Participant’s retirement benefit under the provisions of this Step 2 shall not reflect any mortality decrement to the extent that the benefit will not be forfeited upon the death of the Participant.

(iii) If the actual commencement date occurs after the date on which the Participant first attains age 65, then the age-adjusted defined benefit dollar limitation is equal to the result obtained by increasing, on an actuarially equivalent basis, the age-adjusted defined benefit dollar limitation that would have applied had the actual commencement date been the date on which the Participant first attains age 65. The actuarially equivalent basis used to determine such increased age-adjusted dollar limit shall be either (1) the factor derived by dividing the highest monthly amount of the Participant’s retirement benefit under the Plan if paid in a Single Life Annuity that commences as of the actual commencement date by the highest monthly amount of the Participant’s retirement benefit under the Plan if paid in a Single Life Annuity that commences upon the Participant’s attainment of age 65 (with both such amounts determined without regard to the provisions of this Article 10 or the requirements of section 415 of the Code) or (2) the combination of an interest rate assumption of 5% per annum and the applicable mortality assumption (as such term is defined in Subsection 10.1.4 below), whichever combination of assumptions produces the lesser age-adjusted defined benefit dollar limitation. Notwithstanding the foregoing provisions of this subparagraph (iii), any adjustment in the dollar limitation otherwise required to apply to a Participant’s retirement benefit under the provisions of this Step 2 shall not reflect any mortality decrement to the extent that the benefit will not be forfeited upon the death of the Participant between the Participant’s attainment of age 65 and the actual commencement date.

(c) Step 3: This Step 3 determines the defined benefit compensation limitation that applies to the Participant. The defined benefit compensation limitation is equal to the amount set forth in Subsection 10.1.1(b) above that applies to the Participant.

The annual amount of the Participant’s retirement benefit under the Plan, when expressed in the form of a Single Life Annuity, shall be reduced to the extent necessary so that, if such reduction would be deemed to apply under the provisions of the Plan that do not include the provisions of this Section 10.1, the annual amount of the equivalent Single Life Annuity determined under Step 1 above would not exceed the lesser of the age-adjusted defined benefit dollar

4

limitation determined under Step 2 above and the defined benefit compensation limitation determined under Step 3 above.

10.1.4 Applicable Interest Rate and Applicable Mortality Assumption.

(a) For purposes of this Section 10.1, the “applicable interest rate” means, with respect to adjusting any benefit or limitation applicable to any single sum form of benefit, the annual interest rate on 30-year Treasury securities for the fifth calendar month which precedes the first calendar month included in the Plan Year in which the applicable benefit is paid (as specified for purposes of defined benefit pension plans by the Secretary of the Treasury or his delegate for that month in revenue rulings, notices, or other guidance).

(b) Also for purposes of this Section 10.1, the “applicable mortality assumption” means, with respect to adjusting any benefit or limitation of a retirement benefit, an appropriate mortality assumption based on the mortality table prescribed by the Secretary of the Treasury or his delegate under section 417(e)(3) of the Code as of the date as of which the applicable retirement benefit begins to be paid or is paid in its entirety. Such table is based on the prevailing commissioners’ standard table (described in section 807(d)(5)(A) of the Code) used to determine reserves for group annuity contracts (without regard to any other subparagraph of section 807(d)(5) of the Code).

10.1.5 Reduction for Participation or Service of Less Than Ten Years.

(a) In the case of a Participant who has less than ten years of participation in this Plan when his retirement benefit commences, the defined benefit dollar limitation shall be adjusted for all purposes of this Section 10.1 (including for purposes of determining the age-adjusted defined benefit dollar limitation described in Step 2 of Subsection 10.1.3 above) so as to be equal to the defined benefit dollar limitation (determined without regard to this Subsection 10.1.5) multiplied by a fraction. The numerator of such fraction is the Participant’s years (and any fraction thereof) of participation in the Plan at the time his benefit commences, and its denominator is ten.

(b) Further, in the case of a Participant who has less than ten years of Vesting Service, the defined benefit compensation limitation shall be adjusted for all purposes of this Section 10.1 (including for purposes of Step 3 of Subsection 10.1.3 above) so as to be equal to such limitation (determined without regard to this Subsection 10.1.5) multiplied by a fraction. The numerator of such fraction is the Participant’s years of Vesting Service, and its denominator is ten.

5

(c) In no event shall the provisions of paragraph (a) or (b) above reduce the defined benefit dollar limitation or the defined benefit compensation limitation to an amount less than 1/10 of such limitations (determined without regard to this Subsection 10.1.5).

10.1.6 Preservation of Current Accrued Benefit. If a Participant’s current accrued benefit under the Plan as of the first day of the first limitation year beginning on or after January 1, 1987 exceeds the benefit limits set forth in the foregoing provisions of this Section 10.1, then the defined benefit dollar limitation referred to in Subsection 10.1.1(a) above shall be deemed to be not less than such current accrued benefit. For purposes hereof, the Participant’s “current accrued benefit” means his Accrued Benefit under the Plan, determined as of the close of the last limitation year beginning before January 1, 1987 but disregarding any change in the terms and conditions of the Plan after May 5, 1986 and any cost of living adjustment occurring after May 5, 1986.

10.1.7 Combining of Plans. If any other defined benefit plans (as defined in section 414(j) of the Code) in addition to this Plan are maintained by any Affiliated Employer, then the limitations set forth in this Section 10.1 shall be applied as if this Plan and such other defined benefit plans are a single plan. If any adjustment in a Participant’s retirement benefit is required by this Section 10.1, such adjustment shall when necessary be made to the extent possible under the other defined benefit plan or plans in which the Participant actively participated (i.e., performed service which is taken into consideration in determining the amount of his benefit under the benefit formulas of the other plan or plans) at a later point in time (that occurs by the end of the applicable limitation year) than the latest point in time (that occurs by the end of the applicable limitation year) at which he actively participated in this Plan (provided such other plan or plans provide for such adjustment in such situation). To the extent still necessary, such adjustment shall be made under this Plan.

Section B. Increase in Annual Compensation Limit

1. Effective Date. This section B, and the Plan changes made under this section B, shall be effective as of January 1, 2002 and for Plan Years, and limitation years (as defined in Subsection 10.1.2 of the Plan), beginning after December 31, 2001.

2. Plan Changes. In order to reflect the increase in the annual compensation limit of section 401(a)(17) of the Code permitted by EGTRRA, a new Section 18.16 reading as follows is added to the Plan immediately after Plan Section 18.15:

6

18.16 Increase in Compensation Limit for Periods Beginning After December 31, 2001.

18.16.1 Increase in Limit. Notwithstanding any other provision of the Plan to the contrary (and in lieu of any maximum annual compensation limit set forth in any other provision of the Plan that by its terms or its context relates to the requirements of section 401(a)(17) of the Code), the annual compensation of each Participant taken into account in determining benefit accruals under the Plan in any Plan Year beginning after December 31, 2001 shall not exceed $200,000. Annual compensation means any compensation taken into account under the Plan for a Plan Year or any other 12-month period over which compensation is otherwise determined under the Plan (for purposes of this Section 18.16, a “determination period”), including but not limited to Covered Compensation for any determination period. Notwithstanding the foregoing, for purposes of determining benefit accruals in a Plan Year beginning after December 31, 2001, annual compensation for any determination period that begins prior to January 1, 2002 shall be limited as provided in Subsection 18.16.3 below.

18.16.2 Cost-of-Living Adjustment. The $200,000 limit on annual compensation in Subsection 18.16.1 above shall be adjusted for cost-of- living increases in accordance with section 401(a)(17)(B) of the Code. The cost- of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year.

18.16.3 Compensation Limit for Prior Determination Periods. In determining benefit accruals in Plan Years beginning after December 31, 2001, the annual compensation limit in Subsection 18.16.1 above for determination periods that begin before January 1, 2002 shall be: $150,000 for any determination period that begins in 1996 or an earlier calendar year; $160,000 for any determination period that begins in 1997, 1998, or 1999; and $170,000 for any determination period that begins in 2000 or 2001.

Section C. Modification of Top Heavy Rules

1. Effective Date. This section C, and the Plan changes made under this section C, shall be effective as of January 1, 2002 and apply for purposes of determining whether the Plan is a top heavy plan under section 416(g) of the Code for Plan Years beginning after December 31, 2001 and whether the Plan satisfies the minimum benefit requirements of section 416(c) of the Code for such years.

2. Plan Changes. In order to reflect the modification of the top heavy rules of section 416 of the Code permitted by EGTRRA, Article 17 of the Plan is amended in its entirety to read as follows:

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ARTICLE 17

TOP HEAVY PROVISIONS

17.1 Determination of Whether Plan Is Top Heavy. For purposes of this Article 17, this Plan shall be considered a “Top Heavy Plan” for any Plan Year beginning after December 31, 2001 (for purposes of the first two sentences of this Section 17.1, the “subject Plan Year”) if, and only if, (1) this Plan is an Aggregation Group Plan during at least part of the subject Plan Year, and (2) the ratio of the total Present Value of all accrued benefits of Key Employees under all Aggregation Group Plans to the total Present Value of all accrued benefits of both Key Employees and Non-Key Employees under all Aggregation Group Plans equals or exceeds 0.6. All calculations called for in clauses (1) and (2) above with respect to this Plan and with respect to the subject Plan Year shall be made as of this Plan’s Determination Date which is applicable to the subject Plan Year, and all calculations called for under clause (2) above with respect to any Aggregation Group Plan other than this Plan and with respect to the subject Plan Year shall be made as of that plan’s Determination Date which is applicable to such plan’s plan year that has its Determination Date fall within the same calendar year as the Determination Date being used by this Plan for the subject Plan Year. For the purpose of this Article 17, the following terms shall have the meanings hereinafter set forth:

17.1.1 Aggregation Group Plan. “Aggregation Group Plan” refers, with respect to any plan year of such plan, to a plan (1) which qualifies under Code section 401(a), (2) which is maintained by an Affiliated Employer, and (3) which either includes a Key Employee as a participant (determined as of the Determination Date applicable to such plan year) or allows another plan qualified under Code section 401(a), maintained by an Affiliated Employer, and so including at least one Key Employee as a participant to meet the requirements of section 401(a)(4) or section 410(b) of the Code. In addition, if the Company so decides, any plan which meets clauses (1) and (2) but not (3) of the immediately preceding sentence shall be treated as an “Aggregation Group Plan” with respect to any plan year of such plan if the group of such plan and all other Aggregation Group Plans will meet the requirements of section 401(a)(4) and 410(b) of the Code with such plan being taken into account.

17.1.2 Determination Date. The “Determination Date” which is applicable to any plan year of an Aggregation Group Plan refers to the last day of the immediately preceding plan year (except that, for the first plan year of such a plan, the “Determination Date” applicable to such plan year shall be the last day of such first plan year).

17.1.3 Key Employee. With respect to any Aggregation Group Plan and as of any Determination Date that applies to a plan year of such plan, a

8

“Key Employee” refers to a person who at any time during the plan year ending on the subject Determination Date is:

(a) An officer of an Affiliated Employer, provided such person receives compensation from the Affiliated Employers of an amount greater than $130,000 (as adjusted under section 416(i) of the Code for plan years beginning after December 31, 2002) for the applicable plan year. For this purpose, no more than 50 employees (or, if less, the greater of three or 10% of the employees of all of the Affiliated Employers) shall be treated as officers;

(b) A 5% or more owner of any Affiliated Employer; or

(c) A 1% or more owner of any Affiliated Employer who receives compensation of $150,000 or more from the Affiliated Employers for the applicable plan year.

For purposes of paragraphs (b) and (c) above, a person is considered to own 5% or 1%, as the case may be, of an Affiliated Employer if he owns (or is considered as owning within the meaning of Code section 318, except that subparagraph (C) of Code section 318(a)(2) shall be applied by substituting “5%” for “50%”) at least 5% or 1%, as the case may be, of either the outstanding stock or the voting power of all stock of the Affiliated Employer (or, if the Affiliated Employer is not a corporation, at least 5% or 1%, as the case may be, of the capital or profits interest in the Affiliated Employer). Further, for purposes of this entire Subsection 17.1.3, the term “Key Employee” includes any person who is deceased as of the subject Determination Date but who when alive had been a Key Employee at any time during the plan year ending on the subject Determination Date, and any accrued benefit payable to his beneficiary shall be deemed to be the accrued benefit of such person.

17.1.4 Non-Key Employee. With respect to any Aggregation Group Plan and as of any Determination Date that applies to a plan year of such plan, a “Non-Key Employee” refers to a person who at any time during the plan year ending on the subject Determination Date is an employee of an Affiliated Employer and who has never been considered a Key Employee as of such or any earlier Determination Date. Further, for purposes of this Subsection 17.1.4, the term “Non-Key Employee” includes any person who is deceased as of the subject Determination Date and who when alive had been an employee of an Affiliated Employer at any time during the plan year ending on the subject Determination Date, but had not been a Key Employee as of the subject or any earlier Determination Date, and any accrued benefit payable to his beneficiary shall be deemed to be the accrued benefit of such person.

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17.1.5 Present Value of Accrued Benefits.

(a) For any Aggregation Group Plan which is a defined benefit plan (as defined in Code section 414(j)), including such a plan which has been terminated, the “Present Value” of a participant’s accrued benefit, as determined as of any Determination Date, refers to the single sum value (calculated as of the latest Valuation Date which coincides with or precedes such Determination Date and in accordance with the actuarial assumptions referred to in the next sentence) of the monthly retirement or termination benefit which the participant had accrued under such plan to such Valuation Date. For this purpose, the actuarial assumptions to be used shall be the same actuarial assumptions used under the Plan for valuing single sum forms of benefit which are in effect on the latest Valuation Date which coincides with or precedes such Determination Date. Also, for this purpose, such accrued monthly retirement or termination benefit is calculated as if it was to first commence as of the first day of the month next following the month the participant first attains his normal retirement age under such plan (or, if such normal retirement age had already been attained, as of the first day of the month next following the month in which occurs such Valuation Date) and as if it was to be paid in the form of a single life annuity. Further, the accrued benefit of any participant under such plan (other than a participant who is a Key Employee) shall be determined under the method which is used for accrual purposes for all defined benefit plans of the Affiliated Employers (or, if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rates permitted under the fractional rule of section 411(b)(1)(C) of the Code). In addition, the dollar amount of any distributions made from the plan (including the value of any annuity contract distributed from the plan) actually paid to such participant prior to the subject Valuation Date but still within the plan year ending on the subject Determination Date shall be added in calculating such “Present Value” of the participant’s accrued benefit.

(b) For any Aggregation Group Plan which is a defined contribution plan (as defined in Code section 414(i)), including such a plan which has been terminated, the “Present Value” of a participant’s accrued benefit, as determined as of any Determination Date, refers to the sum of (1) the total of the participant’s account balances under the plan (valued as of the latest Valuation Date which coincides with or precedes such Determination Date), and (2) an adjustment for contributions due as of such Determination Date. In the case of a profit sharing or stock bonus plan, the adjustment in clause (2) above shall be the amount of the contributions, if any, actually made after the subject Valuation Date but on or before such Determination Date (and, in the case of the first plan year, any amounts contributed to the plan after such Determination Date which are allocated as of a date in such first plan year). In the case of a money purchase pension or target benefit plan, the adjustment in clause (2) above shall be the amount of the contributions, if any, which are either actually made or due to be made after the subject Valuation Date but before the expiration of the period

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allowed for meeting minimum funding requirements under Code section 412 for the plan year which includes the subject Determination Date. In addition, the value of any distributions made from the plan (including the value of any annuity contract distributed from the plan) actually paid to such participant prior to the subject Valuation Date but still within the plan year ending on the subject Determination Date shall be added in calculating such “Present Value” of the participant’s accrued benefit.

(c) In the case of any rollover (as defined in the appropriate provisions of the Code), or a direct plan-to-plan transfer, to or from a subject Aggregation Group Plan, which rollover or transfer is both initiated by a participant and made between a plan maintained by an Affiliated Employer and a plan maintained by an employer other than an Affiliated Employer, (1) the Aggregation Group Plan, if it is the plan from which the rollover or transfer is made, shall count the amount of the rollover or transfer as a distribution made as of the date such amount is distributed by such plan in determining the “Present Value” of the participant’s accrued benefit under paragraph (a) or (b) above, as applicable, and (2) the Aggregation Group Plan, if it is the plan to which the rollover or transfer is made, shall not so consider the amount of the rollover or transfer as part of the participant’s accrued benefit in determining such “Present Value” if such rollover or transfer was or is accepted after December 31, 1983 and shall so consider such amount if such rollover or transfer was accepted prior to January 1, 1984.

(d) In the case of any rollover (as defined in the appropriate provisions of the Code), or a direct plan-to-plan transfer, to or from a subject Aggregation Group Plan, which rollover or transfer is not described in paragraph (c) above, (1) the subject Aggregation Group Plan, if it is the plan from which the rollover or transfer is made, shall not consider the amount of the rollover or transfer as part of the participant’s accrued benefit in determining the “Present Value” thereof under paragraph (a) or (b) above, as applicable, and (2) the subject Aggregation Group Plan, if it is the plan to which the rollover or transfer is made, shall consider the amount of the rollover or transfer when made as part of the participant’s accrued benefit in determining such “Present Value.”

(e) As is noted in paragraphs (a) and (b) above, the “Present Value” of any participant’s accrued benefit under any Aggregation Group Plan (that is either a defined benefit plan or a defined contribution plan) as of any Determination Date includes the value of any distribution from such a plan actually paid to such participant prior to the last Valuation Date which coincides with or precedes such Determination Date but still within the plan year ending on the subject Determination Date. This rule shall also apply to any distribution under any terminated defined benefit or defined contribution plan which, if it had not been terminated, would have been required to be included as an Aggregation Group Plan.

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(f) Notwithstanding the foregoing provisions, the “Present Value” of a participant’s accrued benefit under any Aggregation Group Plan (that is either a defined benefit plan or a defined contribution plan) as of any Determination Date shall be deemed to be zero if the participant has not performed services for any Affiliated Employer at any time during the plan year ending on the subject Determination Date.

17.1.6 Valuation Date. A “Valuation Date” refers to: (1) in the case of an Aggregation Group Plan that is a defined benefit plan (as defined in Code section 414(j)), the date as of which the plan actuary computes plan costs for minimum funding requirements under Code section 412 (except that, for an Aggregation Group Plan that is a defined benefit plan which has terminated, a “Valuation Date” shall be deemed to be the same as a Determination Date); and (2) in the case of an Aggregation Group Plan that is a defined contribution plan (as defined in Code section 414(i)), the date as of which plan income, gains, and/or contributions are allocated to plan accounts of participants.

17.1.7 Compensation. For purposes hereof, a participant’s “compensation” shall refer to his Compensation as defined in Section 10.4 above, as modified pursuant to the provisions of Section 18.16 below.

17.2 Effect of Top Heavy Status on Vesting. If for any Plan Year this Plan is a Top Heavy Plan, then any Participant who is a Participant at some time during such Plan Year and who ceases to be an Employee during such or any later Plan Year prior to being entitled to any other retirement benefit under the Plan, but after completing at least three years of Vesting Service (not including any years of Vesting Service completed after the last Plan Year in which this Plan is considered a Top Heavy Plan), shall still be entitled to a retirement benefit under the Plan (unless he dies before the commencement date of the benefit). The provisions of Article 7 above (concerning, e.g., the commencement date and form of payment), Article 8 above (concerning certain death benefits), Article 9 above (concerning certain “transition” and other benefits), Article 10 above (concerning maximum benefit limits and restrictions on benefits for highly paid participants), and Article 11 above (concerning certain miscellaneous benefit matters) shall apply to the payment of any retirement benefit payable under this Section 17.2 as if such retirement benefit was described in Article 6 above.

17.3 Effect of Top Heavy Status on Benefit Amounts.

17.3.1 For any Plan Year in which this Plan is considered a Top Heavy Plan, the annual amount (if paid in the form of an annuity) or the single sum amount (if paid in the form of a single sum payment) of any retirement benefit to which a Participant becomes entitled under the Plan shall not: (1) if paid in the form of a Single Life Annuity that commences as of the later of the

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Participant’s Normal Retirement Date or the date as of which the Participant’s retirement benefit under the Plan commences (for purposes of this Subsection 17.3.1, the Participant’s “normal commencing Single Life Annuity”), be less than the product obtained by multiplying (x) 2% of the Participant’s average annual compensation (as defined below) by (y) the Participant’s years of service (as defined below), up to but not exceeding ten such years; and (2) if paid in any form of benefit and/or as of any commencement date other than the form of benefit and commencement date that apply under a normal commencing Single Life Annuity, be less than the annual amount or single sum amount (as appropriate) that makes the Participant’s retirement benefit that is paid in such other form and/or as of such other commencement date actuarially equivalent to the minimum retirement benefit that is described in clause (1) above when such retirement benefit is paid in the form of a normal commencing Single Life Annuity.

17.3.2 For purposes of this Section 17.3, a Participant’s “average annual compensation” refers to the annual average of his compensation received from the Affiliated Employers for the five consecutive calendar years which produce the highest result (excluding from consideration, however, compensation received in any Plan Year which began prior to January 1, 1984, in any calendar year which begins after the end of the last Plan Year in which the Plan is considered a Top Heavy Plan, and in any calendar year which does not end during a year of service).

17.3.3 For purposes of this Section 17.3, except as provided below, a Participant’s “years of service” shall include each period for which the Participant is credited with a year of Vesting Service, regardless of the Participant’s level of compensation during such period and regardless of whether the Participant is employed on any particular date during such period (such as the last day of such period). Notwithstanding the foregoing, a Participant’s “years of service” for purposes of this Section 17.3 shall not include any period which began prior to January 1, 1984, any period which is not included at least in part in a Plan Year as of which the Plan is considered a Top Heavy Plan, or any period which occurs during a Plan Year when the Plan benefits (within the meaning of section 410(b) of the Code) no Key Employee or former Key Employee.

Section D. Direct Rollovers of Plan Distributions

1. Effective Date. This section D, and the Plan changes made under this section D, shall be effective as of January 1, 2002 and apply to distributions made under the Plan after December 31, 2001.

2. Plan Changes. In order to reflect the modification of the direct rollover requirements of section 401(a)(31) of the Code permitted by EGTRRA, Section 11.8 of the Plan is amended in its entirety to read as follows:

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11.8 Direct Rollover Distributions.

11.8.1 Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this Section 11.8, a distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an eligible rollover distribution otherwise payable to him paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

11.8.2 For purposes of this Section 11.8, the following terms shall have the meanings indicated below:

(a) An “eligible rollover distribution” means, with respect to any distributee, any distribution of all or any portion of the entire benefit otherwise payable under the Plan to the distributee, except that an eligible rollover distribution does not include: (1) 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; or (2) any distribution to the extent such distribution is required to be made under section 401(a)(9) of the Code. For purposes of this paragraph (a), a portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income; however, such portion may be paid only to an individual retirement account or annuity described in section 408(a) or (b) of the Code or to a qualified defined contribution plan described in section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

(b) An “eligible retirement plan” means, with respect to any distributee’s eligible rollover distribution, 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, an annuity contract described in section 403(b) of the Code, an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan, or a qualified trust described in section 401(a) of the Code, that accepts the distributee’s eligible rollover distribution. This definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in section 206(d)(3) of ERISA and section 414(p) of the Code.

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(c) A “distributee” means a Participant. In addition, a Participant’s surviving spouse, or a Participant’s spouse or former spouse who is the alternate payee under a qualified domestic relations order (as defined in section 206(d)(3) of ERISA and section 414(p) of the Code), is a distributee with regard to any interest of the Participant which becomes payable under the Plan to such spouse or former spouse.

(d) A “direct rollover” means, with respect to any distributee, a payment by the Plan to an eligible retirement plan specified by the distributee.

11.8.3 The Committee may prescribe reasonable rules in order to provide for the Plan to meet the provisions of this Section 11.8. Any such rules shall comply with the provisions of Code section 401(a)(31) and any applicable Treasury regulations which are issued with respect to the direct rollover requirements. For example, subject to meeting the provisions of Code section 401(a)(31) and applicable Treasury regulations, the Committee may: (1) prescribe the specific manner in which a direct rollover shall be made by the Plan, whether by wire transfer to the eligible retirement plan, by mailing a check to the eligible retirement plan, by providing the distributee a check made payable to the eligible retirement plan and directing the distributee to deliver the check to the eligible retirement plan, and/or by some other method; (2) prohibit any direct rollover of any eligible rollover distributions payable during a calendar year to a distributee when the total of such distributions is less than $200; or (3) refuse to make a direct rollover of an eligible rollover distribution to more than one eligible retirement plan.

Section E. Change in Applicable Mortality Table

1. Effective Date. This section E, and the Plan changes made under this section E, shall be effective as of December 31, 2002 and apply to Plan distributions of benefits with commencement dates (as defined in Section 11.3 of the Plan) on or after December 31, 2002.

2. Plan Changes. In order to reflect the change in the applicable mortality table prescribed by Revenue Ruling 2001-62, a new Section 18.17 reading as follows is added to the Plan immediately after Plan Section 18.16:

18.17 Change in Applicable Mortality Table for Distributions Commencing On or After December 31, 2002.

18.17.1 Effective Date. This section shall be effective as of December 31, 2002 and for Plan benefits with commencement dates on or after such date.

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18.17.2 Notwithstanding any other Plan provisions to the contrary, effective as of the date determined under Subsection 18.17.1 above and for Plan benefits with commencement dates on or after such date, the applicable mortality table defined in Subsection 10.1.4(b) above when used for all purposes described in Section 10.1 above shall be deemed to be the table prescribed in Revenue Ruling 2001 -62.

18.17.3 Notwithstanding any other Plan provisions to the contrary, effective as of the date determined under Subsection 18.17.1 above and for Plan benefits with commencement dates on or after such date, the applicable mortality table defined in Subsection 11.5.4 above when used for all provisions of the Plan that refer to the applicable mortality table (other than Section 10.1 above) shall be deemed to be the table prescribed in Revenue Ruling 2001-62.

IN ORDER TO EFFECT THE FOREGOING PLAN CHANGES, Broadwing Inc., the Plan sponsor, has caused its name to be subscribed to this Plan amendment this 31 day of December, 2002.

BROADWING INC.
By:	/s/ Jeffery C. Smith
	Jeffery C. Smith
Title:	Chief Human Resources Officer General Counsel and Corporate Secretary

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EX-10.III.A.17.2

Exhibit (10)(iii)(A)(17.2)

AMENDMENT TO

BROADWING PENSION PLAN

The Broadwing Pension Plan (the “Plan”) is hereby amended, effective as of May 27, 2003 and in order to reflect the change in the name of the sponsor of the Plan from Broadwing Inc. to Cincinnati Bell Inc. and the sale of substantially all of the assets of certain employers whose employees were participating in the Plan, in the following respects.

1. The name of the Plan is amended to be the “Cincinnati Bell Management Pension Plan”.

2. Each reference in the Plan to “Broadwing Pension Plan” is amended to be a reference to “Cincinnati Bell Management Pension Plan”.

3. Subsection 2.1.8 of the Plan is amended in its entirety to read as follows:

2.1.8 “Company” means Cincinnati Bell Inc. (which corporation was named Broadwing Inc. from April 20, 2000 to May 27, 2003), or any corporate successor thereto. The Company is the sponsor of the Plan.

4. Section 3.7 of the Plan is amended in its entirety to read as follows:

3.7 Mandatory Portability Agreement. To the extent required under the Mandatory Portability Agreement, service of Employees with former Bell System companies (and their successors) shall be recognized under this Plan. In this regard, Employees of certain Participating Companies may not be subject to or affected by the Mandatory Portability Agreement while employed by any such companies, and this Section 3.7 shall not give any rights under the Mandatory Portability Agreement to such Employees while employed by any such companies.

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	V.P. & General Counsel
Date:	9-11-03

EX-10.III.A.17.3

Exhibit (10)(iii)(A)(17.3)

AMENDMENT TO

CINCINNATI BELL MANAGEMENT PENSION PLAN

The Cincinnati Bell Management Pension Plan (the “Plan”), which for a certain prior period (that ended as of May 27, 2003) was named the Broadwing Pension Plan, is hereby amended, effective as of January 1, 1997 and in order to correct inadvertent scrivener errors in the Plan, make certain provisions of the Plan consistent with each other, and clarify the method by which benefits accrued by rehired Plan participants are to be determined, in the following respects.

1. Paragraph (j) of Subsection 2.1.9 of the Plan is amended in its entirety to read as follows.

(j) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” for any period that occurs on or after January 1, 1994 and prior to January 1, 1998 and during which he is or was considered a substantial service employee (within the meaning of Treas. Reg. section 1.414(r)-11(b)(2)) with respect to MATRIXX Marketing Inc. or any direct or indirect subsidiary of MATRIXX Marketing Inc.

2. Subsection 2.1.16 of the Plan is amended in its entirety to read as follows.

2.1.16 “Normal Retirement Date” means, with respect to any Participant, the date on which the Participant first attains his Normal Retirement Age.

3. Paragraph (a) of Subsection 7.1.2 of the Plan is amended in its entirety to read as follows.

(a) Such commencement date shall not occur prior to the earlier of (i) the date immediately following the date on which the Participant ceases to be an Employee or (ii) the Participant’s Required Beginning Date;

4. Paragraph (a) of Subsection 7.6.3 of the Plan is amended in its entirety to read as follows.

(a) If the payment of the Participant’s prior retirement benefit was paid in the form of a single sum payment or was paid in the form of an annuity that was suspended pursuant to the provisions of clause (a) of Subsection 7.6.2 above, then the initially determined amount shall be reduced by the sum of each payment actually made to the Participant of his prior retirement benefit before the commencement date of the Participant’s new retirement benefit, together with interest on such payment. When the commencement date of the Participant’s new retirement benefit occurs prior to October 1, 2003, such interest shall be

1

determined (without compounding) from the original date as of which such payment was made to the date the Participant is reemployed as an Employee at the rate or rates of interest determined for purposes of section 41 l(c)(2)(C) of the Code for such initial period and from such reemployment date to the commencement date of the Participant’s new retirement benefit at the rate or rates that would have been used under Section 5.5 above for determining interest credit amounts to a Cash Balance Account of the Participant if the Participant had had a Cash Balance Account throughout such latter period. When the commencement date of the Participant’s new retirement benefit occurs on or after October 1, 2003, such interest shall be determined (without compounding) from the original date as of which such payment was made to the commencement date of the Participant’s new retirement benefit at the rate or rates that would have been used under Section 5.5 above for determining interest credit amounts to a Cash Balance Account of the Participant if the Participant had had a Cash Balance Account throughout such period.

5. Paragraph (c) of Subsection 7.6.3 of the Plan is amended in its entirety to read as follows.

(c) Notwithstanding the provisions of paragraph (a) above, no reduction shall be made in the initially determined amount by reason of the provisions of paragraph (a) if (i) the Participant had received his prior retirement benefit in the form of a single sum payment prior to both the commencement date of the Participant’s new retirement benefit and January 1, 2003, (ii) the Participant is a Covered Employee after his reemployment, and (iii) the Participant repays, before the earlier of (A) five years after the first date on which he is reemployed as a Covered Employee or (B) the date he incurs five consecutive Breaks in Service following the original date as of which the single sum payment of his prior retirement benefit was made, the full amount of such single sum payment plus interest thereon. When such repayment is made prior to October 1, 2003, such interest shall be determined (without compounding) from the original date as of which such payment was made to the date the Participant is reemployed as an Employee at the rate or rates of interest determined for purposes of section 41 l(c)(2)(C) of the Code for such initial period and from such reemployment date to the repayment date of such payment at the rate or rates that would have been used under Section 5.5 above for determining interest credit amounts to a Cash Balance Account of the Participant if the Participant had had a Cash Balance Account throughout such latter period. When such repayment is made on or after October 1, 2003, such interest shall be determined (without compounding) from the original date as of which such payment was made to the repayment date of such payment at the rate or rates that would have been used under Section 5.5 above for determining interest credit amounts to a Cash Balance Account of the Participant if the Participant had had a Cash Balance Account throughout such period.

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6. Table 1 contained at the end of the Plan is amended by deleting the “2.875864” single sum payment factor for payment age 34 that is set forth in such table and substituting therefore a single sum payment factor of “2.875664.”

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	V.P. and General Counsel
Date:	11-7-03

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EX-10.III.A.17.4

Exhibit (10)(iii)(A)(17.4)

AMENDMENT TO

CINCINNATI BELL MANAGEMENT PENSION PLAN

The Cincinnati Bell Management Pension Plan (the “Plan”), which for a certain prior period (that ended as of May 27, 2003) was named the Broadwing Pension Plan, is hereby amended, effective as of December 4, 2003 and in order to permit certain Plan participants to participate in both the non-qualified excess benefit part of the Plan and the Cincinnati Bell Inc. Pension Program, by deleting Subsection 18.15.6 of the Plan in its entirety.

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor; Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	Vice President and General Counsel
Date:	1-30-04

EX-10.III.A.17.5

Exhibit (10)(iii)(A)(17.5)

AMENDMENT TO

CINCINNATI BELL MANAGEMENT PENSION PLAN

The Cincinnati Bell Management Pension Plan (the “Plan”) is hereby amended, effective as of August 19, 2004, by adding a new Article 19 reading as follows immediately after Plan Article 18.

ARTICLE 19

2004 EARLY RETIREMENT OFFER

19.1 Overview. This Article 19 is effective as of August 19, 2004 and provides for special benefits to be provided certain Participants who accept an offer of the Participating Employers of a special benefit program, all as is provided for in the following provisions of this Article 19.

19.2 Special Definitions. For purposes of this Article 19 only, the following terms shall have the meanings hereinafter set forth:

19.2.1 The term “Eligible Participant” means any person who is eligible under Section 19.3 below to be offered the special benefit program described in this Article 19.

19.2.2 The term “Extra Lump Sum Formula Amount” means, with respect to any Eligible Participant who accepts the special benefit program offer provided under this Article 19, an amount equal to the product obtained by multiplying (a) a dollar amount equal to two weeks value of the Eligible Participant’s base rate of pay as determined on October 1, 2004 by (b) the number of whole years included in the Eligible Participant’s Net Credited Service as determined on October 1, 2004. Notwithstanding the immediately preceding sentence, such Eligible Participant’s “Extra Lump Sum Formula Amount” shall in no event be deemed to exceed an amount equal to one year’s value of the Eligible Participant’s base rate of pay as determined on October 1, 2004. For purposes of this Subsection 19.2.2, if such Eligible Participant is assigned to a sales division of a Participating Employer and received Sales Incentive Compensation Awards, all such awards paid to him for the twelve month period ending on the day immediately preceding October 1, 2004 will be taken into account in determining his base rate of pay on October 1, 2004. In addition, for purposes of this Subsection 19.2.2 and except as is provided in the immediately preceding sentence, night differentials, overtime pay, team incentive and other awards, bonuses, and any other amounts not part of such Eligible Participant’s basic rate of scheduled pay shall not be included in determining such Eligible Participant’s base rate of pay. Notwithstanding the foregoing, for an Eligible Participant who is described in Subsection 19.4.4 below, each reference to “October 1, 2004” in the foregoing provisions of this Subsection 19.2.2 shall be deemed to be a

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reference to the Eligible Participant’s last day of employment with the Affiliated Employers.

19.2.3 The term “Normal Retirement Extra Single Life Annuity Benefit” means, with respect to any Eligible Participant who accepts the special benefit program offer provided under this Article 19 and when determined as of any date (for purposes of this Subsection 19.2.3, the “subject date”), a hypothetical Single Life Annuity payable to the Eligible Participant that both (a) commences to be paid as of the later of the Eligible Participant’s Normal Retirement Date or the Eligible Participant’s Offer Retirement Date and (b) has a monthly amount that is actuarially equivalent to a hypothetical single sum payment that both is made as of the subject date and is equal to the Eligible Participant’s Extra Lump Sum Formula Amount. The actuarial assumptions to be used in making such actuarially equivalent calculation shall be solely the applicable interest rate and applicable mortality assumption that are in effect under Subsection 11.5.4 above for a benefit for which the subject date is the benefit’s commencement date.

19.2.4 The term “Offer Retirement Date” means, with respect to any Eligible Participant who accepts the special benefit program offer provided under this Article 19, the date the Participant ceases to be an Employee pursuant to such offer.

19.2.5 The term “Net Credited Service” means, with respect to any Participant, the Eligible Participant’s Term of Employment that would be determined under the terms of the Prior Pension Plan if all references to a “Covered Employee” in such Prior Pension Plan were deemed to be references to an “Employee” (and if section 4.1.8 of such Prior Pension Plan were disregarded).

19.3 Eligible Participants. Any person shall be eligible to be offered the special benefit program described in this Article 19 if, and only if, he meets the following conditions:

19.3.1 He is on August 19, 2004 both a Covered Employee and a Participant in the Plan; and

19.3.2 He would by December 31, 2006, if he remained an Employee from August 19, 2004 to December 31, 2006, either (a) have Net Credited Service of 30 or more years, (b) both be age 50 and have Net Credited Service of 25 or more years, (c) both be age 55 and have Net Credited Service of 20 or more years, or (d) both be age 60 and have Net Credited Service of 10 or more years; and

19.3.3 He is not prevented by the Participating Employers from accepting the special benefit program offer provided under this Article 19 because

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of business needs of the Participating Employers. In this regard, the Participating Employers may take actions to exclude employees performing certain jobs from being eligible for such offer and/or to limit the number of employees in the Participating Employers in the aggregate, or in any department, job, or other unit, who will be permitted to accept such offer.

19.4 Offer.

19.4.1 The Participating Employers shall, on or about November 3, 2004, deliver or mail written material to each Eligible Participant setting forth the special benefit program offer described in this Article 19 (with such written material being referred to in this Article 19 as an “offer package”).

19.4.2 Such special benefit program offer shall provide that an Eligible Participant shall receive the benefits described in Sections 19.5 and 19.6 below if, and only if, the Eligible Participant:

(a) voluntarily terminates his employment with the Affiliated Employers on such date as is requested or agreed to by the Participating Employers (which date shall not be earlier than the date on which he receives the offer package or later than December 31, 2006);

(b) accepts the special benefit program offered to him under this Article 19 by, and only by, signing a form prepared by the Participating Employers for this purpose (which form sets forth the Eligible Participant’s agreement to accept the offer and to retire in accordance with the rules of paragraph (a) of this Subsection 19.4.2) and filing such signed form with the Participating Employers on or prior to the latest date as of which the latest offer package received by him indicates he can accept such offer (which date shall not in any event occur after November 29, 2004); and

(c) releases and waives any claims that he may have against the Affiliated Employers and all of the Affiliated Employers’ related parties that are requested to be released by the Participating Employers in connection with the special benefit program offer provided under this Article 19, by, and only by, signing a form prepared by the Participating Employers for this purpose and filing such signed form with the Participating Employers within such time period as is set by the Participating Employers (which generally will be his Offer Retirement Date or the three immediately following business days); and

(d) meets all other conditions imposed by the Participating Employers for accepting such offer.

19.4.3 If an Eligible Participant does not accept the special benefit program offer provided to him under this Article 19 or fails to meet all of the

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conditions set forth in Subsection 19.4.2 above, he shall not at any time be entitled to the benefits described in Sections 19.5 and 19.6 below.

19.4.4 Notwithstanding the provisions of Subsections 19.4.1 through 19.4.3 above, any person who qualifies as an Eligible Participant but who voluntarily terminated his employment with the Affiliated Employers between August 19, 2004 and November 2, 2004 shall, provided that he complies with the requirements of paragraph (c) of Subsection 19.4.2 above (within such time, after he is notified as to the special benefit program described in this Article 19, as is provided him by the Participating Employers), be deemed for all of the provisions of this Article 19 to have been offered the special program benefit offer described in this Article 19, to have accepted and complied with all of the conditions of such offer, and to have voluntarily terminated his employment with the Affiliated Employers under and pursuant to such offer.

19.5 Special Extra Retirement Benefit. If an Eligible Participant accepts the special benefit program offer provided under this Article 19 and complies with all of the conditions of such offer, he shall be entitled to a special retirement benefit not otherwise provided under the foregoing Articles of this Plan. Such special retirement benefit is described in the following provisions of this Section 19.5 and is referred to in such provisions and in Section 19.6 below as the “extra retirement benefit.” The monthly or single sum amount of the Eligible Participant’s extra retirement benefit shall be determined under the provisions of Subsection 19.5.1 below, and all other details of the extra retirement benefit (including such benefit’s form of payment and commencement date) shall be determined under the provisions of Subsections 19.5.2 and 19.5.3 below.

19.5.1 The monthly or single sum amount of the Eligible Participant’s extra retirement benefit shall be determined as follows:

(a) If the Eligible Participant’s extra retirement benefit is paid to the Eligible Participant in the form of a Single Life Annuity that commences as of any certain date (for purposes of this paragraph (a), the “subject commencement date”), then the monthly amount of such benefit shall be equal to the greater of (1) the amount that would make such Single Life Annuity actuarially equivalent to a hypothetical single sum payment that both is made as of the subject commencement date and is equal to the Eligible Participant’s Extra Lump Sum Formula Amount or (2) the amount that would make such Single Life Annuity actuarially equivalent to the Eligible Participant’s Normal Retirement Extra Single Life Annuity Benefit determined as of the subject commencement date. The actuarial assumptions to be used in making any of the actuarially equivalent calculations required under this paragraph (a) shall be solely the applicable interest rate and applicable mortality assumption that are in effect under Subsection 11.5.4 above for a benefit for which the subject commencement date is the benefit’s commencement date;

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(b) If the Eligible Participant’s extra retirement benefit is paid to the Eligible Participant in the form of a Qualified Joint and Survivor Annuity that commences as of any certain date, then the monthly amount of such benefit shall be the amount that would be determined under Subsection 7.2.2 above if the extra retirement benefit were the Eligible Participant’s sole retirement benefit under the Plan; and

(c) If the Eligible Participant’s extra retirement benefit is paid to the Eligible Participant in the form of a single sum payment that is made as of any certain date (for purposes of this paragraph (c), the “subject payment date”), then the single sum amount of such benefit shall be an amount equal to the greater of (1) the Eligible Participant’s Extra Lump Sum Formula Amount or (2) the amount that would make such single sum payment actuarially equivalent to the Eligible Participant’s Normal Retirement Extra Single Life Annuity Benefit determined as of the subject payment date. The actuarial assumptions to be used in making the actuarially equivalent calculation required under this paragraph (c) shall be solely the applicable interest rate and applicable mortality assumption that are in effect under Subsection 11.5.4 above for a benefit for which the subject payment date is the benefit’s commencement date.

19.5.2 Except to the extent otherwise provided or modified in Subsection 19.5.3 below or to the extent the context of this Article 19 otherwise requires, all of the provisions of this Plan (other than Articles 3, 4, 5, and 9 above) shall apply as if the Eligible Participant’s extra retirement benefit were added to and were a part of the Eligible Participant’s retirement benefit accrued under the Articles of this Plan that precede this Article 19 as of his Offer Retirement Date and as such benefit may be modified under the provisions of Section 19.6 below (for purposes of this Section 19.5 and Section 19.6 below, his “regular retirement benefit”). In particular, except to the extent otherwise provided or modified in Subsection 19.5.3 below, the Eligible Participant’s extra retirement benefit and regular retirement benefit shall be deemed to be one retirement benefit for purposes of determining the form of and commencement date of such benefits and applying the provisions of Articles 10 and 17 above (which provide for benefit limits and top heavy plan rules).

19.5.3 Notwithstanding the provisions of Subsection 19.5.2 above, as a special option and not in any event limiting the forms of benefit in which the Eligible Participant’s extra retirement benefit and regular retirement benefit can be paid, the Eligible Participant may elect to receive his extra retirement benefit and regular retirement benefit, in lieu of the normal form of benefit otherwise payable under Section 7.2 above or any other optional form of benefit described in Section 7.3 above and provided all of the election provisions of Section 7.4 above are met, in the following forms:

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(a) a Single Life Annuity for his regular retirement benefit and a single sum payment for his extra retirement benefit; or

(b) if the Eligible Participant is married as of the commencement date of his retirement benefits under the Plan, a Qualified Joint and Survivor Annuity for his regular retirement benefit and a single sum payment for his extra retirement benefit.

The commencement date of the payment of each of his regular retirement benefit and his extra retirement benefit must in such case still be the same date and determined as if the Eligible Participant’s extra retirement benefit and regular retirement benefit were one benefit.

19.6 Special Early Retirement Discount Factors for Regular Retirement Benefit. If an Eligible Participant accepts the special benefit program offer provided under this Article 19 and complies with all of the conditions of such offer, then, in addition to the extra retirement benefit under Section 19.5 above, he shall have his regular retirement benefit under the Plan determined in accordance with the other provisions of the Plan but with the following adjustment in the event the commencement date of his regular retirement benefit occurs prior to December 31, 2006: his Prior Pension Plan Amount (as is otherwise defined in Subsection 9.2.4(a) above) as of the commencement date of his regular retirement benefit (which Prior Pension Plan Amount is sometimes used to help determine his regular retirement benefit) shall be determined under the provisions of Subsection 9.2.4(a) above but with any early retirement discount reduction factors set forth in the provisions of the Prior Pension Plan that are used in such determination (to the extent the provisions of Subsection 9.2.4(a) above would require that such Prior Pension Plan early retirement discount factors are used in determining the Prior Pension Plan Amount) being applied in such determination of the Prior Pension Plan Amount based on the age and service with the Affiliated Employers that the Eligible Participant would have on December 31, 2006 if he continued in the employment of the Affiliated Employers from his actual date of termination with the Affiliated Employers (pursuant to his acceptance of the special benefit program offer provided under this Article 19) to December 31, 2006.

[Signature Page Immediately Follows This Page]

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IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	V.P. & General Counsel
Date:	12-13-04

7

EX-10.III.A.17.6

Exhibit (10)(iii)(A)(17.6)

AMENDMENT TO

CINCINNATI BELL MANAGEMENT PENSION PLAN

The Cincinnati Bell Management Pension Plan (the “Plan”) is hereby amended, effective as of June 1, 2005 (and with respect to any Plan participant’s retirement benefit under the Plan the commencement date of which has not occurred by June 1, 2005) and to permit the use of retroactive annuity starting dates in the payment of annuity benefits under the Plan and to clarify certain other rules in the Plan’s benefit payment provisions, in the following respects.

1. Section 7.1 of the Plan is amended in its entirety to read as follows.

7.1 Commencement Date of Retirement Benefit. If a Participant is entitled to a retirement benefit under the Plan pursuant to any of the provisions of Article 6 above, then, subject to the provisions of Section 7.5 below, he may, as a part of his filing with a Plan representative of a claim for his retirement benefit under and in accordance with the provisions of Section 7.4 below, elect the specific commencement date as of which his retirement benefit under the Plan will commence to be paid, provided that the elected commencement date meets each and every of the requirements set forth in Subsections 7.1.1 through 7.1.5 below (to the extent such requirements apply to the elected commencement date under the terms of such Subsections).

7.1.1 Such commencement date must occur both: (i) no later than the Participant’s Required Commencement Date; and (ii) if the date on which the Participant ceases to be an Employee occurs before the Participant’s Required Commencement Date, after the date on which the Participant ceases to be an Employee.

7.1.2 Such commencement date may not occur more than 90 days after the date (for purposes of this Section 7.1, the “written explanation date”) on which the latest written explanation as to the Participant’s benefit form options and other benefit payment rules that is described in Subsection 7.4.4 below (for purposes of this Section 7.1, the “written explanation”) is provided to the Participant.

7.1.3 Such commencement date may not occur before 30 days have expired after the written explanation date unless all of the following conditions are met:

(a) the written explanation clearly indicates that the Participant has a right to at least 30 days to consider the form in which his retirement benefit will be paid and elect a permitted form of benefit;

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(b) the Participant affirmatively elects the form in which he wants his retirement benefit to be paid prior to the expiration of the 30- day period beginning on the date that immediately follows the written explanation date;

(c) the Participant is permitted to amend or revoke an affirmative election he makes for payment of his retirement benefit in any form at least until the later of the date as of which the Participant’s retirement benefit under the Plan will commence based on such election or the expiration of the seven-day period that begins on the date that immediately follows the written explanation date; and

(d) the actual distribution of the retirement benefit in accordance with the Participant’s affirmative election does not begin before the expiration of the seven-day period that begins on the date that immediately follows the written explanation date.

7.1.4 Such commencement date may occur prior to the date on which the Participant makes a claim for his retirement benefit only if the actual payment of the Participant’s retirement benefit begins to be paid within 90 days after the written explanation date (or if the actual payment of the Participant’s retirement benefit begins to be paid after the end of such 90-day period solely due to administrative reasons).

7.1.5 Such commencement date may occur prior to the written explanation date (in which case such commencement date shall be considered a “retroactive commencement date” under this Subsection 7.1.5) only if all of the following conditions are met:

(a) such commencement date does not occur before the later of (i) June 1, 2005 or (ii) the date that is twelve months before the date on which the Participant’s retirement benefit actually begins to be paid;

(b) the Participant affirmatively elects the commencement date of his retirement benefit and the form in which he wants his retirement benefit to be paid no later than 90 days after the date on which the earliest written explanation as to the Participant’s benefit form options and other benefit payment rules that is described in Subsection 7.4.4 below is provided to the Participant;

(c) the Participant’s retirement benefit is paid in the form of an Annuity and not in the form of a single sum cash payment pursuant to the Participant’s election of the benefit form for his retirement benefit (and the other provisions of this Plan);

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(d) the Participant’s spouse as of the date the retirement benefit actually begins to be paid (if any) is treated as the Participant’s spouse as of the retroactive commencement date for all purposes of the rules of Article 7 of the Plan (and, if the Participant actually had a different spouse as of his retroactive commencement date, such former spouse is not treated for such purposes as the Participant’s spouse as of such date except to the extent otherwise required by a qualified domestic relations order as defined in section 206(d) of ERISA and section 414(p) of the Code);

(e) the Participant’s spouse as of the date the benefit actually begins to be paid (if any) consents to the form of the retirement benefit and the retroactive commencement date (even if the form is a Qualified Joint and Survivor Annuity when the spouse’s consent would not be required but for the retroactive commencement date applying) in a manner that would satisfy the requirements of Subsection 7.4.2 below;

(f) the Participant receives a make-up payment to reflect any missed payments from the retroactive commencement date to the date of the actual make-up payment, with an appropriate adjustment for interest from the dates the missed payments would have been made to the date of the actual make-up payment, which interest adjustment will be based on the annual interest rate on 30-year Treasury securities for the fifth calendar month which precedes the first calendar month included in the Plan Year in which the date of the actual make-up payment occurs (as such interest rate is specified for purposes of Code section 417(e)(3) by the Secretary of the Treasury or his delegate in revenue rulings, notices, or other guidance);

(g) the actual payment of the Participant’s retirement benefit begins to be paid within 90 days after the written explanation date (or the actual payment of the Participant’s retirement benefit begins to be paid after the end of such 90-day period solely due to administrative reasons); and

(h) the date of the first actual payment of the retirement benefit is substituted for the retroactive commencement date for purposes of Subsections 7.1.1 through 7.1.4 above.

If the Participant makes a claim for his retirement benefit under the Plan but fails to elect the specific commencement date of such benefit, then such commencement date shall be set by the Committee (i) to be relatively close to the date on which the Participant files such claim (but not in any event later than the Participant’s Required Commencement Date), (ii) to meet all of the requirements of Subsections 7.1.1 through 7.1.4 above, and (iii) to occur in any event after the written explanation date.

2. Section 7.4 of the Plan is amended in its entirety to read as follows.

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7.4 Claim for Benefit.

7.4.1 A Participant entitled to a retirement benefit under the Plan may, in a writing filed with a Plan representative (on a form prepared or accepted by the Committee), file a claim that such benefit commence and elect to receive his retirement benefit in the normal form that otherwise applies to him under Section 7.2 above or to waive such normal form and instead to have such benefit paid in any optional form permitted him under Section 7.3 above, provided that such claim and election is made in writing on a form prepared or approved by the Committee: (a) after the date (for purposes of this Section 7.4, the “written explanation date”) on which the latest written explanation as to the Participant’s benefit form options and other benefit payment rules and that is described in Subsection 7.4.4 below (for purposes of this Section 7.4, the “written explanation”) is provided to the Participant; (b) no more than 90 days before the date that becomes the commencement date of his retirement benefit under Section 7.1 above; and (e) no later than the date that becomes the commencement date of his retirement benefit under Section 7.1 above (except that his claim for a benefit may be made after the date that becomes the commencement date of his retirement benefit under Section 7.1 above if the provisions of Subsection 7.1.4 above are met).

7.4.2 Notwithstanding the provisions of Subsection 7.4.1 above but subject to the last sentence of this Subsection 7.4.2 and to the provisions of Subsection 7.1.5 above, if a Participant is married on the date as of which his retirement benefit commences, his election of any optional form permitted him under Section 7.3 above is not effective unless the person who is the spouse of the Participant as of the commencement date of the retirement benefit consents, in a writing filed with a Plan representative (on a form prepared or accepted by the Committee), to such election of the named optional form within the same period in which the Participant has to make his election, with the spouse’s consent acknowledging the effect of such consent and being witnessed by a notary public or a Plan representative. Any such spouse’s consent shall be irrevocable once received by a Plan representative. However, any consent of the Participant’s spouse otherwise required under this Subsection 7.4.2 shall not be required if it is established to the satisfaction of a Plan representative that the consent cannot be obtained because no spouse exists, because the spouse cannot reasonably be located, or because of such other circumstances as the Secretary of the Treasury or his delegate allows in regulations.

7.4.3 If a Participant elects a form of payment different than his normal form under Section 7.2 above, he may amend or revoke that election by a written notice filed with a Plan representative (on a form prepared or accepted by the Committee) before the commencement date of his retirement benefit under the Plan (or, if the Participant elects a commencement date for such benefit that is before or in any event less than 30 days after the date on which the written

4

explanation is provided to the Participant, he may amend or revoke his election of a form of payment different than his normal form under Section 7.2 above until the later of the commencement date of his retirement benefit as based on his election or the expiration of the seven-day period that begins on the date that immediately follows the written explanation date); provided that if the Participant desires to elect another form of payment different than the normal form applicable to him, the conditions of Subsections 7.4.1 and 7.4.2 above must be satisfied as if that amendment were a new election.

7.4.4 The Committee shall provide each Participant who is entitled to a retirement benefit under the Plan a written explanation of:

(a) the terms and conditions of the normal form in which such benefit will be paid unless there is an election out of such form according to this Section 7.4;

(b) the Participant’s rights to make and the effect of an election out of the normal form;

(c) the requirement, if applicable, that the Participant’s spouse consent to any election out of the normal form;

(d) the right of the Participant to revoke an election out of the normal form;

(e) the Participant’s right to elect the commencement date of his retirement benefit under the Plan; and

(f) any other items that are required to be contained in the written explanation by Treasury regulations and/or Internal Revenue Service notices or other guidance.

In addition, such written explanation shall generally indicate that the Participant has a right to at least 30 days to consider the form in which his retirement benefit will be paid and elect a permitted form of payment of his retirement benefit.

7.4.5 The Committee or a Plan representative shall provide the written explanation to a Participant at any time deemed appropriate by the Committee and in any event within a reasonable administrative period after the Participant notifies the Committee that he desires to commence payment of his benefit (if he is then eligible, or if it is anticipated that he will soon be eligible, to commence such benefit) and/or within a reasonable administrative period prior to the latest date that such benefit must commence under the other provisions of the Plan. The written explanation shall be deemed to have been provided the Participant for purposes of the other provisions of the Plan on the date it is either personally delivered or faxed to the Participant or is deposited in the mail (first

5

class or certified mail, postage prepaid) by the Committee or a Plan representative.

[Signature Page of Plan Amendment Is On Following Page]

6

IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	Vice President & General Counsel
Date:	7/12/05

7

EX-10.III.A.17.7

Exhibit (10)(iii)(A)(17.7)

AMENDMENT TO

CINCINNATI BELL MANAGEMENT PENSION PLAN

The Cincinnati Bell Management Pension Plan (the “Plan”) is hereby amended, effective as of March 28, 2005 and to reduce the cashout limit of any participant’s benefit under the Plan (the lump sum amount of such benefit below which such benefit may automatically be cashed out to the participant without his or her consent) and to clarify the Plan’s provisions used in determining the payment of automatically cashed out benefits, in the following respects.

1. Subsection 7.5.1 of the Plan is amended in its entirety to read as follows.

7.5.1 Notwithstanding any other provision of the Plan to the contrary, if (a) any retirement benefit payable under the Plan to a Participant has a present value of $1,000 or less as of such benefit’s distribution date and (b) such benefit has not begun to be paid to the Participant prior to March 28, 2005, then such retirement benefit shall be converted to and paid as a single sum cash payment as of such benefit’s distribution date (with the amount of such payment equal to the present value of such benefit as of such date). For purposes of this Subsection 7.5.1, the “distribution date” of a Participant’s retirement benefit under the Plan means the date as of which the single sum payment amount of such benefit is determined by a Plan representative under its administrative processes, which date (a) shall occur on or after the date on which the Participant ceases to be an Employee and no more than 90 days before the first date on which the Plan representative is in a position administratively to have the Plan actually distribute such benefit to the Participant (e.g., after calculating the single sum payment amount of such benefit, confirming the Participant’s ceasing of Employee status, and meeting all requirements set forth in the other provisions of the Plan as to providing the Participant an opportunity to elect a direct rollover of such benefit to the extent a direct rollover of such benefit is permitted under the Code) and (b) shall in no event occur later than the Participant’s Required Commencement Date.

2. Section 8.1 of the Plan is amended in its entirety to read as follows.

8.1 Unmarried Participants. If an unmarried Vested Participant dies while an Employee or after ceasing to be an Employee but prior to his benefit commencement date, then, unless waived under the provisions of Section 8.3 below, a death benefit shall be paid to his estate. Such death benefit shall be paid in the form of a single sum cash payment that is made as of such benefit’s distribution date. The amount of such single sum payment shall be equal to the product produced by multiplying the amount credited to the Participant’s Cash Balance Account on such date by the Participant’s vested percentage determined as of the date of his death. For purposes of this Section 8.1, the “distribution date” of an unmarried Vested Participant’s estate’s death benefit under the Plan

1

means the date as of which the single sum payment amount of such benefit is determined by a Plan representative under its administrative processes, which date shall occur on or after the date of the Participant’s death and no more than 90 days before the first date after such death on which the Plan representative is in a position administratively to have the Plan actually distribute such benefit to the estate (e.g., after calculating the single sum payment amount of such benefit and confirming the Participant’s death).

3. Subsection 8.2.2 of the Plan is amended in its entirety to read as follows.

8.2.2 Notwithstanding the provisions of Subsection 8.2.1 above, if (a) the death benefit payable under this Section 8.2 to the surviving spouse of a Vested Participant has a present value of $5,000 or less as of such benefit’s distribution date and (b) such benefit has not begun to be paid to the Participant’s surviving Spouse prior to March 28, 2005, then such death benefit shall be converted to and paid as a single sum cash payment as of such benefit’s distribution date (with the amount of such payment equal to the present value of such benefit as of such date). For purposes of this Subsection 8.2.2, the present value as of the distribution date of such spouse’s death benefit shall be equal to the product produced by multiplying (a) the amount credited to the Participant’s Cash Balance Account as of the distribution date by (b) the Participant’s vested percentage determined as of the date of his death. For purposes of this Subsection 8.2.3, the “distribution date” of a Participant’s surviving spouse’s death benefit under the Plan means the date as of which the single sum payment amount of such benefit is determined by a Plan representative under its administrative processes, which date shall occur on or after the date of the Participant’s death and no more than 90 days before the first date after such death on which the Plan representative is in a position administratively to have the Plan actually distribute such benefit to the Participant’s surviving spouse (e.g., after calculating the single sum payment amount of such benefit, confirming the Participant’s death, and meeting all requirements set forth in the other provisions of the Plan as to providing the spouse an opportunity to elect a direct rollover of such benefit to the extent a direct rollover of such benefit is permitted under the Code).

[Signature Page for Amendment Is On Following Page]

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IN ORDER TO EFFECT THE FOREGOING CHANGES TO THE PLAN, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	V.P. & GENERAL COUNSEL
Date:	12/8/2005

3

EX-10.III.A.17.8

Exhibit (10)(iii)(A)(17.8)

AMENDMENT TO

CINCINNATI BELL MANAGEMENT PENSION PLAN

The Cincinnati Bell Management Pension Plan (the “Plan”) is hereby amended, effective as of January 1, 2006 and in order to clarify certain eligibility rules of the Plan, by amending paragraph (b) of Plan Section 2.1.9 in its entirety to read as follows.

(b) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” for any period during which he is or was an ineligible bargained-for or hourly employee. For purposes of the Plan, a person is considered an “ineligible bargained-for or hourly employee” for any period if, and only if, he is during such period either: (1) an Employee of a Participating Company who is a collectively bargained employee (within the meaning of Treas. Reg. section 1.410(b)-6(d)(2)), unless his participation in the Plan is required for such period under a collective bargaining agreement entered into between the Participating Company and the representatives of the applicable collective bargaining unit; or (2) an Employee of a Participating Company who is not a collectively bargained employee (within the meaning of Treas. Reg. section 1.410(b)-6(d)(2)) but whose position is an hourly paid position that is, or at any prior time had been, either subject to automatic wage progression or a position the holder of which would be eligible to participate in the Cincinnati Bell Pension Plan (another defined benefit pension plan sponsored by the Company) upon the meeting of any applicable minimum age and/or service requirements of such plan. In addition, for purposes of the Plan, a person shall still be considered an “ineligible bargained-for or hourly employee” for any period during which he is or was temporarily promoted from an ineligible bargained-for or hourly employee position to another position for one year or less.

IN ORDER TO EFFECT THE FOREGOING PLAN CHANGE, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	V.P. General Counsel & Secretary
Date:	11-21-06

EX-10.III.A.17.9

Exhibit (10)(iii)(A)(17.9)

AMENDMENT TO

CINCINNATI BELL MANAGEMENT PENSION PLAN

The Cincinnati Bell Management Pension Plan (the “Plan”) is hereby amended, effective as of January 1, 2007 and in order to ensure that employees cannot at the same time actively participate in more than one defined benefit pension plan to which the Plan employers contribute, by adding a new paragraph (k) reading as follows to the end of Plan Subsection 2.1.9.

(k) Notwithstanding the provisions of paragraph (a) above, a person shall not in any event be considered a “Covered Employee” for any period that occurs on or after January 1, 2007 and during which he is a participant, eligible for participation, or in the process of qualifying for participation in any other defined benefit plan (within the meaning of Section 414(j) of the Code) which qualifies under Section 401(a) of the Code and the cost of which is borne, in whole or in part, by any Participating Company. However, a person who otherwise qualifies as an “Covered Employee” under the other provisions of this Subsection 2.1.9 shall not be considered other than as a “Covered Employee” merely because of his participation in another defined benefit pension plan if such participation relates solely to employment which preceded the date on which he would otherwise become a Participant under the Plan and the person’s benefits under such other plan relate solely to such past service.

IN ORDER TO EFFECT THE FOREGOING PLAN CHANGE, the Plan’s sponsor, Cincinnati Bell Inc., has caused its name to be subscribed to this Plan amendment.

CINCINNATI BELL INC.
By:	/s/ Christopher J. Wilson
Title:	V.P. General Counsel & Secretary
Date:	3-2-07

EX-21

Exhibit 21

Subsidiaries of the Registrant

(as of February 26, 2008)

Subsidiary Name	State of Incorporation or Formation
Cincinnati Bell Telephone Company LLC	Ohio
Cincinnati Bell Telecommunications Services LLC	Ohio
Cincinnati Bell Extended Territories LLC	Ohio
Cincinnati Bell Entertainment Inc.	Ohio
Cincinnati Bell Wireless Company	Ohio
Cincinnati Bell Wireless LLC	Ohio
Cincinnati Bell Any Distance Inc.	Delaware
BRCOM Inc.	Delaware
Cincinnati Bell Technology Solutions Inc.	Delaware
GramTel Inc. (f/k/a BCSIVA Inc.)	Virginia
IXC Internet Services, Inc.	Delaware
Mutual Signal Holding Corporation	Delaware
Mutual Signal Corporation	New York
Mutual Signal Corporation of Michigan	New York
MSM Assoc. Limited Partnership	Delaware
Cincinnati Bell Complete Protection Inc.	Ohio
MVNO Holdings LLC	Delaware
CB Funding LLC	Delaware

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-65581 and 002-82253 on Form S-3 and Registration Statements No. 333-60370, 333-60376, 333-60378, 333-60384, 333-38743, 333-38763, 333-28385, 333-28381, 333-77011,

333-143088 and 333-143089 on Form S-8 of our reports dated February 26, 2008 (which reports express an unqualified opinion and include an explanatory paragraph relating to Cincinnati Bell Inc. and its subsidiaries (the “Company”) adoption of Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, elected application effective January 1, 2006, FASB Statement No. 123(R), Share-Based Payment, effective January 1, 2006, FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R), effective December 31, 2006, and the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, effective January 1, 2007) relating to the financial statements and financial statement schedule of the Company and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2007.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio

February 26, 2008

EX-24

Exhibit 24

POWER OF ATTORNEY

WHEREAS, Cincinnati Bell Inc., 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 1934, as amended, and the rules and regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2007 and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby designates and appoints John F. Cassidy, Brian A. Ross and Christopher J. Wilson, 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 annual report on Form 10-K, 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 25^th day of January, 2008.

/s/ Phillip R. Cox

Phillip R. Cox

Director

STATE OF OHIO	)
	)	SS:
COUNTY OF HAMILTON	)

On the 25^th day of January, 2008, personally appeared before me Phillip R. Cox, to me known and known to me to be the person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.

Witness my hand and official seal this 25^th day of January, 2008.

/s/ Susan D. McClamon

Notary Public

   Susan D. McClamon

   Notary Public, State of Ohio

   My Commission Expires Mar. 16, 2008

POWER OF ATTORNEY

WHEREAS, Cincinnati Bell Inc., 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 1934, as amended, and the rules and regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2007 and

WHEREAS, the undersigned is a director of the Company;

NOW THEREFORE, the undersigned hereby designates and appoints John F. Cassidy, Brian A. Ross and Christopher J. Wilson, 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 annual report on Form 10-K, 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 25^th day of January, 2008.

/s/ Daniel J. Meyer

Daniel J. Meyer

Director

STATE OF OHIO	)
	)	SS:
COUNTY OF HAMILTON	)

On the 25^th day of January, 2008, personally appeared before me Daniel J. Meyer, to me known and known to me to be the person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.

Witness my hand and official seal this 25^th day of January, 2008.

/s/ Susan D. McClamon

Notary Public

   Susan D. McClamon

   Notary Public, State of Ohio

   My Commission Expires Mar. 16, 2008

POWER OF ATTORNEY

WHEREAS, Cincinnati Bell Inc., 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 1934, as amended, and the rules and regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2007 and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby designates and appoints John F. Cassidy, Brian A. Ross and Christopher J. Wilson, 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 annual report on Form 10-K, 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 25^th day of January, 2008.

/s/ Alex Shumate

Alex Shumate

Director

STATE OF OHIO	)
	)	SS:
COUNTY OF HAMILTON	)

On the 25^th day of January, 2008, personally appeared before me Alex Shumate, to me known and known to me to be the person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.

Witness my hand and official seal this 25^th day of January, 2008.

/s/ Susan D. McClamon

Notary Public

   Susan D. McClamon

   Notary Public, State of Ohio

   My Commission Expires Mar. 16, 2008

POWER OF ATTORNEY

WHEREAS, Cincinnati Bell Inc., 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 1934, as amended, and the rules and regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2007 and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby designates and appoints John F. Cassidy, Brian A. Ross and Christopher J. Wilson, 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 annual report on Form 10-K, 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 25^th day of January, 2008.

/s/ John M. Zrno

John M. Zrno

Director

STATE OF OHIO	)
	)	SS:
COUNTY OF HAMILTON	)

On the 25^th day of January, 2008, personally appeared before me John M. Zrno, to me known and known to me to be the person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.

Witness my hand and official seal this 25^th day of January, 2008.

/s/ Susan D. McClamon

Notary Public

   Susan D. McClamon

   Notary Public, State of Ohio

   My Commission Expires Mar. 16, 2008

POWER OF ATTORNEY

WHEREAS, Cincinnati Bell Inc., 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 1934, as amended, and the rules and regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2007 and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby designates and appoints John F. Cassidy, Brian A. Ross and Christopher J. Wilson, 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 annual report on Form 10-K, 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 25^th day of January, 2008.

/s/ Bruce L. Byrnes

Bruce L. Byrnes

Director

STATE OF OHIO	)
	)	SS:
COUNTY OF HAMILTON	)

On the 25^th day of January, 2008, personally appeared before me Bruce L. Byrnes, to me known and known to me to be the person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.

Witness my hand and official seal this 25^th day of January, 2008.

/s/ Susan D. McClamon

Notary Public

   Susan D. McClamon

   Notary Public, State of Ohio

   My Commission Expires Mar. 16, 2008

POWER OF ATTORNEY

WHEREAS, Cincinnati Bell Inc., 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 1934, as amended, and the rules and regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2007 and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby designates and appoints John F. Cassidy, Brian A. Ross and Christopher J. Wilson, 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 annual report on Form 10-K, 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 25^th day of January, 2008.

/s/ Michael G. Morris

Michael G. Morris

Director

STATE OF OHIO	)
	)	SS:
COUNTY OF HAMILTON	)

On the 25^th day of January, 2008, personally appeared before me Michael G. Morris, to me known and known to me to be the person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.

Witness my hand and official seal this 25^th day of January, 2008.

/s/ Susan D. McClamon

Notary Public

   Susan D. McClamon

   Notary Public, State of Ohio

   My Commission Expires Mar. 16, 2008

POWER OF ATTORNEY

WHEREAS, Cincinnati Bell Inc., 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 1934, as amended, and the rules and regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2007 and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby designates and appoints John F. Cassidy, Brian A. Ross and Christopher J. Wilson, 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 annual report on Form 10-K, 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 25^th day of January, 2008.

/s/ Robert W. Mahoney

Robert W. Mahoney

Director

STATE OF OHIO	)
	)	SS:
COUNTY OF HAMILTON	)

On the 25^th day of January, 2008, personally appeared before me Robert W. Mahoney, to me known and known to me to be the person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.

Witness my hand and official seal this 25^th day of January, 2008.

/s/ Susan D. McClamon

Notary Public

   Susan D. McClamon

   Notary Public, State of Ohio

   My Commission Expires Mar. 16, 2008

EX-31.1

Exhibit 31.1

Certifications

I, John F. Cassidy, President and Chief Executive Officer, certify that:

1. I have reviewed this annual report on Form 10-K of Cincinnati Bell Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2008	/s/ John F. Cassidy
	John F. Cassidy
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certifications

I, Brian A. Ross, Chief Financial Officer, certify that:

1. I have reviewed this annual report on Form 10-K of Cincinnati Bell Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2008	/s/ Brian A. Ross
	Brian A. Ross
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Cincinnati Bell Inc. (the “Company”) on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John F. Cassidy, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John F. Cassidy

John F. Cassidy

President and Chief Executive Officer

February 26, 2008

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Cincinnati Bell Inc. (the “Company”) on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian A. Ross, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Brian A. Ross

Brian A. Ross

Chief Financial Officer

February 26, 2008