PREM14A 1 d870478dprem14a.htm PREM14A PREM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Under Rule 14a-12

CINCINNATI BELL INC.

(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

  No fee required
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
 

(1)

 

Title of each class of securities to which transaction applies:

 

Common stock, par value $0.01 per share (“Company common shares”) of Cincinnati Bell Inc.

  (2)  

Aggregate number of securities to which transaction applies:

 

As of the close of business on December 17, 2019, 50,420,700 Company common shares, 939,489 restricted stock units (other than performance-based restricted stock units), 1,282,005 performance-based restricted stock units, 23,444 Company common shares subject to phantom shares granted under the Deferred Compensation Plan for Outside Directors.

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

The proposed maximum aggregate value of the transaction was determined based upon the sum of (A) 50,420,700 Company common shares; (B) 939,489 restricted stock units (other than performance-based restricted stock units); (C) 1,282,005 performance-based restricted stock units; and (D) 23,444 Company common shares subject to phantom shares granted under the Deferred Compensation Plan for Outside Directors, totaling 52,665,638 shares of common stock, multiplied by the cash merger consideration of $10.50 per share.

 

In accordance with Exchange Act Rule 0-11(c), the filing fee of $71,778 was determined by multiplying .0001298 by the proposed maximum aggregate value of the transaction.

  (4)  

Proposed maximum aggregate value of transaction:

 

$552,989,199

  (5)  

Total fee paid:

 

$71,778

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount previously paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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PRELIMINARY PROXY MATERIAL SUBJECT TO COMPLETION

 

 

LOGO

Dear Shareholder:

You are cordially invited to attend a special meeting of shareholders of Cincinnati Bell Inc., an Ohio corporation (the “Company”), on [                ], 2020 at [    ], local time, at [    ].

On December 21, 2019, the Company entered into an Agreement and Plan of Merger (the “merger agreement”) with Charlie AcquireCo Inc., a Delaware corporation (“Parent”), and Charlie Merger Sub Inc., an Ohio corporation and a wholly owned subsidiary of Parent (“Merger Sub”), providing for, subject to the satisfaction or (to the extent permitted by law) waiver of specified conditions, the acquisition of the Company by Parent at a price of $10.50 per Company common share in cash. Subject to the terms and conditions of the merger agreement, Merger Sub will be merged with and into the Company (the “merger”), with the Company surviving the merger as a subsidiary of Parent (the “surviving corporation”).

At the special meeting, the holders of Company common shares and holders of 6 34% cumulative convertible preferred shares (“6 34% preferred shares”) of the Company (voting as a single class) will vote on the adoption of the merger agreement. At the special meeting, holders of depositary shares representing one-twentieth of a 6 34% preferred share (the “depositary shares”) will be entitled to vote the number of 6 34% preferred shares represented by such depositary shares.

If the merger is completed, you will be entitled to receive $10.50 in cash, without interest and less any applicable withholding taxes, for each Company common share you own at the effective time of the merger. Immediately following the consummation of the merger, the 6 34% preferred shares will remain outstanding and the depositary shares representing interests in such 6 34% preferred shares will remain outstanding and continue to be listed on the NYSE, although Parent intends to cause the surviving corporation to redeem the 6 34% preferred shares (and the depositary shares representing interests in such 6 34% preferred shares) in accordance with the Company’s articles of incorporation as promptly as practicable following the completion of the merger.

The proxy statement accompanying this letter provides you with more specific information concerning the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement. We encourage you to carefully read the accompanying proxy statement and the copy of the merger agreement attached as Annex A thereto.

The board of directors of the Company (the “Board”) carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. The Board unanimously (i) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (ii) determined that entering into the merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, the Company and its shareholders, (iii) declared the merger agreement, the merger and the other transactions contemplated by the merger agreement advisable and (iv) recommends that the holders of Company common shares and 6 34% preferred shares adopt the merger agreement. Accordingly, the Board recommends you vote “FOR” the proposal to adopt the merger agreement.

At the special meeting, shareholders will also be asked to vote (i) on a nonbinding, advisory proposal to approve the compensation that may be paid or become payable to the Company’s named executive officers in connection with, or following, the consummation of the merger, and (ii) to adjourn the special meeting to a later date or time, if necessary or appropriate, to solicit additional proxies in the event there are insufficient votes at the time of the special meeting or any adjournment or postponement thereof to adopt the merger agreement. The Board recommends that you vote “FOR” each of these proposals.


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Whether or not you plan to attend the special meeting and regardless of the number of shares you own, your careful consideration of, and vote on, the merger agreement is important and we encourage you to vote promptly. The merger cannot be completed unless the proposal to adopt the merger agreement is approved by the affirmative vote of shareholders holding at least two-thirds of the outstanding Company common shares and the 6 34% preferred shares (voting as a single class) in each case entitled to vote thereon at the special meeting. The failure to vote will have the same effect as a vote against the proposal to adopt the merger agreement.

After reading the accompanying proxy statement, please make sure to vote your Company common shares and 6 34% preferred shares (or the depositary shares representing interests in such 6 34% preferred shares) by promptly voting electronically or telephonically as described in the accompanying proxy statement, or, if you received a paper copy of the proxy card, by completing, dating, signing and returning your proxy card, or attending our special shareholders’ meeting in person. Instructions regarding all four methods of voting are provided on the proxy card. If you hold shares through an account with a brokerage firm, bank or other nominee, please follow the instructions you receive from them to vote your Company common shares, 6 34% preferred shares and/or depositary shares representing interests in 6 34% preferred shares. If you have any questions or need assistance voting your shares, please contact our proxy solicitor, Innisfree M&A Incorporated, toll-free at 877-825-8971.

We appreciate your investment in the Company.

By Order of the Board of Directors

Lynn A. Wentworth

Chairman of the Board

[                    ], 2020

The merger has not been approved or disapproved by the Securities and Exchange Commission or any state securities commission. Neither the Securities and Exchange Commission nor any state securities commission has passed upon the merits or fairness of the merger or upon the adequacy or accuracy of the information contained in this document or the accompanying proxy statement. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated [                ], 2020 and is first being mailed to holders of Company common shares, 6 34% preferred shares and depositary shares on or about [                ], 2020.


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LOGO

Notice of Special Meeting

The special meeting of holders of the common stock, par value $0.01 per share (“Company common shares”), and holders of the 6 34% cumulative convertible preferred shares, without par value ( “6 34% preferred shares”), of Cincinnati Bell Inc., an Ohio corporation, will be held at the time and place and for the purposes indicated below.

[                    ], 2020

[            ], Local Time

221 East Fourth Street, Cincinnati, Ohio 45202

 

Items of Business:  

1.  To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of December 21, 2019 (the “merger agreement”), by and among Charlie AcquireCo Inc., a Delaware corporation (“Parent”), Cincinnati Bell Inc., an Ohio corporation (the “Company”), and Charlie Merger Sub Inc., an Ohio corporation and a wholly owned subsidiary of Parent (“Merger Sub”).

 

2.  To consider and vote on a nonbinding, advisory proposal to approve the compensation that may be paid or become payable to the Company’s named executive officers in connection with, or following, the consummation of the merger (this nonbinding, advisory proposal (the “nonbinding compensation proposal”) relates only to contractual obligations of the Company in existence prior to consummation of the merger that may result in a payment to the Company’s named executive officers in connection with, or following, the consummation of the merger and does not relate to any new compensation or other arrangements between the Company’s named executive officers and Parent or, following the merger, the surviving corporation and its subsidiaries).

 

3.  To consider and vote on a proposal to adjourn the special meeting to a later date or time, if necessary or appropriate, to solicit additional proxies in the event there are insufficient votes at the time of the special meeting or any adjournment or postponement thereof to adopt the merger agreement (the “adjournment proposal”).

Record Date:   Holders of Company common shares and 6 34% preferred shares of record as of the close of business on [                    ], 2020 are entitled to notice of the special meeting and any adjournments or postponements thereof. Only holders of Company common shares and 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) of record as of the close of business on [            ], 2020 are entitled to vote at the special meeting and any adjournments or postponements thereof.


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General:  

For more information concerning the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement, please review the accompanying proxy statement and the copy of the merger agreement attached as Annex A thereto.

 

Under Ohio law, holders of Company common shares and holders of 6 34% preferred shares who do not vote in favor of the adoption of the merger agreement will have the right to seek appraisal of the fair cash value of their Company common shares or 6 34% preferred shares, as applicable, as determined by the court of common pleas of the Ohio county in which the principal office of the Company is located if the merger is completed, but only if they submit a written demand for such an appraisal prior to the vote on the merger proposal and comply with the other Ohio law procedures explained in the accompanying proxy statement. Holders of Company common shares who do not vote in favor of the merger proposal and who submit a written demand for such an appraisal prior to the vote on merger proposal and comply with the other Ohio law procedures will not receive the merger consideration.

 

The board of directors of the Company (the “Board”) carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. The Board unanimously (i) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (ii) determined that entering into the merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to, and in the best interest of the Company and its shareholders, (iii) declared the merger agreement, the merger and the other transactions contemplated by the merger agreement advisable and (iv) recommends that the shareholders holding Company common shares and 6 34% preferred shares adopt the merger agreement.

 

Accordingly, the Board recommends a vote “FOR” the proposal to adopt the merger agreement, “FOR” the nonbinding compensation proposal and “FOR” the adjournment proposal.

 

Regardless of whether you plan to personally attend the meeting, please vote telephonically or electronically for the matters before our shareholders as described in the accompanying proxy statement, or promptly fill in, date, sign and return the enclosed proxy card in the accompanying pre-paid envelope to ensure that your shares are represented at the meeting. You may revoke your proxy before it is voted. If you attend the meeting, you may choose to vote in person even if you have previously sent in your proxy card. If you hold common shares, 6 34% preferred shares or depositary shares representing interests in the 6 34% preferred shares through an account with a brokerage firm, bank or other nominee, please follow the instructions you receive from them to vote your common shares, 6 34% preferred shares or depositary shares.

By Order of the Board of Directors

Lynn A. Wentworth

Chairman of the Board


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TABLE OF CONTENTS

 

     Page  

SUMMARY TERM SHEET

     1  

The Parties

     1  

The Merger

     2  

The Special Meeting

     3  

Shareholders Entitled to Vote; Vote Required to Adopt the Merger Agreement

     3  

Background of the Merger

     3  

Reasons for the Merger; Recommendation of the Board

     3  

Opinion of the Company’s Financial Advisors

     3  

Certain Effects of the Merger

     4  

Effects on the Company if the Merger Is Not Completed

     5  

Treatment of Equity and Equity-Based Awards

     5  

Interests of the Company’s Directors and Executive Officers in the Merger

     6  

Common Share Ownership of Directors and Executive Officers

     6  

Financing of the Merger

     7  

Guaranty

     7  

Conditions of the Merger

     7  

Regulatory Approvals Required for the Merger

     8  

No Solicitation; Board Recommendation

     8  

Termination

     9  

Termination Fee

     9  

Dissenters’ Rights Available to Company Shareholders

     10  

Material U.S. Federal Income Tax Consequences of the Merger

     10  

Current Price of Common Shares

     11  

Additional Information

     11  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     12  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     21  

THE PARTIES

     22  

Cincinnati Bell Inc.

     22  

Charlie AcquireCo Inc.

     22  

Charlie Merger Sub Inc.

     22  

THE SPECIAL MEETING

     23  

Date, Time and Place

     23  

Purpose of the Special Meeting

     23  

Recommendation of the Board

     23  


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     Page  

Record Date and Shareholders Entitled to Vote

     24  

Quorum

     24  

Vote Required

     24  

Voting Procedures

     25  

How Proxies Are Voted

     26  

Revocation of Proxies

     26  

Voting in Person

     26  

Solicitation of Proxies

     27  

Adjournments and Postponements

     27  

Voting by Company Directors, Executive Officers and Principal Securityholders

     27  

Assistance

     27  

List of Shareholders

     27  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     28  

PROPOSAL 2: ADVISORY, NON-BINDING VOTE ON MERGER-RELATED EXECUTIVE COMPENSATION ARRANGEMENTS

     29  

PROPOSAL 3: VOTE ON POSSIBLE ADJOURNMENT TO SOLICIT ADDITIONAL PROXIES, IF NECESSARY

     30  

THE MERGER

     31  

Overview

     31  

Background of the Merger

     31  

Recommendation of the Board

     44  

Reasons for the Merger

     45  

Financial Forecasts

     50  

Opinion of the Company’s Financial Advisors

     53  

Certain Effects of the Merger

     70  

Effects on the Company if the Merger Is Not Completed

     71  

Financing of the Merger

     71  

Dissenters’ Rights for Company Shareholders

     73  

Interests of the Company’s Directors and Executive Officers in the Merger

     76  

Material U.S. Federal Income Tax Consequences of the Merger

     81  

Dividends

     83  

Regulatory Approvals Required for the Merger

     83  

Delisting and Deregistration of the Company Common Shares

     84  

THE MERGER AGREEMENT

     85  

Explanatory Note Regarding the Merger Agreement

     85  

Effects of the Merger

     85  


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Closing and Effective Time of the Merger

     86  

Consideration To Be Received in the Merger

     86  

Appraisal Shares

     86  

Excluded Shares

     87  

Treatment of Equity and Equity-Based Awards

     87  

Payment for Shares

     87  

Representations and Warranties

     88  

Covenants Regarding Conduct of Business by the Company Pending the Effective Time

     90  

Reasonable Best Efforts

     92  

No Solicitation

     94  

Change in Board Recommendation

     96  

Efforts to Obtain the Company Shareholder Approval

     97  

Financing

     98  

2024 and 2025 Notes

     98  

Indemnification

     98  

Employee Benefits Matters

     99  

Additional Agreements

     99  

Conditions of the Merger

     99  

Termination

     100  

Fees and Expenses

     101  

Withholding Taxes

     102  

Amendment

     102  

Extension; Waiver

     102  

Governing Law

     103  

Specific Enforcement

     103  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     104  

MARKET PRICE AND DIVIDEND INFORMATION

     107  

HOUSEHOLDING

     108  

SHAREHOLDER PROPOSALS

     109  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     110  

Annex A     Agreement and Plan of Merger, dated as of December 21, 2019

     A-1  

Annex B    Opinion of Morgan Stanley  & Co. LLC

     B-1  

Annex C    Opinion of Moelis  & Company LLC

     C-1  

Annex D    Section 1701.84 and Section  1701.85 of the Ohio General Corporation Law

     D-1  


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CINCINNATI BELL INC.

221 East Fourth Street

Cincinnati, Ohio 45202

 

 

SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON [            ], 2020

 

 

PROXY STATEMENT

This proxy statement contains information relating to a special meeting of shareholders of Cincinnati Bell Inc., an Ohio corporation (“Cincinnati Bell”, the “Company”, “we”, “us” or “our”). All references to “Parent” refer to Charlie AcquireCo Inc., a Delaware corporation; all references to “Merger Sub” refer to Charlie Merger Sub Inc., an Ohio corporation; all references to “Brookfield Infrastructure” refer to Brookfield Asset Management’s infrastructure investment division known as the Brookfield Infrastructure Group, which owns and operates one of the largest infrastructure portfolios in the world through operating businesses that are industry leaders in their geography and sector; all references to the “Brookfield Funds” refer collectively to certain controlled investment vehicles through which Brookfield Infrastructure carries out its investment activities.

The special meeting will be held on [                    ], 2020, at [            ] local time, at [            ]. We are furnishing this proxy statement to holders of shares of common stock, par value $0.01 per share, of the Company (“Company common shares”), holders of 6 34% cumulative convertible preferred shares, without par value, of the Company (“6 34% preferred shares”) and holders of depositary shares representing one-twentieth of a 6 34% preferred share (the “depositary shares”), as part of the solicitation of proxies by the Company’s board of directors (the “Board”), for use at the special meeting and at any adjournments or postponements thereof. This proxy statement is dated [                    ], 2020 and is first being mailed to holders of Company common shares on or about [                    ], 2020.

SUMMARY TERM SHEET

This summary term sheet highlights selected information in this proxy statement and may not contain all of the information about the merger agreement, the merger or the other transactions contemplated by the merger agreement that is important to you. We have included page references in parentheses to direct you to more complete descriptions of the topics presented in this summary term sheet. You should carefully read this proxy statement in its entirety, including the annexes hereto and the other documents to which we have referred you, for a more complete understanding of the matters being considered at the special meeting. You may obtain, without charge, copies of documents incorporated by reference into this proxy statement by following the instructions under the section of this proxy statement entitled “Where You Can Find Additional Information” beginning on page [    ].

The Parties

(page [    ])

The Company, together with its wholly owned subsidiaries, delivers integrated communications solutions to residential and business customers over its fiber-optic and copper networks, including high-speed internet, video, voice and data. The Company provides service in areas of Ohio, Kentucky, Indiana and Hawaii. In addition, enterprise customers across the United States and Canada rely on CBTS and OnX, wholly owned subsidiaries of the Company, for efficient, scalable office communications systems and end-to-end IT solutions. Our common shares are traded on the New York Stock Exchange (the “NYSE”) under the trading symbol “CBB”. Our 6 34%

 

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preferred shares were deposited into a trust and the depositary shares were issued. The depositary shares are traded on the NYSE under the trading symbol “CBB.PB”. Our principal corporate office is located at 221 East Fourth Street, Cincinnati, Ohio 45202 with telephone number 513-397-9900.

Parent is a Delaware corporation that was formed solely for the purpose of entering into the merger agreement and related agreements and completing the transactions contemplated thereby. Parent has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement and related agreements. Upon completion of the transactions contemplated thereby, the Company will be a direct subsidiary of Parent. Its principal executive office is located at Brookfield Place, 181 Bay Street, Suite 300, Toronto, Canada.

Merger Sub is an Ohio corporation and a wholly owned subsidiary of Parent that was formed solely for the purpose of entering into the merger agreement and completing the transactions contemplated thereby. Merger Sub has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement and related agreements. Upon completion of the merger, Merger Sub will merge with and into the Company, and Merger Sub will cease to exist. Merger Sub’s principal executive office is located at Brookfield Place, 181 Bay Street, Suite 300, Toronto, Canada.

In connection with the merger and the other transactions contemplated by the merger agreement, the Brookfield Funds have committed to capitalize Parent, on the date of the closing of the merger, with the full amount in cash necessary to fund the aggregate merger consideration, subject to the terms and conditions of the equity funding letter from the Brookfield Funds, dated as of December 21, 2020 (the “equity funding letter”). Brookfield Infrastructure is a leading global infrastructure company with a long-standing history as an owner and operator of high-quality infrastructure assets. It has a global portfolio of assets in the utilities, transport, energy and data infrastructure sectors across North and South America, Asia Pacific and Europe. Brookfield Infrastructure is the flagship listed infrastructure company of Brookfield Asset Management, a leading global alternative asset manager with over $500 billion of assets under management.

The Merger

(page [    ])

The Company, Parent and Merger Sub entered into an Agreement and Plan of Merger (the “merger agreement”) on December 21, 2019. A copy of the merger agreement is included as Annex A to this proxy statement. Under the terms of the merger agreement, subject to the satisfaction or (to the extent permitted by applicable law) waiver of specified conditions, Merger Sub will be merged with and into the Company (the “merger”). The Company will survive the merger as a subsidiary of Parent (the “surviving corporation”).

Upon the consummation of the merger, each Company common share that is issued and outstanding immediately prior to the effective time (defined below under “The Merger Agreement—Closing and Effective Time of the Merger”) of the merger, (other than (i) Company common shares owned by the Company as treasury shares, held by Parent or Merger Sub or owned by any subsidiary of the Company or Parent (collectively, the “excluded shares”) and (ii) Company common shares with respect to which appraisal rights are properly exercised and not withdrawn or otherwise lost (“dissenting shares”)), will be converted into the right to receive $10.50 in cash, without interest (the “merger consideration”), less any applicable withholding taxes. Each 6 34% preferred share issued and outstanding immediately prior to the effective time shall remain issued and outstanding immediately following the effective time as one 6 34% cumulative convertible preferred share, without par value, of the surviving corporation, and shall not be affected by the merger (except for the effects specifically set forth in the Amended and Restated Articles of Incorporation of the Company and amendments thereto (the “Articles”)). The depositary shares will remain listed on the NYSE and registered by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) immediately following the merger.

Brookfield Infrastructure intends to cause the surviving corporation to redeem the 6 34% preferred shares (and the depositary shares representing interests in such 6 34% preferred shares) in accordance with the Articles as promptly as practicable following the completion of the merger.

 

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The Special Meeting

(page [    ])

The special meeting will be held on [ ], 2020, at [ ] local time. At the special meeting, holders of Company common shares and 6 34% preferred shares (voting as a single class) will be asked to, among other things, vote for the adoption of the merger agreement. Please see the section of this proxy statement entitled “The Special Meeting” for additional information on the special meeting, including how to vote your Company common shares and 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares).

Shareholders Entitled to Vote; Vote Required to Adopt the Merger Agreement

(page [    ])

You may vote the Company common shares and the 6 34% preferred shares (or the depositary shares representing interests in such 6 34% preferred shares) at the special meeting that you owned at the close of business on [                    ], 2020, the record date for the special meeting. As of the close of business on the record date, there were [            ] Company common shares and [            ] 6 34% preferred shares outstanding and entitled to vote. You may cast one vote for each Company common share and one vote for each 6 34% preferred share that you held on the record date. Holders of depositary shares may vote the 6 34% preferred shares represented by their depositary shares. The adoption of the merger agreement by the holders of Company common shares and 6 34% preferred shares requires the affirmative vote of shareholders holding at least two-thirds of the outstanding Company common shares and 6 34% preferred shares (voting as a single class) in each case entitled to vote thereon as of the close of business on the record date (the “Company shareholder approval”).

Background of the Merger

(page [    ])

A description of the process we undertook that led to the proposed merger, including our discussions with Brookfield Infrastructure, is included in this proxy statement under “The Merger—Background of the Merger”.

Reasons for the Merger; Recommendation of the Board

(page [    ])

After careful consideration, the Board determined to approve the merger agreement and recommend the adoption of the merger agreement by the holders of Company common shares and 6 34% preferred shares. Accordingly, the Board recommends a vote “FOR” the proposal to adopt the merger agreement. The Board also recommends a vote “FOR” the nonbinding compensation proposal and “FOR” the adjournment proposal (each, as described below under “Questions and Answers about the Special Meeting and the Merger—What proposals will be considered at the special meeting?”).

The Board believes that the merger agreement, the merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of the Company and its shareholders. For a discussion of the material factors that the Board considered in determining to recommend the adoption of the merger agreement, please see the section of this proxy statement entitled “The Merger—Reasons for the Merger” beginning on page [    ].

Opinion of the Company’s Financial Advisors

(page [    ])

Opinion of Morgan Stanley & Co. LLC (Page [    ])

Morgan Stanley & Co. LLC (“Morgan Stanley”) was retained by the Board to act as its financial advisor in connection with a potential sale of the Company. The Board selected Morgan Stanley to act as its financial

 

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advisor based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of and involvement in recent transactions in the Company’s industry and its knowledge and understanding of the business and affairs of the Company. On December 21, 2019, Morgan Stanley rendered its oral opinion, which was subsequently confirmed in writing, to the Board to the effect that, as of that date, and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in Morgan Stanley’s written opinion, the merger consideration to be received by the holders of Company common shares, pursuant to the merger agreement was fair, from a financial point of view, to the holders of Company common shares (other than Brookfield Infrastructure and its affiliates).

The full text of the written opinion of Morgan Stanley delivered to the Board, dated December 21, 2019, is attached as Annex B and incorporated by reference into this proxy statement in its entirety. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. Shareholders of the Company are urged to, and should, read the opinion carefully and in its entirety. Morgan Stanley’s opinion is directed to the Board and addresses only the fairness, from a financial point of view, of the merger consideration to be paid to the holders of Company common shares (other than Brookfield Infrastructure and its affiliates), pursuant to the merger agreement. Morgan Stanley’s opinion did not address any other aspect of the transactions contemplated by the merger agreement and did not address any other aspects or implications of the merger. Morgan Stanley’s opinion was not intended to, and does not constitute advice or a recommendation as to, how shareholders of the Company should vote at the special meeting or to take any other action with respect to the merger. The summary of Morgan Stanley’s opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of Morgan Stanley’s opinion.

For a description of the opinion that the Board received from Morgan Stanley, and for additional information, see the section entitled “The Merger—Opinion of Morgan Stanley & Co. LLC” beginning on page [    ] and Annex B to this proxy statement.

Opinion of Moelis & Company LLC (Page [    ])

At the December 21, 2019 meeting of the Board, Moelis & Company LLC (“Moelis”), financial advisor to the Company, rendered its oral opinion to the Board, confirmed by the delivery of a written opinion dated December 21, 2019, as to the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration to be received in the merger by the holders of the Company common shares.

The full text of Moelis’ written opinion dated December 21, 2019, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of the Board (solely in its capacity as such) in its evaluation of the merger. Moelis’ opinion is limited solely to the fairness, from a financial point of view, of the merger consideration to be received by the holders of the Company common shares and does not address the Company’s underlying business decision to effect the merger or the relative merits of the merger as compared to any alternative business strategies or transactions that might be available to the Company. Moelis’ opinion does not constitute a recommendation as to how any holder of securities should vote or act with respect to the merger or any other matter.

For additional information, see the section entitled “The Merger—Opinion of Moelis & Company LLC” beginning on page [    ] and Annex C to this proxy statement.

Certain Effects of the Merger

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Upon the consummation of the merger, Merger Sub will be merged with and into the Company, and the Company will continue to exist following the merger as a subsidiary of Parent.

 

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Following the consummation of the merger, Company common shares will no longer be traded on the NYSE or any other public market, and the registration of Company common shares under the Exchange Act will be terminated. Immediately following the consummation of the merger, the 6 34% preferred shares will remain outstanding and the depositary shares representing interests in such 6 34% preferred shares will remain outstanding and continue to be listed on the NYSE. Brookfield Infrastructure intends to cause the surviving corporation to redeem the 6 34% preferred shares (and the depositary shares representing interests in such 6 34% preferred shares) in accordance with the Company’s Articles as promptly as practicable following the completion of the merger.

Effects on the Company if the Merger Is Not Completed

(page [    ])

In the event that the proposal to adopt the merger agreement does not receive the Company shareholder approval, or if the merger is not completed for any other reason, the holders of Company common shares will not receive any payment for their Company common shares in connection with the merger. Instead, the Company will remain an independent public company and shareholders will continue to own their Company common shares. Under certain circumstances, if the merger agreement is terminated, the Company may be obligated to pay to Parent a termination fee. Please see the section of this proxy statement entitled “The Merger Agreement—Termination Fee” beginning on page [    ].

Treatment of Equity and Equity-Based Awards

(page [    ])

At the effective time of the merger, subject to all required withholding taxes:

 

   

each performance stock unit of the Company outstanding immediately prior to the effective time of the merger (a “Company PSU”), whether vested or unvested, will become fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company PSU, with the number of Company common shares determined based on the greater of target performance and actual performance as determined by the Board (or appropriate committee thereof) prior to the closing date of the merger, and (y) the merger consideration;

 

   

each restricted stock unit of the Company outstanding immediately prior to the effective time of the merger (a “Company RSU”), whether vested or unvested, will become fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company RSU and (y) the merger consideration;

 

   

each option to purchase Company common shares outstanding immediately prior to the effective time of the merger (a “Company Stock Option”), whether vested or unvested, will be deemed to be fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company Stock Option and (y) the excess (if any) of the merger consideration over the per share exercise price of such Company Stock Option, provided that each Company Stock Option that has an exercise price that is greater than or equal to the merger consideration will be canceled for no consideration;

 

   

each stock appreciation right relating to Company common shares outstanding immediately prior to the effective time of the merger (a “Company SAR”), whether vested or unvested, will be deemed to be fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company SAR and (y) the excess (if any) of the merger consideration over the per share base price of such Company SAR, provided that each Company SAR that has a base price that is greater than or equal to the merger consideration will be canceled for no consideration; and

 

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each notional Company common share granted under the Company’s director deferred compensation plan outstanding immediately prior to the effective time of the merger (a “Company Phantom Share”), whether vested or unvested, will become fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company Phantom Share and (y) the merger consideration.

See “The Merger Agreement—Treatment of Equity and Equity-Based Awards” beginning on page [    ].

Interests of the Company’s Directors and Executive Officers in the Merger

(page [    ])

The Company’s directors and executive officers have financial interests in the merger that may be different from, or in addition to, the interests of the Company’s shareholders generally. The members of the Board were aware of and considered these interests in reaching the determination to approve the merger agreement and recommend that the holders of Company common shares and 6 34% preferred shares (voting as a single class) vote their Company common shares or 6 34% preferred shares, as applicable, to adopt the merger agreement. These interests may include:

 

   

each outstanding Company PSU, Company RSU, Company Stock Option, Company SAR and Company Phantom Share will fully vest and be cashed out upon the effective time of the merger (in each case as described below in “The Merger—Treatment of Equity and Equity-Based Awards”);

 

   

each of the Company’s executive officers is party to an individual employment agreement with the Company that provides severance and other benefits in the case of a “qualifying termination” following a change of control, which will include the completion of the merger (as described below in The Merger—Interests of the Company’s Directors and Executive Officers in the Merger—Severance Entitlements”);

 

   

all employees of the Company (including the executive officers) are eligible to receive cash-based long-term incentive awards, retention bonuses or completion bonuses, the aggregate amount of which may not exceed $17.5 million. As of the date of this proxy statement, although no determinations have been made as to whether any executive officer will receive any such bonuses, the estimated aggregate value of the cash-based long-term incentive awards the Company executive officers would be entitled to is $5,530,000;

 

   

all participants (including the executive officers) in the Company’s annual bonus plan will receive a pro rata bonus payment based on the portion of the plan year elapsed prior to the effective time of the merger and the Company’s determination of achievement of performance goals; and

 

   

the Company’s directors and executive officers are entitled to continued indemnification and insurance coverage under the merger agreement and the Company’s organizational documents.

Please see the section entitled “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page [    ] of this proxy statement for additional information about these financial interests.

Common Share Ownership of Directors and Executive Officers

(page [    ])

As of January 15, 2020, the directors and executive officers of the Company beneficially owned in the aggregate 1,373,152 Company common shares, or approximately 2.72% of the outstanding Company common shares, and no 6 34% preferred shares. We currently expect that each of these individuals will vote all of his or her shares in favor of each of the proposals to be presented at the special meeting.

 

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Financing of the Merger

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Parent’s obligation to complete the merger is not contingent upon receipt by Parent of any financing. Parent plans to fund the merger consideration with committed equity financing and debt financing, as described below.

Parent has obtained equity financing commitments from the Brookfield Funds pursuant to the equity funding letter, the aggregate proceeds of which will be used to provide the full amount in cash as necessary to fund (i) the aggregate merger consideration, (ii) the repayment or redemption of any indebtedness to be repaid or redeemed by the Company and its subsidiaries pursuant to the merger agreement and (iii) the payment of all fees, costs and expenses required to be paid by Parent or Merger Sub at or prior to the closing of the merger, in connection with the merger and the other transactions contemplated by the merger agreement (the “Expense Amount”), which shall be reduced by the proceeds of any debt financing received by Parent at the closing of the merger, if any, to the extent that the proceeds of the debt financing are actually used to pay the merger consideration (in aggregate, the “Commitment”).

Additionally, Bank of America, N.A. and BofA Securities, Inc. (together, “Bank of America”), Bank of Montreal and BMO Capital Markets Corp. (together, “BMO”), Citigroup Global Markets Inc. (“Citi”), The Bank of Nova Scotia (“Scotia”), The Toronto-Dominion Bank, New York Branch and TD Securities (USA) LLC (together, “TD”) and Wells Fargo Bank, National Association and Wells Fargo Securities, LLC (together, “Wells Fargo” and together with Bank of America, BMO, Citi, Scotia and TD, the “debt financing sources”) committed to provide Merger Sub a senior secured term loan facility in an amount of up to $920 million and senior secured revolving facility in an amount of up to $200 million (collectively, the “Facilities”), which may be used to refinance existing debt and pay a portion of the aggregate merger consideration to be paid to holders of Company common shares pursuant to the merger agreement to the extent that Brookfield Infrastructure does not issue equity or debt, or obtain alternative financing, in lieu of such financing at or prior to the closing of the merger.

Guaranty

(see page [    ])

Subject to the terms and conditions set forth in the equity funding letter, the Brookfield Funds have guaranteed the payment obligations of Parent with respect to all (i) indemnification and reimbursement obligations of Parent and Merger Sub under the merger agreement and all monetary damages or losses suffered or incurred by the Company as a result of any breach or failure to perform by Parent or Merger Sub under the merger agreement, (ii) reasonable documented out-of-pocket costs and expenses of the Company in connection with the successful enforcement of Parent’s payment obligations under clause (i) above and (iii) certain reasonable documented out-of-pocket costs and expenses of the Company incurred pursuant to the merger agreement (collectively, the “Guaranteed Costs”). The Brookfield Funds’ obligations under its guaranty are subject to an aggregate cap of $578,017,192.

Conditions of the Merger

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Each party’s obligation to consummate the merger is subject to the satisfaction or (to the extent permitted by law) waiver, on or prior to the closing date of the merger (the “closing date”), of the following conditions:

 

   

no applicable law and no judgment, preliminary, temporary or permanent, or other legal restraint and no binding order or determination by any governmental entity (collectively, “legal restraints”) shall be in effect that prevents, restrains, enjoins, makes illegal or otherwise prohibits the consummation of the merger;

 

   

the waiting period (including any extension thereof) applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), shall have been terminated or shall have expired and Competition Act (Canada) Compliance (as defined under the section entitled “The Merger—Regulatory Approvals Required for the Merger”) shall have been obtained;

 

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the receipt of CFIUS Approval (as defined under the section entitled “The Merger—Regulatory Approvals Required for the Merger”) ;

 

   

certain FCC consents and state regulatory consents required in connection with the merger shall have been obtained, shall not be subject to agency reconsideration or judicial review, and the time for any person to petition for agency reconsideration or judicial review shall have expired;

 

   

the receipt of the Company shareholder approval;

 

   

subject to certain materiality and other qualifiers, the accuracy of the representations and warranties of the other party; and

 

   

performance in all material respects by the other party of its obligations under the merger agreement.

In addition, Parent’s and Merger Sub’s obligation to consummate the merger is also subject to (i) the absence of any event or development that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on the Company (as defined in the section entitled “The Merger Agreement—Representations and Warranties”) and (ii) the absence of a Burdensome Condition (as defined below in the section entitled “Regulatory Approvals Required for the Merger”).

The consummation of the merger is not conditioned upon Parent’s receipt of financing.

Before the closing, each of the Company and Parent may waive any of the conditions to its obligation to consummate the merger even though one or more of the conditions described above has not been met, except where waiver is not permitted by law.

Regulatory Approvals Required for the Merger

(page [    ])

The consummation of the merger is subject to review under the HSR Act, the DPA and the Competition Act (Canada). As described above in the section entitled “Conditions of the Merger”, the obligations of the Company and Parent to effect the merger are subject to, among other things, (i) the waiting period (and any extension thereof) applicable to the merger under the HSR Act shall have been terminated or shall have expired, (ii) the receipt of CFIUS Approval, (iii) Competition Act (Canada) Compliance (as defined under the section entitled “The Merger—Regulatory Approvals Required for the Merger”) shall have been obtained, and (iv) the receipt of certain FCC consents and state regulatory consents.

The merger agreement includes covenants obligating each of the parties to use reasonable best efforts to cause the merger to be consummated as promptly as practicable and to take certain actions to resolve objections under any antitrust laws. In addition, Parent has agreed that its reasonable best efforts include taking all actions necessary to obtain the required approvals, including (i) contesting and resisting legal actions challenging the merger and the other transactions contemplated by the merger agreement as violative of any law, (ii) attempting to repeal laws and challenging any judgment, injunction or other restraint that would make the merger and the other transactions contemplated thereby illegal, (iii) entering into a consent decree, hold separate order, or otherwise committing to divest businesses, product lines, assets or operations, (iv) agreeing to operational restrictions and (v) otherwise taking actions that would limit its or its affiliates ability to retain any businesses, product lines, assets or operations of Parent or any of its affiliates or the Company or any of its subsidiaries. Parent is not, however, required to take any of the foregoing actions that, individually or in the aggregate, would be reasonably likely to have a material adverse effect on Parent and its affiliates (taken as a whole) or the Company and its subsidiaries (taken as a whole) (a “Burdensome Condition”).

No Solicitation; Board Recommendation

(page [    ])

The merger agreement generally restricts the Company’s ability to directly or indirectly solicit takeover proposals (as defined below under “The Merger Agreement—No Solicitation”) from third parties (including by

 

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furnishing non-public information), to participate in discussions or negotiations with third parties regarding any takeover proposal, or to waive, terminate, modify, amend, release or assign any provisions of any confidentiality or standstill agreement (or similar agreement) to which it is a party or fail to enforce the provisions of any such agreement. Under certain circumstances, however, and in compliance with certain obligations contained in the merger agreement, the Company is permitted to engage in negotiations with, and provide information to, third parties that have made an unsolicited takeover proposal if the Board determines in good faith, after consultation with its financial advisors and outside legal counsel, that the failure to take such actions would reasonably be expected to be inconsistent with its fiduciary duties and that such takeover proposal constitutes or is reasonably likely to lead to a superior proposal (as defined below under “The Merger Agreement—No Solicitation”).

Under certain circumstances, the Company is permitted to terminate the merger agreement prior to the receipt of the Company shareholder approval in connection with entering into a definitive agreement with respect to a superior proposal, subject to the prior or concurrent payment by the Company of a $17.97 million termination fee to Parent.

Termination

(page [    ])

The merger agreement may be terminated at any time prior to the effective time of the merger under the following circumstances:

 

   

by mutual written consent of the Company and Parent;

 

   

by either the Company or Parent:

 

   

if the merger is not completed by March 20, 2021, subject to a three-month extension under certain circumstances;

 

   

certain legal restraints regarding the merger become final and nonappealable;

 

   

if the Company’s shareholders fail to adopt the merger agreement at the special meeting; or

 

   

the other party breaches the merger agreement in a way that would entitle the party seeking to terminate the agreement not to complete the merger, subject to the right of the breaching party to take good faith efforts to cure the breach;

 

   

by Parent, prior to the receipt of the Company shareholder approval, in the event that a company adverse recommendation change (as defined in the section entitled “The Merger Agreement—No Solicitation”) occurs; or

 

   

by the Company, prior to the receipt of the Company shareholder approval, to enter into a definitive agreement constituting a superior proposal (as defined in the section entitled “The Merger Agreement—No Solicitation”).

Termination Fee

(page [    ])

With the exception of the termination fee of $17.97 million to be paid by the Company to Parent under certain circumstances, all fees and expenses incurred in connection with the merger and the other transactions contemplated by the merger agreement will be paid by the party incurring such fees and expenses, whether or not such transactions are completed. For a description of certain fees and expenses incurred by the parties in connection with this proxy statement, see the section of this proxy statement titled “Special Meeting—Solicitation of Proxies” beginning on page [    ].

The Company may be obligated to pay Parent a termination fee of $17.97 million if prior to the receipt of the Company shareholder approval, the merger agreement is terminated under certain circumstances, such as

 

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(i) termination by Parent in the event that the Board makes a company adverse recommendation change (as defined in the section entitled “The Merger Agreement—Change in Board Recommendation” beginning on page [    ]) or (ii) termination by the Company to enter into a definitive agreement constituting a superior proposal.

Dissenters’ Rights Available to Company Shareholders

(page [    ])

If the merger agreement is adopted by the Company’s shareholders, Company shareholders who do not vote in favor of the adoption of the merger agreement and who properly demand payment of fair cash value of their shares are entitled to certain dissenters’ rights pursuant to Sections 1701.84 and 1701.85 of the Ohio General Corporation Law (the “OGCL”). Section 1701.85 generally provides that Company shareholders will not be entitled to such rights without strict compliance with the procedures set forth in Section 1701.85, and failure to timely take any one of the required steps may result in the termination or waiver of such rights. Specifically, any Company shareholder who is a record holder of Company common shares or 6 34% preferred shares on [            ], 2020, the record date for the special meeting, and whose shares are not voted in favor of the adoption of the merger agreement may be entitled to be paid the “fair cash value” of such shares after the completion of the merger in lieu of any applicable merger consideration.

To be entitled to such payment, a shareholder must, among other things, deliver to the Company a written demand for payment of the fair cash value of the shares held by such shareholder with the information provided for in Section 1701.85(A)(4) of the OGCL before the vote to adopt the merger agreement is taken, not vote in favor of the adoption of the merger agreement, and otherwise comply with Section 1701.85. A shareholder’s failure to vote against the adoption of the merger agreement will not constitute a waiver of such shareholder’s dissenters’ rights as long as such shareholder does not vote in favor of the adoption of the merger agreement. However, a proxy submitted but not marked to specify voting instructions will be voted in favor of the adoption of the merger agreement and will be deemed a waiver of dissenters’ rights. Any written demand must specify the shareholder’s name and address, the number and class of shares held by him, her or it on the record date, and the amount claimed as the “fair cash value” of such shares of common stock.

Shareholders holding Company common shares considering seeking payment of fair cash value of their shares should be aware that the “fair cash value” of their shares as determined pursuant to Section 1701.85 of the OGCL could be more than, the same as, or less than the value of the consideration they would receive pursuant to the merger if they did not seek payment of fair cash value of their shares. For shares listed on a national securities exchange (such as the NYSE, on which the Company common shares are currently listed) immediately before the effective time of the merger, the fair cash value will be the closing sale price of the shares as of the close of trading on the day before the vote of the Company’s shareholders on the adoption of the merger agreement.

Please see the section of this proxy statement entitled “The Merger—Appraisal Rights for Company Shareholders” beginning on page [    ] and the text of Sections 1701.84 and 1701.85, which is attached as Annex D to this proxy statement and incorporated herein by reference, for more specific information on the procedures to be followed in exercising dissenters’ rights. Shareholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of dissenters’ rights due to the complexity of the appraisal process and because failure to follow fully and precisely the procedural requirements of the statute may result in termination or waiver of such rights.

Material U.S. Federal Income Tax Consequences of the Merger

(page [    ])

The receipt of cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Generally, for U.S. federal income tax purposes, if you are a holder of Company common shares who is a U.S. holder (as defined below in the section of this proxy statement entitled “The Merger—Material U.S.

 

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Federal Income Tax Consequences of the Merger”), you will recognize capital gain or loss equal to the difference between the amount of cash you receive in the merger and your adjusted tax basis in the Company common shares converted into cash in the merger. If you are a holder of Company common shares who is a non-U.S. holder (as defined below in the section of this proxy statement entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”), the merger will generally not be taxable to you under U.S. federal income tax laws unless you have certain connections to the United States or we are a USRPHC (as defined below in the section of this proxy statement entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) and certain other conditions are met.

Because we believe we may be, or may have been during the applicable period, a USRPHC, a non-U.S. holder may be subject to U.S. federal income tax on any gain recognized upon the receipt of cash pursuant to the merger. Whether or not a non-U.S. holder will be subject to U.S. federal income tax depends on the number of Company common shares such non-U.S. Holder holds and whether such shares are considered to be “regularly traded” on an established securities market within the meaning of applicable Treasury Regulations issued by the IRS. Because individual circumstances may differ, we recommend that you consult your own tax advisor to determine the particular tax effects to you.

You should read the section of this proxy statement entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page [ ] for a more complete discussion of the material U.S. federal income tax consequences of the merger.

Current Price of Common Shares

(page [    ])

The closing sale price of Company common shares on the NYSE on [ ], 2020 was $[ ]. You are encouraged to obtain current market quotations for Company common shares in connection with voting your Company common shares.

Additional Information

(page [    ])

You can find more information about the Company in the periodic reports and other information we file with the U.S. Securities and Exchange Commission (the “SEC”). The information is available at the SEC’s public reference facilities and at the website maintained by the SEC at www.sec.gov.

 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to briefly address some commonly asked questions regarding the special meeting and the merger. These questions and answers may not address all questions that may be important to you as a holder of Company common shares or 6 34% preferred shares. You should read the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement.

 

Q:

Why am I receiving this proxy statement?

 

A:

On December 21, 2019, the Company entered into the merger agreement with Parent and Merger Sub. Pursuant to the merger agreement, Merger Sub will be merged with and into the Company, with the Company surviving the merger as a subsidiary of Parent.

You are receiving this proxy statement in connection with the solicitation of proxies by the Board in favor of the proposal to adopt the merger agreement and the other matters to be voted on at the special meeting described below under “—What proposals will be considered at the special meeting?

 

Q:

As a holder of Company common shares, what will I receive in the merger?

 

A:

If the merger is completed, you will be entitled to receive $10.50 in cash, without interest and less any applicable withholding taxes, for each Company common share that you own immediately prior to the effective time of the merger.

The receipt of cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Please see the section of this proxy statement entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page [    ] for a more detailed description of the United States federal income tax consequences of the merger. You should consult your own tax advisor for a full understanding of how the merger will affect your federal, state, local and/or non-U.S. taxes.

 

Q:

What will happen to outstanding Company equity compensation awards in the merger?

At the effective time of the merger, subject to all required withholding taxes:

 

   

each Company PSU outstanding immediately prior to the effective time of the merger, whether vested or unvested, will become fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company PSU, with the number of Company common shares determined based on the greater of target performance and actual performance as determined by the Board (or appropriate committee thereof) prior to the closing date of the merger and (y) the merger consideration;

 

   

each Company RSU outstanding immediately prior to the effective time of the merger, whether vested or unvested, will become fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company RSU and (y) the merger consideration;

 

   

each Company Stock Option outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be deemed to be fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company Stock Option and (y) the excess (if any) of the merger consideration over the per share exercise price of such Company Stock Option, provided that each Company Stock Option that has an exercise price that is greater than or equal to the merger consideration will be canceled for no consideration;

 

   

each Company SAR outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be deemed to be fully vested and will be canceled and converted into the right to

 

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receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company SAR and (y) the excess (if any) of the merger consideration over the per share base price of such Company SAR, provided that each Company SAR that has a base price that is greater than or equal to the merger consideration will be canceled for no consideration; and

 

   

each Company Phantom Share outstanding immediately prior to the effective time of the merger, whether vested or unvested, will become fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company Phantom Share and (y) the merger consideration.

See “The Merger Agreement—Treatment of Equity and Equity-Based Awards” beginning on page [    ].

 

Q:

What will happen to the 6 34% preferred shares and the depositary shares representing interests in such 6 34% preferred shares in the merger?

 

A:

If the merger is completed, each 6 34% preferred share and depositary share representing one-twentieth of a 6 34% preferred share issued and outstanding immediately prior to the effective time of the merger will remain issued and outstanding immediately following the effective time of the merger.

After the effective time of the merger, the Company will be required either to (i) offer to repurchase the 6 34% preferred shares on the date that is 75 days after the Company gives notice of the merger for their liquidation preference of $1,000 per share (or $50 per depositary share) plus any accrued and unpaid dividends or, if such offer is not made, (ii) modify the conversion ratio applicable to the 6 34% preferred shares so that upon conversion the holders of the 6 34% preferred shares will have the right to receive an amount in cash equal to the liquidation preference of $1,000 per share (or $50 per depositary share) plus any accrued and unpaid dividends. Parent intends to cause the surviving corporation to redeem the 6 34% preferred shares (and the depositary shares representing interests in such 6 ¾% preferred shares) in accordance with the Articles as promptly as practicable following the completion of the merger.

 

Q:

When and where is the special meeting of our shareholders?

 

A:

The special meeting will be held on [                    ], 2020, at [            ] local time, at [            ].

 

Q:

Who may attend the special meeting? Are there procedures for attending?

 

A:

Only holders of record of Company common shares, 6 34% preferred shares or depositary shares representing interests in such 6 34% preferred shares as of [ ], 2020, the record date for the special meeting, or their legal proxy holders may attend the special meeting or any adjournments or postponements thereof. Due to space constraints and other security considerations, we will not be able to accommodate the guests of either shareholders or their legal proxy holders.

To be admitted to the special meeting, you must present valid proof of ownership of Company common shares, 6 34% preferred shares or depositary shares representing interests in such 6 34% preferred shares as of [                    ], 2020, or a valid legal proxy. All attendees must also provide a form of government-issued photo identification. If you arrive at the special meeting without the required items, we will admit you only if we are able to verify that you are a shareholder of the Company as of [                    ], 2020. If you hold any Company common shares, 6 34% preferred shares or depositary shares representing interests in such 6 34% preferred shares through a brokerage firm, bank, trust, custodian or other nominee (we refer to those organizations collectively as “broker”) and wish to vote in person, you must obtain a legal proxy issued in your name from your broker or other nominee.

 

Q:

Who is entitled to vote at the special meeting?

 

A:

At the special meeting, holders of record of Company common shares or 6 34% preferred shares as of the close of business on [                    ], 2020, the record date for the special meeting, will be entitled to vote the

 

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  Company common shares or 6 34% preferred shares (voting as a single class) they held on the record date at the special meeting. As of the close of business on the record date, there were [    ] Company common shares outstanding and entitled to vote and [    ] 6 34% preferred shares outstanding and entitled to vote. Each shareholder is entitled to one vote for each Company common share or 6 34% preferred share held by such shareholder on the record date on each of the proposals presented in this proxy statement. At the special meeting, holders of depositary shares representing one-twentieth of a 6 34% preferred share will be entitled to vote the number of 6 34% preferred shares represented by their depositary shares.

If on [            ], 2020, you were a “record” holder of Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) (that is, if you held Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) in your own name in the share transfer records maintained by our transfer agent, Computershare Investor Services, LLC (“Computershare”)), you may vote in person at the special meeting or by proxy. Whether or not you intend to attend the special meeting, we encourage you to vote now, online, by phone or proxy card to ensure that your vote is counted.

If on [            ], 2020, you were the beneficial owner of Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) held in “street name” (that is, if you held Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) through your broker) then these materials are being forwarded to you by your broker. You may direct your broker how to vote your Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares), as applicable, by following the voting instructions on the form provided by your broker. If you hold any Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) through your broker and wish to attend the special meeting and vote in person, you may attend the special meeting but may not be able to vote in person unless you first obtain a legal proxy issued in your name from your broker or other nominee.

A list of Company shareholders of record as of the record date who are entitled to vote at the special meeting will be open for examination by any shareholder at the meeting.

 

Q:

What proposals will be considered at the special meeting?

 

A:

At the special meeting, holders of Company common shares and holders of 6 34% preferred shares (voting as a single class) will be asked to consider and vote on the following proposals:

 

   

a proposal to adopt the merger agreement;

 

   

a nonbinding, advisory proposal to approve the compensation that may be paid or become payable to the Company’s named executive officers in connection with, or following, the consummation of the merger (this nonbinding, advisory proposal (the “nonbinding compensation proposal”), relates only to contractual obligations of the Company in existence prior to consummation of the merger that may result in a payment to the Company’s named executive officers in connection with, or following, the consummation of the merger and does not relate to any new compensation or other arrangements between the Company’s named executive officers and Parent or, following the merger, the surviving corporation and its subsidiaries); and

 

   

a proposal to adjourn the special meeting to a later date or time, if necessary or appropriate, to solicit additional proxies in the event there are insufficient votes at the time of the special meeting or any adjournment or postponement thereof to adopt the merger agreement (the “adjournment proposal”).

 

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Q:

What constitutes a quorum for purposes of the special meeting?

 

A:

A majority of all of the issued and outstanding Company common shares and 6 34% preferred shares entitled to vote, present in person or represented by proxy, constitutes a quorum. Abstentions will be counted for purposes of determining the presence of a quorum. “Broker non-votes” (as described under “The Special Meeting—Quorum”) will not be counted for purposes of determining the presence of a quorum unless your broker) has been instructed to vote on at least one of the proposals presented in this proxy statement. If, however, less than a quorum is present or represented at the special meeting, the holders of Company common shares and 6 34% preferred shares representing a majority in interest present or represented and entitled to vote at the meeting may adjourn the meeting.

 

Q:

What vote of our shareholders is required to approve each of the proposals?

 

A:

The adoption of the merger agreement requires the affirmative vote of shareholders holding at least two-thirds of the outstanding Company common shares and 6 34% preferred shares (voting as a single class), in each case entitled to vote thereon as of the close of business on the record date. Abstentions, failures to vote and “broker non-votes” will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Note that you may vote to adopt the merger agreement and vote not to approve the nonbinding compensation proposal or adjournment proposal and vice versa.

The approval of the nonbinding compensation proposal requires the affirmative vote of a majority of the Company common shares and 6 34% preferred shares (voting as a single class) present and entitled to vote on that proposal at the special meeting. Assuming a quorum is present at the special meeting, failures to vote and “broker non-votes” will have no effect on the outcome of the nonbinding compensation proposal and abstentions will have the same effect as a vote “AGAINST” the proposal.

The approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast by holders of Company common shares and 6 34% preferred shares (voting as a single class) on such proposal at the special meeting. Assuming a quorum is present at the special meeting, abstentions, failures to vote and “broker non-votes” will have no effect on the outcome of the adjournment proposal. If, however, less than a quorum is present or represented at the special meeting, the holders of Company common shares and 6 34% preferred shares representing a majority in interest present or represented and entitled to vote at the meeting may adjourn the meeting.

 

Q:

How does the Board recommend that I vote?

 

A:

The Board recommends a vote “FOR” the proposal to adopt the merger agreement, “FOR” the nonbinding compensation proposal and “FOR” the adjournment proposal.

For a discussion of the factors that the Board considered in determining to recommend the adoption of the merger agreement, please see the section of this proxy statement entitled “The Merger—Reasons for the Merger” beginning on page [    ]. In addition, in considering the recommendation of the Board with respect to the merger agreement, you should be aware that some of the Company’s directors and executive officers have interests that may be different from, or in addition to, the interests of the Company’s shareholders generally. Please see the section of this proxy statement entitled “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page [    ].

The Board also recommends a vote “FOR” the nonbinding compensation proposal and a vote “FOR” the adjournment proposal.

 

Q:

How do the Company’s directors and executive officers intend to vote?

 

A:

As of January 15, 2020, the directors and executive officers of the Company beneficially owned in the aggregate 1,373,152 Company common shares, or approximately 2.72% of the outstanding Company

 

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  common shares, and no 6 34% preferred shares. Although none of the directors or executive officers is obligated to vote to adopt the merger agreement, we currently expect that each of these individuals will vote all of his or her shares in favor of each of the proposals to be presented at the special meeting.

 

Q:

Do any of the Company’s directors or executive officers have any interests in the merger that are different from, or in addition to, my interests as a shareholder?

 

A:

In considering the proposals to be voted on at the special meeting, you should be aware that the Company’s directors and executive officers have financial interests in the merger that may be different from, or in addition to, your interests as a shareholder. The members of the Board were aware of and considered these interests in reaching the determination to adopt the merger agreement and recommend that the holders of Company common shares and 6 34% preferred shares (voting as a single class) vote their Company common shares or 6 34% preferred shares, as applicable, to adopt the merger agreement. These interests may include:

 

   

each outstanding Company PSU, Company RSU, Company Stock Option, Company SAR and Company Phantom Share will fully vest and will be cashed out upon the effective time of the merger (in each case as described below in “The Merger—Treatment of Equity and Equity-Based Awards”);

 

   

each of the Company’s executive officers is party to an individual employment agreement with the Company that provides severance and other benefits in the case of a “qualifying termination” following a change of control, which will include the completion of the merger (as described below in The Merger—Interests of the Company’s Directors and Executive Officers in the Merger—Severance Entitlements”);

 

   

all employees of the Company (including the executive officers) are eligible to receive cash-based long-term incentive awards, retention bonuses or completion bonuses, the aggregate amount of which may not exceed $17.5 million. As of the date of this proxy statement, although no determinations have been made as to whether any executive officer will receive any such bonuses, the estimated aggregate value of the cash-based long-term incentive awards the Company executive officers would be entitled to is $5,530,000;

 

   

all participants (including the executive officers) in the Company’s annual bonus plan will receive a pro rata bonus payment based on the portion of the plan year elapsed prior to the effective time of the merger and the Company’s determination of achievement of performance goals; and

 

   

the Company’s directors and executive officers are entitled to continued indemnification and insurance coverage under the merger agreement and the Company’s organizational documents.

For more information, please see the section of this proxy statement entitled “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page [    ].

 

Q:

What happens if I transfer my Company common shares before the special meeting?

 

A:

The record date for the special meeting is earlier than the date of the special meeting. If you own Company common shares on the record date but transfer your shares after the record date but prior to the special meeting, you will retain your right to vote such shares at the special meeting. However, the right to receive the merger consideration will pass to the person to whom you transferred your shares.

 

Q:

What happens if I transfer my 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) before the special meeting?

 

A:

The record date for the special meeting is earlier than the date of the special meeting. If you own 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) on the record

 

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  date but transfer your shares after the record date but prior to the special meeting, you will retain your right to vote such shares at the special meeting.

 

Q:

How do I cast my vote if I am a shareholder of record?

 

A:

If you are a shareholder with Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) registered in your name, you may vote such shares in person at the special meeting or by submitting a proxy for the special meeting via the internet, by telephone or by completing, signing, dating and mailing the enclosed proxy card in the envelope provided.

For more detailed instructions on how to vote using one of these methods, please see the section of this proxy statement entitled “The Special Meeting—Voting Procedures” beginning on page [    ].

If you are a holder of record of Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) and you submit a proxy card or voting instructions but do not direct how to vote on each item, the persons named as proxies will vote in favor of the proposal to adopt the merger agreement, the nonbinding compensation proposal and the adjournment proposal.

Whether or not you plan to attend the special meeting, we urge you to vote now to ensure your vote is counted. You may still attend the special meeting and vote in person if you have already voted by proxy.

 

Q:

How do I cast my vote if my Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) are held in “street name” by my broker?

 

A:

If you hold your shares in street name,” in other words your shares are held in the name of your broker, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from the Company. In order to vote, complete and mail the proxy card received from your broker to ensure that your vote is counted. Alternatively, you may vote by telephone or over the internet as instructed by your broker. To vote in person at the special meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker included with these proxy materials or contact your broker to request a proxy form.

Without following those instructions, your shares will not be voted, which will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement but will have no effect on either the nonbinding compensation proposal or the adjournment proposal.

 

Q:

What will happen if I abstain from voting or fail to vote on any of the proposals?

 

A:

If you abstain from voting, fail to cast your vote in person or by proxy or fail to give voting instructions to your broker, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

Assuming a quorum is present at the special meeting, failures to vote and “broker non-votes” will have no effect on the outcome of the nonbinding compensation proposal and abstentions will have the same effect as a vote “AGAINST” the proposal.

Assuming a quorum is present at the special meeting, abstentions, failures to vote and “broker non-votes” will have no effect on the outcome of the adjournment proposal.

 

Q:

Can I change my vote after I have delivered my proxy?

 

A:

Yes. For shareholders of record, any time after you have submitted a proxy card and before it is voted at the special meeting, you may revoke or change your vote in one of three ways:

 

   

You may submit a new proxy card bearing a later date (which automatically revokes the earlier proxy or voting instructions) whether made on the internet, by telephone or by mail.

 

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You may submit a written notice of revocation to the Company’s Corporate Secretary at 221 East Fourth Street, Cincinnati, Ohio 45202.

 

   

You may attend the special meeting, give written notice of your proxy revocation and vote in person.

Please note that if you want to revoke your proxy by sending a new proxy card or a written notice of revocation to the Company, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by the Company prior to the special meeting.

If you hold your shares in “street name,” you will need to revoke or resubmit your proxy through your broker and in accordance with its procedures. If your broker allows you to submit a proxy via the internet or by telephone, you may be able to change your vote by submitting a new proxy via the internet or by telephone or by mail. In order to attend the special meeting and vote in person, you will need to obtain a proxy for your broker, the shareholder of record.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement or multiple proxy or voting instruction cards. For example, if you hold your Company common shares, 6 34% preferred shares and/or depositary shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold Company common shares, 6 34% preferred shares or depositary shares, as applicable. If you are a holder of record of Company common shares, 6 34% preferred shares or depositary shares and your shares are registered in more than one name, you will receive more than one proxy card. Please submit each proxy and voting instruction card that you receive to ensure that all your shares are voted.

 

Q:

If I hold my Company common shares in certificated form, should I send in my share certificates now?

 

A:

No. As promptly as practicable after the effective time of the merger, and not later than the third business day after the effective time of the merger, the paying agent will mail to each holder of record of Company common shares that have been converted into the right to receive the merger consideration a letter of transmittal and instructions describing the procedure for surrendering such shares in exchange for the merger consideration. If you hold your shares in certificated form, you will receive your cash payment after the paying agent receives your share certificates and any other documents requested in the instructions. You should not return your share certificates with the enclosed proxy card, and you should not forward your share certificates to the paying agent without a letter of transmittal. If you hold Company common shares in non-certificated book-entry form, you will not be required to deliver a share certificate, and you will receive your cash payment after the paying agent receives the documents requested in the instructions.

 

Q:

Am I entitled to exercise appraisal rights instead of receiving the merger consideration for my Company common shares or 6 34% preferred shares?

 

A:

Yes. Holders of Company common shares or 6 34% preferred shares are entitled to dissenters’ rights in connection with the merger. For additional information, please see the section of this proxy statement entitled “The Merger—Appraisal Rights” beginning on page [    ].

 

Q:

When is the merger expected to be completed?

 

A:

We currently anticipate the merger to close by the end of 2020, but we cannot be certain when or if the conditions of the merger will be satisfied or (if permissible under applicable law) waived. The merger cannot be completed until the conditions to closing are satisfied or (if permissible under applicable law) waived, including the adoption of the merger agreement by the holders of Company common shares and 6 34% preferred shares (voting as a single class) at the special meeting and the receipt of certain regulatory approvals.

 

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Q:

What effect will the merger have on the Company?

 

A:

If the merger is consummated, Merger Sub will be merged with and into the Company, and the Company will continue to exist following the merger as a subsidiary of Parent. Following such consummation of the merger, Company common shares will no longer be traded on the NYSE or any other public market, and the registration of Company common shares under the Exchange Act will be terminated.

Immediately following the consummation of the merger, the 6 34% preferred shares will remain outstanding and the depositary shares representing interests in such 6 34% preferred shares will remain outstanding and continue to be listed on the NYSE.

After the effective time of the merger, the Company will be required either to (i) offer to repurchase the 6 34% preferred shares on the date that is 75 days after the Company gives notice of the merger for their liquidation preference of $1,000 per share (or $50 per depositary share) plus any accrued and unpaid dividends or, if such offer is not made, (ii) modify the conversion ratio applicable to the 6 34% preferred shares so that upon conversion the holders of the 6 34% preferred shares will have the right to receive an amount in cash equal to the liquidation preference of $1,000 per share (or $50 per depositary share) plus any accrued and unpaid dividends. Parent intends to cause the surviving corporation to redeem the 6 34% preferred shares (and the depositary shares representing interests in such 6 34% preferred shares) in accordance with the Articles as promptly as practicable following the completion of the merger.

 

Q:

What happens if the merger is not completed?

 

A:

In the event that the proposal to adopt the merger agreement does not receive the required approval by the affirmative vote of shareholders holding at least two-thirds of the outstanding Company common shares and 6 34% preferred shares (voting as a single class), or if the merger is not completed for any other reason, the holders of Company common shares will not receive any payment for their Company common shares in connection with the merger. Instead, the Company will remain an independent public company and shareholders will continue to own their Company common shares. The Company common shares will continue to be registered under the Exchange Act and listed and traded on the NYSE. Under certain circumstances, if the merger is not completed, the Company may be obligated to pay to Parent a termination fee. Please see the section of this proxy statement entitled “The Merger Agreement—Termination Fee” beginning on page [    ].

 

Q:

What is householding and how does it affect me?

 

A:

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single proxy statement addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for shareholders and cost savings for companies.

Brokers with account holders who are Company shareholders may be “householding” our proxy materials. A single proxy statement will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, please notify your broker and direct your written request to Cincinnati Bell Inc., Attention: Investor Relations, 221 East Fourth Street, Cincinnati, Ohio 45202 or call 1-800-345-6301. Shareholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should contact their broker.

 

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Q:

Who can help answer my questions?

 

A:

If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact Innisfree M&A Incorporated (“Innisfree”), which is acting as the Company’s proxy solicitation agent in connection with the merger, toll free at 877-825-8971. Brokers may call collect at 212-750-5833.

 

 

LOGO

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Shareholders Call Toll-Free: 877-825-8971

Brokers Call Collect: 212-750-5833

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain of the statements in this proxy statement contain forward-looking statements regarding future events and results that are subject to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, including, among other things, statements regarding the proposed merger and the expected timetable for completing the proposed merger, are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “predicts,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “will”, “may,” “proposes,” “potential,” “could,” “should,” “outlook,” or variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of future financial performance, anticipated growth and trends in businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause actual results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: (i) the risk that the proposed merger with Parent may not be completed in a timely manner or at all; (ii) the failure to receive, on a timely basis or otherwise, the Company shareholder approval; (iii) the possibility that competing offers or acquisition proposals for the Company will be made; (iv) the possibility that any or all of the various conditions to the consummation of the merger may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); (v) the occurrence of any event, change or other circumstance that could give rise to the termination of the transaction, including in circumstances which would require the Company to pay a termination fee or other expenses; (vi) the effect of the announcement or pendency of the transaction on the Company’s ability to retain and hire key personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does business, or its operating results and business generally; (vii) risks related to diverting management’s attention from the Company’s ongoing business operations; (viii) the risk that shareholder litigation in connection with the transaction may result in significant costs of defense, indemnification and liability and (ix) (A) those discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and in our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 and, in particular, the risks discussed under the caption “Risk Factors” in Item 1A, and (B) those discussed in other documents the Company filed with the Securities and Exchange Commission. Actual results may differ materially and adversely from those expressed in any forward-looking statements. The Company undertakes no, and expressly disclaims any, obligation to revise or update any forward-looking statements for any reason, except as required by applicable law.

 

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THE PARTIES

Cincinnati Bell Inc.

The Company, together with its wholly owned subsidiaries, delivers integrated communications solutions to residential and business customers over its fiber-optic and copper networks including high-speed internet, video, voice and data. The Company provides service in areas of Ohio, Kentucky, Indiana and Hawaii. In addition, enterprise customers across the United States and Canada rely on CBTS and OnX, wholly owned subsidiaries, for efficient, scalable office communications systems and end-to-end IT solutions. Our common shares are traded on the NYSE under the trading symbol “CBB”. The depositary shares are traded on the NYSE under the trading symbol “CBB.PB”. Our principal corporate office is located at 221 East Fourth Street, Cincinnati, Ohio 45202 with telephone number 513-397-9900.

Charlie AcquireCo Inc.

Parent is a Delaware corporation that was formed solely for the purpose of entering into the merger agreement and related agreements and completing the transactions contemplated thereby. Parent has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement and related agreements. Upon completion of the transactions contemplated thereby, the Company will be a direct subsidiary of Parent. Its principal executive office is located at Brookfield Place, 181 Bay Street, Suite 300, Toronto, Canada.

Charlie Merger Sub Inc.

Merger Sub is an Ohio corporation and a wholly owned subsidiary of Parent that was formed solely for the purpose of entering into the merger agreement and completing the transactions contemplated thereby. Merger Sub has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement and related agreements. Upon completion of the merger, Merger Sub will merge with and into the Company, and Merger Sub will cease to exist. Merger Sub’s principal executive office is located at Brookfield Place, 181 Bay Street, Suite 300, Toronto, Canada .

In connection with the merger and the other transactions contemplated by the merger agreement, the Brookfield Funds have committed to capitalize, or cause another person to capitalize, Parent, on the date of the closing of the merger, with such amount in cash as necessary, subject to the terms and conditions of the equity funding letter. Brookfield Infrastructure is a leading global company with a long-standing history as an owner and operator of high-quality infrastructure assets. It has a global portfolio of assets in the utilities, transport, energy and data infrastructure sectors across North and South America, Asia Pacific and Europe. Brookfield Infrastructure is the flagship listed infrastructure company of Brookfield Asset Management, a leading global alternative asset manager with over $500 billion of assets under management.

 

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THE SPECIAL MEETING

We are furnishing this proxy statement to the holders of Company common shares, 6 34% preferred shares and depositary shares representing interests in such 6 34% preferred shares as part of the solicitation of proxies by the Board for use at the special meeting and at any adjournments or postponements thereof.

Date, Time and Place

The special meeting will be held on [                    ], 2020, at [            ] local time, at [            ]. For instructions on how to attend and vote at the special meeting, please see the section of this proxy statement entitled “The Special Meeting—Voting in Person” beginning on page [    ].

Purpose of the Special Meeting

The special meeting is being held for the following purposes:

 

   

to consider and vote on a proposal to adopt the merger agreement (see the section of this proxy statement entitled “The Merger Agreement” beginning on page [    ]);

 

   

to consider and vote on a nonbinding, advisory proposal to approve the compensation that may be paid or become payable to the Company’s named executive officers in connection with, or following, the consummation of the merger (this nonbinding compensation proposal relates only to contractual obligations of the Company in existence prior to consummation of the merger that may result in a payment to the Company’s named executive officers in connection with, or following, the consummation of the merger and does not relate to any new compensation or other arrangements between the Company’s named executive officers and Parent or, following the merger, the surviving corporation and its subsidiaries) (see the section of this proxy statement entitled “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page [    ]); and

 

   

to consider and vote on the adjournment proposal to adjourn the special meeting to a later date or time, if necessary or appropriate, to solicit additional proxies in the event there are insufficient votes at the time of the special meeting or any adjournment or postponement thereof to adopt the merger agreement.

A copy of the merger agreement is attached as Annex A to this proxy statement.

Recommendation of the Board

The Board carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. The Board unanimously (i) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (ii) determined that entering into the merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to, and in the best interests of the Company and the Company’s shareholders, (iii) declared the merger agreement, the merger and the other transactions contemplated by the merger agreement advisable and (iv) recommends that the holders of Company common shares and 6 34% preferred shares adopt the merger agreement. Accordingly, the Board recommends a vote “FOR” the proposal to adopt the merger agreement. For a discussion of the factors that the Board considered in determining to recommend the adoption of the merger agreement, please see the section of this proxy statement entitled “The Merger—Reasons for the Merger” beginning on page [    ].

The Board also recommends a vote “FOR” the nonbinding compensation proposal and a vote “FOR” the adjournment proposal.

 

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Record Date and Shareholders Entitled to Vote

Shareholders of record as of the close of business on [                    ], 2020, the record date for the special meeting, or their legal proxy holders, will be entitled to vote the Company common shares and 6 34% preferred shares they held on the record date at the special meeting. Holders of depositary shares representing interests in the 6 34% preferred shares as of the close of business on the record date will be entitled to vote the number of 6 34% preferred shares represented by their depositary shares. As of the close of business on the record date, there were [            ] Company common shares and [    ] 6 34% preferred shares outstanding and entitled to vote. Each shareholder is entitled to one vote for each Company common share and one vote for each 6 34% preferred share held by such shareholder on the record date on each of the proposals presented in this proxy statement.

Quorum

A majority of all of the issued and outstanding Company common shares and 6 34% preferred shares entitled to vote, whether present in person or represented by proxy, constitutes a quorum for the transaction of business at any meeting of the holders of Company common shares and 6 34% preferred shares. Abstentions will be counted for purposes of determining the presence of a quorum. “Broker non-votes” will not be counted for purposes of determining the presence of a quorum unless your broker has been instructed to vote on at least one of the proposals presented in this proxy statement.

A “broker non-vote” occurs when (i) your Company common shares or 6 34% preferred shares are held by a broker, in nominee name or otherwise, exercising fiduciary powers (typically referred to as being held in “street name”) and (ii) a broker submits a proxy card for your Company common shares or 6 34% preferred shares held in “street name”, but does not vote on a particular proposal because your broker has not received voting instructions from you and does not have the authority to vote on that matter without instructions. You must follow instructions from your broker to authorize it to vote with respect to the proposal to adopt the merger agreement, the nonbinding compensation proposal or the adjournment proposal.

If, however, less than a quorum is present or represented at the special meeting, shareholders holding a majority of the Company common shares and 6 34% preferred shares (voting as a single class) represented at the special meeting may adjourn the meeting.

In the event that a quorum is not present at the special meeting, or if there are insufficient votes to adopt the merger agreement at the time of the special meeting, we expect that the special meeting will be adjourned or postponed to solicit additional proxies.

Vote Required

Adoption of the Merger Agreement

The adoption of the merger agreement by the Company’s shareholders requires the affirmative vote of shareholders holding at least two-thirds of the outstanding Company common shares and 6 34% preferred shares (voting as a single class), in each case entitled to vote thereon as of the close of business on the record date. Under the merger agreement, the receipt of such required vote is a condition to the consummation of the merger. Note that you may vote to adopt the merger agreement and vote not to approve the nonbinding compensation proposal or adjournment proposal and vice versa.

Abstentions, failures to vote and “broker non-votes” will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

Approval of the Nonbinding Compensation Proposal

The approval of the nonbinding compensation proposal requires the affirmative vote of at least a majority of the outstanding Company common shares and 6 34% preferred shares (voting as a single class) present and

 

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entitled to vote on such proposal at the special meeting. Assuming a quorum is present at the special meeting, failures to vote and “broker non-votes” will have no effect on the outcome of the nonbinding compensation proposal and abstentions will have the same effect as a vote “AGAINST” the proposal.

The vote on the nonbinding compensation proposal is a vote separate and apart from the vote to adopt the merger agreement. Because the vote on the nonbinding compensation proposal is advisory only, it will not be binding on the Company, the Board, Parent or the surviving corporation. Accordingly, because the Company is contractually obligated to pay the compensation, if the merger agreement is adopted by the holders of Company common shares and 6 34% preferred shares (voting as a single class) and the merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the nonbinding advisory vote.

Approval of the Adjournment Proposal

The approval of the adjournment proposal requires the affirmative vote of at least a majority of the votes cast by the holders of the outstanding Company common shares and 6 34% preferred shares (voting as a single class) on such proposal at the special meeting. Assuming a quorum is present at the special meeting, abstentions, failures to vote and “broker non-votes” will have no effect on the outcome of the adjournment proposal. If less than a majority of the outstanding shares entitled to vote are present in person or represented by proxy at the special meeting, shareholders holding a majority of the Company common shares and 6 34% preferred shares (voting as a single class) represented at the meeting may also adjourn the special meeting. The Company does not intend to call a vote on this proposal if the proposal to adopt the merger agreement is approved at the special meeting.

The vote on the adjournment proposal is a vote separate and apart from the vote to adopt the merger agreement. Accordingly, you may vote to adopt the merger agreement and vote not to approve the adjournment proposal and vice versa.

Voting Procedures

Whether or not you plan to attend the special meeting and regardless of the number of Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) you own, your careful consideration of, and vote on, the merger agreement is important and we encourage you to vote promptly.

To ensure that your Company common shares or 6 34% preferred shares (or depositary shares representing interests in such 6 34% preferred shares) are voted at the special meeting, we recommend that you provide voting instructions promptly by proxy, even if you plan to attend the special meeting in person, using one of the following three methods:

 

   

Vote via the Internet. Follow the instructions for internet voting shown on the proxy card mailed to you.

 

   

Vote by Telephone. Follow the instructions for telephone voting shown on the proxy card mailed to you.

 

   

Vote by Proxy Card. If you do not wish to vote by the internet or by telephone, please complete, sign, date and mail the enclosed proxy card in the envelope provided.

If you hold your shares in “street name,” in other words your shares are held in the name of your broker, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from the Company. In order to vote, complete and mail the proxy card received from your broker to ensure that your vote is counted. Alternatively, you may vote by telephone or over the internet as instructed by

 

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your broker. To vote in person at the special meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker included with these proxy materials or contact your broker to request a proxy form. The timing described in the instructions from your broker may differ from the timing described above. Without following those instructions, your shares held in “street name” will not be voted, which will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

For additional questions about the merger, assistance in submitting proxies or voting Company common shares, 6 34% preferred shares or depositary shares representing interests in such 6 34% preferred shares or to request additional copies of this proxy statement or the enclosed proxy card, please contact Innisfree M&A Incorporated, which is acting as the Company’s proxy solicitation agent in connection with the merger, toll free at 877-825-8971.

How Proxies Are Voted

If you complete and submit your proxy card or voting instructions, the persons named as proxies will follow your instructions. If you are a holder of record of Company common shares, 6 34% preferred shares or depositary shares representing interests in such 6 34% preferred shares and you submit a proxy card or voting instructions but do not direct how to vote on each item, the persons named as proxies will vote in favor of the proposal to adopt the merger agreement, the nonbinding compensation proposal and the adjournment proposal.

Revocation of Proxies

For shareholders of record, any time after you have submitted a proxy card and before the proxy card is exercised, you may revoke or change your vote in one of three ways:

 

   

You may submit a new proxy card bearing a later date (which automatically revokes the earlier proxy or voting instructions) whether made on the internet, by telephone or by mail.

 

   

You may submit a written notice of revocation to the Company’s Corporate Secretary at 221 East Fourth Street, Cincinnati, Ohio 45202.

 

   

You may attend the special meeting, give written notice of your proxy revocation and vote in person.

Please note that if you want to revoke your proxy by sending a new proxy card or a written notice of revocation to the Company, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by the Company prior to the special meeting.

If you hold your shares in “street name,” you will need to revoke or resubmit your proxy through your broker and in accordance with its procedures. If your broker allows you to submit a proxy via the internet or by telephone, you may be able to change your vote by submitting a new proxy via the internet or by telephone or by mail. In order to attend the special meeting and vote in person, you will need to obtain a proxy for your broker, the shareholder of record.

Voting in Person

Only shareholders as of [                    ], 2020, the record date for the special meeting, or their legal proxy holders may attend the special meeting. Due to space constraints and other security considerations, we will not be able to accommodate the guests of either shareholders or their legal proxy holders.

To be admitted to the special meeting, you must present valid proof of ownership of the Company’s common shares, 6 34% preferred shares or depositary shares representing interests in such 6 34% preferred shares as of [                    ], 2020 or a valid legal proxy. All attendees must also provide a form of government-issued photo identification. If you arrive at the special meeting without the required items, we will admit you

 

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only if we are able to verify that you are a shareholder of the Company as of [                    ], 2020. If you hold shares through a broker and wish to attend the meeting and vote in person, you must obtain a legal proxy issued in your name from your broker.

If you are representing an entity that is a shareholder, you must provide evidence of your authority to represent that entity at the special meeting. Shareholders holding shares in a joint account will be admitted to the special meeting if they provide proof of joint ownership.

Solicitation of Proxies

The Company will bear the cost of soliciting proxies, including the expense of preparing, printing and distributing this proxy statement. In addition to soliciting proxies by mail, telephone or electronic means, we may request brokers to solicit their customers who have Company common shares, 6 34% preferred shares or depositary shares representing interests in such 6 34% preferred shares registered in their names and will, upon request, reimburse them for the reasonable, out-of-pocket costs of forwarding proxy materials in accordance with customary practice. We may also use the services of our directors, officers and other employees to solicit proxies, personally or by telephone, without additional compensation. In addition, the Company has retained Innisfree M&A Incorporated to solicit shareholder proxies at a total cost to the Company of approximately $25,000, plus reimbursement of customary expenses.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned, recessed or postponed for the purpose of soliciting additional proxies. An adjournment of the special meeting may be made by holders of Company common shares and 6 34% preferred shares representing a majority in interest present or represented and entitled to vote at the meeting.

At any subsequent reconvening of the special meeting at which a quorum is present in person or represented by proxy, any business may be transacted that might have been transacted at the original meeting, and all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been validly revoked or withdrawn prior to the reconvened meeting.

Voting by Company Directors, Executive Officers and Principal Securityholders

As of January 15, 2020, the directors and executive officers of the Company beneficially owned in the aggregate 1,373,152 Company common shares, or approximately 2.72% of the outstanding Company common shares, and no 6 34% preferred shares. Although none of the directors or executive officers is obligated to vote to adopt the merger agreement, we currently expect that each of these individuals will vote all of his or her shares in favor of each of the proposals to be presented at the special meeting.

The Company’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of the Company’s shareholders generally. For more information, please see the section of this proxy statement entitled “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page [    ].

Assistance

If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact Innisfree M&A Incorporated, which is acting as the Company’s proxy solicitation agent in connection with the merger, toll free at 877-825-8971. Brokers may call collect at 212-750-5833.

List of Shareholders

A list of Company shareholders of record as of the record date who are entitled to vote at the special meeting will be open for examination by any shareholder at the meeting.

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

As discussed elsewhere in this proxy statement, holders of Company common shares and 6 34% preferred shares (voting as a single class) will consider and vote on a proposal to adopt the merger agreement. You are urged to carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement and the merger, including the information set forth under the sections of this proxy statement captioned “The Merger” and “The Merger Agreement”. A copy of the merger agreement is attached as Annex A to this proxy statement. You are urged to read the merger agreement carefully and in its entirety.

The Board recommends a vote “FOR” the adoption of the merger agreement.

 

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PROPOSAL 2: ADVISORY, NON-BINDING VOTE ON MERGER-RELATED EXECUTIVE COMPENSATION ARRANGEMENTS

In accordance with Section 14A of the Exchange Act, the Company is providing holders of Company common shares and 6 34% preferred shares (voting as a single class) with the opportunity to cast a nonbinding advisory vote on the compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger. As required by those rules, the Company is asking holders of Company common shares to vote on the approval of the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger, as disclosed in the table entitled “Potential Payments to Named Executive Officers”, including the associated narrative discussion, and the agreements or understandings pursuant to which such compensation may be paid or become payable, are hereby APPROVED.”

The vote on executive compensation payable in connection with the merger is a vote separate and apart from the vote to adopt the merger agreement. Accordingly, you may vote to adopt the merger agreement and vote not to approve the executive compensation and vice versa. Because the vote is advisory in nature only, it will not be binding on the Company or the Board. Accordingly, because the Company is contractually obligated to pay the compensation, such compensation will be paid or become payable, subject only to the conditions applicable thereto, if the merger is consummated and regardless of the outcome of the advisory vote.

The approval of the nonbinding compensation proposal requires the affirmative vote of at least a majority of the outstanding Company common shares and 6 34% preferred shares (voting as a single class) present and entitled to vote on that proposal at the special meeting. Assuming a quorum is present at the special meeting, failures to vote and “broker non-votes” will have no effect on the outcome of the nonbinding compensation proposal and abstentions will have the same effect as a vote “AGAINST” the proposal.

The Board recommends a vote “FOR” the approval of the nonbinding compensation proposal.

 

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PROPOSAL 3: VOTE ON POSSIBLE ADJOURNMENT TO SOLICIT ADDITIONAL PROXIES, IF NECESSARY

The special meeting may be adjourned to another time and place to permit further solicitation of proxies, if necessary, to obtain additional votes to approve the proposal to adopt the merger agreement. The Company currently does not intend to propose adjournment of the special meeting if there are sufficient votes to approve the proposal to adopt the merger agreement.

The Company is asking you to authorize the holder of any proxy solicited by the Board to vote in favor of any adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the proposal to adopt the merger agreement at the time of the special meeting.

The Board recommends a vote “FOR” the approval of the adjournment proposal.

 

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THE MERGER

Overview

The Company is seeking the adoption by the holders of Company common shares and 6 34% preferred shares (voting as a single class) of the merger agreement the Company entered into on December 21, 2019, with Parent and Merger Sub. Under the terms of the merger agreement, subject to the satisfaction or (if permissible under applicable law) waiver of specified conditions, Merger Sub will be merged with and into the Company, with the Company surviving the merger as a subsidiary of Parent. The Board has unanimously approved the merger agreement, the merger and the other transactions contemplated by the merger agreement and recommends that the holders of Company common shares and 6 34% preferred shares (voting as a single class) vote to adopt the merger agreement.

Upon the consummation of the merger, each Company common share issued and outstanding immediately prior to the effective time of the merger (other than the excluded shares and dissenting shares) will be canceled and converted into the right to receive $10.50 in cash, without interest and less any applicable withholding taxes. Immediately following the consummation of the merger, the 6 34% preferred shares will remain outstanding and the depositary shares representing interests in such 6 34% preferred shares will remain outstanding and continue to be listed on the NYSE. Parent intends to cause the surviving corporation to redeem the 6 34% preferred shares (and the depositary shares representing interests in such 6 34% preferred shares) in accordance with the Articles as promptly as practicable following completion of the merger.

Background of the Merger

The following chronology summarizes the key meetings and events that led to the signing of the merger agreement. This chronology does not purport to catalogue every conversation of or among members of the Board, the Company’s management, the Company’s advisors, Brookfield Infrastructure or any other person.

The Board, together with the Company’s management and with the assistance of the Company’s advisors, regularly evaluates the Company’s historical performance, future growth prospects, long-term strategic plan and considers various strategic opportunities available to the Company as well as ways to enhance shareholder value and the Company’s performance and prospects, including in light of the business, competitive, regulatory, financing and economic environment and developments in the Company’s industry. These reviews have included discussions as to whether the Company should continue to execute on its strategy as a stand-alone company, pursue various acquisitions, seek to improve its capital structure or pursue a sale of the entire Company or one or more of its business units. As part of these reviews, the Board, together with the Company’s management and with the assistance of the Company’s advisors, has considered from time to time what would offer the best avenue to enhance shareholder value along with the potential benefits and risks of any potential alternative.

From time to time, representatives of the Company and its financial advisors have had various conversations with representatives of other companies in, or interested in, the telecommunications industry, and infrastructure funds and other financial sponsors, including Brookfield Infrastructure. The topics of these conversations have included, among other things, developments in the industry generally, potential opportunities in the industry and the potential for the Company to engage in business combinations, strategic transactions or financing transactions with third parties.

In late August 2018, Phillip R. Cox, then Chairman of the Board, met with representatives of Brookfield Infrastructure, at its request, during which meeting Brookfield Infrastructure expressed its interest in potentially pursuing an acquisition of the Company. Also in late August 2018, Mr. Cox met with representatives of Party A, an infrastructure fund, at its request, during which meeting Party A expressed its interest in potentially pursuing an acquisition of the Company. Neither Brookfield Infrastructure nor Party A made any proposal during these meetings. Mr. Cox indicated to each of Brookfield Infrastructure and Party A that the Board would consider any transaction proposal it might make.

 

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On August 31, 2018, Brookfield Infrastructure submitted a preliminary, non-binding expression of interest proposing to acquire the Company.

On September 1, 2018, the Company formally engaged Morgan Stanley to act as its financial advisor in connection with the review of the Company’s strategic alternatives and the potential execution of one or more transactions in connection with such strategic review. The Company also subsequently formally engaged Moelis to act as its financial advisor in the same role.

On September 19, 2018, Party A submitted a preliminary, non-binding expression of interest to acquire the Company.

On October 10, 2018, the Board, after receiving advice from each of Morgan Stanley and Moelis and conscious of the risks of leaks to the Company’s business and its relationships with its regulators, determined to commence an exploratory process involving a maximum of five potential counterparties, including Brookfield Infrastructure and Party A, for a potential transaction (the “2018 Process”). During the 2018 Process, the Board reviewed disclosure statements provided by each of Morgan Stanley and Moelis, which identified prior or current engagements or relationships between Morgan Stanley or Moelis, as applicable, and the potential counterparties to a transaction.

During the remainder of October 2018, representatives of Morgan Stanley and Moelis, initiated contact with five potential counterparties to a strategic transaction and the Company entered into confidentiality agreements, which contained customary standstill provisions that would automatically terminate upon the entry by the Company into a definitive acquisition agreement with a third party, with each of Brookfield Infrastructure, Party A and Party B, another infrastructure fund. Following the execution of confidentiality agreements, members of the Company’s management and representatives of Morgan Stanley, Moelis and Cravath, Swaine & Moore LLP, outside legal counsel to the Company (“Cravath”), facilitated due diligence and engaged in discussions with each of Brookfield Infrastructure, Party A and Party B, and the Board regularly held meetings to discuss the status of the 2018 Process and any feedback received from the potentially interested parties. The Company also exchanged various drafts of a merger agreement with each of Brookfield Infrastructure and Party A. Other than Brookfield Infrastructure and Party A, no other party, including Party B, submitted a preliminary expression of interest to acquire the Company.

Concurrently with the 2018 Process, the Board also reviewed and assessed other potential strategic alternatives, including, among others, a potential sale of Cincinnati Bell Technology Solutions LLC (“CBTS”) and potential financing alternatives, such as incurring additional debt, engaging in sale leaseback transactions, issuing common equity and issuing preferred equity. The Board determined that none of these were a viable option at that time given, among other things, covenant constraints in the Company’s existing indebtedness, the limited size of any potential equity issuance and the high cost of capital for any preferred equity issuance.

On October 25, 2018, Lynn A. Wentworth was elected to succeed Mr. Cox as Chairman of the Board, effective May 2, 2019.

In November and December 2018, the equity and debt markets applicable to the Company experienced downturns, resulting in widened credit spreads in the telecommunications industry and a sharp decline in the stock prices of the Company and its industry peers. Representatives of each of Brookfield Infrastructure and Party A informed representatives of Morgan Stanley and Moelis that the recent downturns in such equity and debt markets would negatively impact the valuation levels at which they would potentially be willing to acquire the Company.

Also in December 2018, Party C, a financial sponsor, informed representatives of Moelis that it was interested in exploring a potential transaction with the Company but did not submit a proposal. Representatives of Moelis, at the direction of the Company, informed Party C that the Company would only entertain exploring a

 

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potential transaction with Party C if it were willing to make an offer materially higher than the Company’s current trading price. Party C declined to pursue a transaction at those levels.

In mid-December 2018, the Board engaged another global investment bank to act as its financial advisor in connection with a potential sale of the Company or other similar transaction and met with such investment bank to discuss the Company’s current situation. The Company did not consult with such investment bank after December 2018.

On January 4, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance, to discuss, among other things, the status of the 2018 Process. During the meeting, Leigh R. Fox, President and Chief Executive Officer of the Company, explained to the Board that based on recent downturns in the equity and debt markets and conversations with each of Brookfield Infrastructure and Party A, members of the Company’s management and representatives of Morgan Stanley and Moelis expected that any final bids would be significantly lower than the levels indicated in the non-binding proposals the Company had previously received and would be subject to material financing contingencies. Representatives of Morgan Stanley explained that recent downturns in the debt markets had resulted in an increase in the rates at which lenders were willing to lend and a sharp decline in the availability of high-yield financing, which would have material impacts on the model-driven valuations of the financial sponsors participating in the 2018 Process. The Board concluded that, in light of the changed circumstances, stopping the 2018 Process would be in the best interests of the Company and its shareholders and directed Morgan Stanley and Moelis to communicate the Board’s decision to Brookfield Infrastructure and Party A.

During the spring and summer of 2019, representatives of the Company and its advisors continued to meet from time to time with representatives of each of Brookfield Infrastructure and Party A as well as with representatives of other companies in, or interested in, the telecommunications industry, and infrastructure funds and other financial sponsors to generally discuss the Company and its business and the telecommunications industry. During this time, none of Brookfield Infrastructure, Party A or Party B nor any other party made any proposals for an acquisition of the Company.

In June 2019, Party D, a financial sponsor, contacted members of the Company’s management, during which time it expressed its interest in potentially acquiring certain assets of the Company but did not submit a proposal. On June 20, 2019, the Company and Party D entered into a confidentiality agreement, which contained customary standstill provisions that would automatically terminate upon the entry by the Company into a definitive acquisition agreement with a third party. Thereafter, Party D conducted preliminary due diligence and discussed certain due diligence matters with members of the Company’s management. During the course of discussions between the Company and Party D, Party D indicated that it was not interested in pursuing an acquisition of the entire Company. Party D never submitted a proposal for acquiring any assets or businesses of the Company or the entire Company.

Also in June 2019, Party E, a financial sponsor, submitted to the Company a non-binding proposal in respect of a joint venture involving CBTS. The Board reviewed the terms of the proposal and concluded that it was not compelling enough to pursue further discussions. During the course of discussions between the Company and Party E, Party E indicated that it was not interested in pursuing an acquisition of the entire Company.

On July 17, 2019, members of the Company’s management and representatives of Moelis held an update call with representatives of Brookfield Infrastructure, during which call the participants discussed the state of the telecommunications industry and the Company’s recent performance.

Also on July 17, 2019, representatives of Moelis, at the direction of the Company, contacted Party A to discuss whether it would be interested in having an update call with members of the Company’s management to discuss the state of the telecommunications industry and the Company’s recent performance. Party A indicated that it was interested in having such a call.

 

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On July 29, 2019, representatives of Party F, a financial sponsor, met, at Party F’s request, with members of the Company’s management in Cincinnati, Ohio, at which meeting the representatives of Party F expressed preliminary interest in exploring a potential transaction with the Company and conducting preliminary due diligence in connection therewith. Members of the Company’s management directed Party F to contact Moelis to engage in further discussions, and representatives of Party F contacted representatives of Moelis on August 1, 2019.

On July 31 and August 1, 2019, the Board met for its regularly scheduled quarterly meetings, with members of the Company’s management and representatives of Moelis present for portions of the meetings. The discussions covered a wide range of topics and addressed, among other things, the Company’s second quarter results, operations and strategy. The Board analyzed with members of the Company’s management and representatives of Moelis the state of and trends in the telecommunications industry. Among other things, they discussed how recent events in the local exchange carrier (“LEC”) sector such as bankruptcies, dividend cuts, dividend eliminations and liquidity concerns among the Company’s industry peers had resulted in an intense focus on debt levels and significant increases in the cost of borrowing, making it difficult for the Company to make new fiber investments in accordance with its strategic plan. They also discussed how the market had re-rated the LEC sector resulting in the Company and its industry peers trading at or near all-time lows.

The Board also analyzed with members of the Company’s management and representatives of Moelis a full range of the Company’s strategic alternatives, including, among others, potentially accelerating the Company’s investment in fiber assets, potential equity and debt repurchases, potential divestitures, including potential divestitures of CBTS and the Hawaiian Telcom business, a potential merger with another company in the telecommunications industry, potential joint ventures, potential partnerships and potential alternative investments and other transactions involving financial sponsors. With respect to a potential divestiture of CBTS, the Board concluded that the Company would be unlikely to receive a premium valuation in a sale of CBTS in the short term but should preserve the option to sell CBTS in the future. With respect to a potential sale of the Hawaiian Telcom business, after preliminary dialogue with a potential strategic buyer, the Board concluded that there was limited interest and qualified buyers due to current LEC sector issues and that a sale of the Hawaiian Telecom business would have a limited impact on the Company’s debt levels, resulting in a smaller company with high leverage and less short-term growth potential. Following the review of strategic alternatives, the Board concluded that the Company should continue to execute its current strategic plan while preserving its rights to sell CBTS and that the Company’s management should continue to have dialogue with third parties potentially interested in a transaction with the Company and advise the Board of any meaningful discussions.

On August 5, 2019, members of the Company’s management and representatives of Moelis met with representatives of Party G, a private equity firm, at Party G’s request, to discuss potential partnership opportunities between the Company and certain portfolio companies of Party G. Party G never submitted a proposal for acquiring any assets or businesses of the Company or the entire Company.

Also on August 5, 2019, following discussions with representatives of Moelis, members of the Company’s management determined to provide Party F with preliminary due diligence information regarding the Company’s business and operations so that Party F could evaluate a potential transaction with the Company, subject to Party F entering into a suitable confidentiality agreement.

On August 8, 2019, the Company and Party F entered into a confidentiality agreement, which contained customary standstill provisions that would automatically terminate upon the entry by the Company into a definitive acquisition agreement with a third party. Following the execution of the confidentiality agreement, Party F was provided access to the electronic data room containing information regarding the Company’s business and operations. Following discussions with representatives of Moelis, members of the Company’s management determined to provide Brookfield Infrastructure and Party A with access to the electronic data room given the fact that each such party had indicated a potential interest in evaluating a transaction with the Company.

 

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On August 9, 2019, each of Brookfield Infrastructure and Party A was provided access to the electronic data room. Throughout the remainder of August 2019 and September 2019, members of the Company’s management responded to due diligence requests from and engaged in discussions and meetings with each of Brookfield Infrastructure, Party A and Party F. During this time, members of the Company’s management and representatives of Morgan Stanley and Moelis regularly updated the Board regarding interactions with each of Brookfield Infrastructure, Party A and Party F.

On September 16, 2019, representatives of Party F sent the Company a non-binding indication of interest proposing to acquire the Company at a price of $7.50 per Company common share in cash, subject to completion of due diligence and other conditions. Party F also requested that the Company enter into exclusive negotiations with Party F. Party F did not have committed debt financing at the time but indicated that it was confident in its ability to secure debt financing. The closing price per Company common share as of the close of trading on September 16, 2019 was $6.22.

Following the receipt of Party F’s proposal, on September 16, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance to review, among other things, Party F’s proposal and discuss potential next steps. Representatives of Cravath reviewed with the Board its fiduciary duties and other legal matters in the context of a review of a potential sale transaction. The Board discussed the status of the updated financial forecasts the Company’s management was preparing and agreed that reviewing such forecasts and the financial analyses of Morgan Stanley and Moelis would be important for making an informed decision regarding whether to proceed further with any offer or to commence a sale process. The Board also concluded that Party F’s proposal was not compelling enough to move forward with Party F on an exclusive basis but decided to encourage Party F to continue to work to improve the value of its offer. At the conclusion of the meeting, the Board authorized the Company’s management and its financial advisors to inform Party F of the Board’s conclusion and to continue engaging with each Brookfield Infrastructure and Party A. The Board also decided that it would consider which other potential counterparties to reach out to following preparation and review of the financial forecasts being prepared by the Company’s management.

On September 19, 2019, Party A informed representatives of Morgan Stanley and Moelis that it was not interested in pursuing an acquisition of the Company due to heightened concentration of fiber assets in its current fund as a result of recent acquisitions.

On September 20, 2019, representatives of Party E submitted to the Company a non-binding proposal contemplating the issuance of unsecured debt to Party E as part of a refinancing of the Company’s capital structure. The Company’s management reviewed the terms of the proposal and concluded that it was not compelling enough to pursue further discussions. During the course of discussions between the Company and Party E, Party E reiterated that it was not interested in pursuing an acquisition of the Company.

On September 25, 2019, Brookfield Infrastructure informed representatives of Morgan Stanley that members of its investment committee were supportive of its decision to submit an updated proposal to acquire the Company, but that its ability to submit an updated proposal was subject to ongoing work with potential debt financing sources.

On October 3, 2019, the Board reviewed updated disclosure statements provided by Morgan Stanley, which identified prior or current engagements or relationships between Morgan Stanley and the potential counterparties to a transaction. Morgan Stanley provided the Board with updated disclosure statements throughout the process. The Board concluded that, based upon the information provided by Morgan Stanley in such disclosure statements, Morgan Stanley did not have any relationships that would be likely to impair its ability to provide independent advice to the Board.

Also on October 3, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. At the meeting, representatives of

 

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Moelis reviewed the interactions the Company had with potential counterparties to a transaction during the 2018 Process and recent interactions with each of Brookfield Infrastructure, Party A and Party F. Members of the Company’s management and representatives of Morgan Stanley and Moelis reviewed with the Board the state of the telecommunications industry generally, the impact that financial distress among the Company’s industry peers and macroeconomic uncertainty might have on the industry and the performance and outlook of the Company and its industry peers. The Board reviewed the financial forecasts that had been prepared by the Company’s management (the September Forecasts, as described further in the section entitled “—Certain Unaudited Prospective Financial Information” beginning on page [    ]) and representatives of each of Morgan Stanley and Moelis presented their respective preliminary financial analyses based on the September Forecasts.

The Board discussed whether to engage in further discussions with Brookfield Infrastructure and Party F and whether to have its financial advisors contact other parties to determine whether they would be interested in exploring a potential transaction with the Company. As part of this discussion, Morgan Stanley and Moelis provided the Board with their respective views as to the potential counterparties that would likely have both the interest and financial capability to acquire the Company. They noted that infrastructure funds, which had lower return thresholds and longer investment horizons than traditional private equity firms, were the most likely counterparties to a potential transaction. They also noted that the universe of strategic buyers lacked the financial capability to complete an all cash transaction, were focused on managing other balance sheet goals (such as reducing leverage), had limited overlap with the strategic focus and priorities of the Company, were focused on integrating recent acquisitions or already competed in the geographies in which the Company conducted business. Morgan Stanley and Moelis identified four infrastructure funds, including Party B, that they believed to be the parties most able and willing to pay the highest price for the Company. For reference, other than Party B, the infrastructure funds identified by Morgan Stanley and Moelis are hereinafter referred to as “Party H”, “Party I” and “Party J”.

At the conclusion of the meeting, the Board authorized the Company’s management, Morgan Stanley and Moelis to continue discussions with Brookfield Infrastructure and Party F and initiate contact with Party B, Party H, Party I and Party J.

Following the October 3, 2019 meeting, Morgan Stanley and Moelis, at the direction of the Company, informed Party F that its offer to acquire the Company at a price of $7.50 per Company common share did not represent a value at which the Company would be willing to transact, but that the Company would allow Party F to perform additional due diligence to support a higher offer. Representatives of Morgan Stanley and Moelis proceeded to contact each of Party B, Party H, Party I and Party J, and each expressed interest in exploring a potential transaction. Over the course of October 2019, Party B entered into an amendment to the confidentiality agreement it had entered into in connection with the 2018 Process, which extended the term of the confidentiality agreement and the standstill provisions by one year, and each of Party H, Party I and Party J entered into confidentiality agreements, which contained customary standstill provisions that would automatically terminate upon the entry by the Company into a definitive acquisition agreement with a third party. Following the extension of existing confidentiality agreements or execution of new confidentiality agreements, Party B, Party H, Party I and Party J were provided access to the electronic data room.

Until the execution of the merger agreement (or, if earlier, the date on which a potential counterparty ceased to pursue a potential transaction with the Company), each of Party B, Party F, Party H, Party I and Party J conducted due diligence, and members of the Company’s management, with the assistance of the Company’s advisors, engaged in diligence calls and in-person meetings with, and responded to written due diligence requests from, such parties.

On October 14, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. Mr. Fox provided the Board with an overview of interactions with each of the potential acquirors and explained that members of the Company’s

 

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management had held due diligence sessions with each of Party B, Party F and Party H. Representatives of Morgan Stanley and Moelis noted that Brookfield Infrastructure continued to evaluate the Company and have discussions with potential debt financing sources. Mr. Fox and representatives of Morgan Stanley and Moelis also discussed with the Board the state of the debt markets and potential near-term catalysts for revaluation of companies in the telecommunications industry.

On October 18, 2019, representatives of Morgan Stanley and Moelis, at the direction of the Company, communicated to each of the potentially interested parties the procedures for the potential sale process and requesting each such party submit preliminary indications of interest, draft financing commitments and details of such party’s financing structure by Friday, November 15, 2019.

On October 23 and 24, 2019, the Board met for its regularly scheduled quarterly Board meetings, with members of the Company’s management present for portions of the meetings. The discussions covered a wide range of topics and addressed, among other things, the Company’s third quarter results, preliminary updates to the September Forecasts and strategic alternatives, including potential acquisitions and a potential sale of CBTS. During the meetings, the Board met in executive session with representatives of Moelis and Cravath participating to discuss the status of the ongoing sale process. Among other things, the Board discussed with representatives of Moelis potential near-term catalysts for revaluation of companies in the telecommunications industry, and the implication any such catalysts might have on the Company’s strategic outlook, including in the context of the current process. Representatives of Moelis discussed with the Board near-term events that could positively impact equity valuations and events that could negatively impact equity valuations in the sector, including financial distress among the Company’s industry peers. The Board discussed the strategic approach of other telecommunications companies in light of the sector-wide challenges. The Board also discussed a potential sale of CBTS and the implications such a sale would have on the Company’s overall debt capacity and markets’ perceptions of the Company’s ability to grow year to year.

On October 25, 2019, Party I informed representatives of Morgan Stanley and Moelis that it would not submit a proposal to acquire the Company because it lacked the resources to conduct due diligence and consider an acquisition of the Company at the time.

On October 28, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. During the meeting, representatives of Morgan Stanley and Moelis provided an overview of recent interactions with the potential counterparties to a transaction and explained that members of the Company’s management and the Company’s advisors were in the midst of holding due diligence sessions with each of the potential counterparties.

On October 31, 2019, representatives of Morgan Stanley received a call from Party K, a private equity firm, which expressed a potential interest in acquiring the Company. Party K did not make a proposal at this time.

Later on October 31, 2019, representatives of Morgan Stanley, at the direction of, and after discussion with, the Company, explained to Party K that if it was interested in evaluating an acquisition of the Company, it would need to submit a proposal by the Friday, November 15, 2019 bid deadline.

At various times in October 2019, representatives of Brookfield Infrastructure informed representatives of Morgan Stanley that Brookfield Infrastructure continued to work with potential debt financing sources regarding a financing package.

On November 4, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. Representatives of Morgan Stanley and Moelis provided an overview of recent interactions with potential counterparties to a transaction, including recently held due diligence sessions with each of Party B, Party F and Party H. The Board also discussed the status of each of the potential counterparties and the overall timing of the process.

 

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On November 5, 2019, the Company entered into a confidentiality agreement with Party K, which contained customary standstill provisions that would automatically terminate upon the entry by the Company into a definitive acquisition agreement with a third party. Following the execution of the confidentiality agreement, Party K was provided with access to the electronic data room and provided the opportunity to submit diligence requests and conduct diligence sessions.

On November 7, 2019, representatives of Party B informed representatives of Morgan Stanley that it had received preliminary debt financing terms from potential debt financing sources but that it may not be able to meet the Friday, November 15, 2019 bid deadline due to internal logistical issues.

On November 11, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. Representatives of Morgan Stanley and Moelis provided an overview of recent interactions with the potential counterparties to a transaction. Representatives of Morgan Stanley and Moelis also provided an overview of recent trends in the telecommunications industry and the market’s reaction to the recent earnings releases of the Company and certain of its industry peers.

On November 12, 2019, representatives of Party J informed representatives of Morgan Stanley and Moelis that it would not submit a proposal to acquire the Company because, among other reasons, the cost of debt financing was too high, making it difficult for Party J to achieve its target internal rate of return, the amount of equity Party J would need to contribute was too large for its fund in light of the amount of debt financing potential debt financing sources were willing to provide and the execution of Party J’s strategic plan following the consummation of a potential transaction was too complex to bring in additional limited partners.

On November 15, 2019, Party H submitted a non-binding preliminary proposal to acquire the Company at a range of $9.00 to $11.00 per Company common share along with draft financing commitment letters from two banks and a highly confident letter from another. Party H had indicated in its initial proposal that the submission of a final, binding offer would be subject to the completion of due diligence, the negotiation of definitive transaction agreements and an approval process which would include approvals from the relevant fund and investor investment committees. Party H had indicated in its initial proposal that it expected to be able to complete its due diligence investigation of the Company within eight weeks of selection to participate in the next round of the process. The closing price per Company common share as of the close of trading on November 15, 2019 was $5.47.

On November 18, 2019, the Board reviewed updated disclosure statements provided by Moelis, which identified prior or current engagements or relationships between Moelis and the potential counterparties. Moelis provided the Board with updated disclosure statements throughout the process. The Board concluded that, based upon the information provided by Moelis in such disclosure statements, Moelis did not have any relationships that would be likely to impair its ability to provide independent advice to the Board.

On November 20, 2019, representatives of Party K informed representatives of Morgan Stanley and Moelis that it would not submit a proposal to acquire the Company, noting that it felt that it did not have the resources to devote to submit a proposal on the Company’s expected timeframe.

On November 22, 2019, representatives of Morgan Stanley and Moelis held a call with Party F, during which call Party F reiterated their initial proposal of $7.50 per share of Company common stock and explained that they anticipated being able to send a revised proposal by the week of December 16, 2019.

Also on November 22, 2019, representatives of Morgan Stanley and Moelis held a call with Party B, during which call Party B communicated that they remained interested in evaluating an acquisition of the Company and that they expected to be in a position to consider a potential proposal during the week of November 25, 2019.

 

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On November 25, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. Representatives of Morgan Stanley and Moelis reviewed the non-binding proposals from Party F and Party H and presented the updated financial analyses of the Company that their respective organizations had prepared. Representatives of Morgan Stanley and Moelis also explained that Cravath had updated the auction draft merger agreement and disclosure letter that the Board had approved during the 2018 Process and that the updated auction drafts could be shared with potential counterparties following the Board’s approval. The Board discussed with members of the Company’s management and representatives of Morgan Stanley, Moelis and Cravath whether to continue the sale process and the Board determined to continue engaging with each of Brookfield Infrastructure, Party B, Party F and Party H.

Later on November 25, 2019, the Company’s advisors, at the direction of the Board, shared the auction draft of the merger agreement and the related disclosure letter with each of Brookfield Infrastructure, Party B and Party H. The Board determined not to share the auction draft with Party F at this time given the relatively low level of its initial expression of interest, the lack of financing support for its proposal and the fact that it had indicated it anticipated providing an updated proposal by mid-December 2019.

On November 27, 2019, representatives of Party B informed representatives of Morgan Stanley and Moelis that it would not submit a proposal to acquire the Company. Party B expressed that it had other opportunities it was working on that it believed had a better return potential.

On November 29, 2019, representatives of Moelis received an inquiry from Party E requesting to participate in the potential sale process. Party E indicated that while an acquisition of the Company was not Party E’s preferred transaction, if the Company was exploring a potential sale and it was not interested in other alternatives, then Party E would be potentially interested in exploring a potential acquisition of the Company.

At various times in November 2019, representatives of Brookfield Infrastructure informed representatives of Morgan Stanley that Brookfield Infrastructure continued to work with potential debt financing sources regarding a financing package.

On December 2, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. During the meeting, representatives of Morgan Stanley and Moelis provided an overview of recent interactions with potentially interested parties, including Party E’s inquiry. Following discussion with members of the Company’s management and the Company’s advisors, the Board authorized the Company’s advisors to engage in further discussions with Party E.

On December 4, 2019, Moelis, at the direction of the Company, sent Party H the Company’s mark-up of the draft financing commitment papers included in Party H’s November 15, 2019 indication of interest.

On December 9, 2019, representatives of Morgan Stanley spoke to representatives of Brookfield Infrastructure, during which time the representatives of Brookfield Infrastructure indicated that they continued to work with potential debt financing sources regarding a financing package.

Also on December 9, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. During the meeting, representatives of Morgan Stanley and Moelis provided an overview of recent interactions with potential counterparties to a transaction. Representatives of Morgan Stanley and Moelis then presented to the Board an illustrative timeline for the final round of the sale process. Following discussion with members of the Company’s management and representatives from Morgan Stanley, Moelis and Cravath, the Board approved the timeline and directed the Company’s advisors to send a process letter to each of Brookfield Infrastructure and Party H setting forth the procedures for the final round of the process and the submission of final binding offers, which contemplated a deadline for final bids (with committed financing) of January 16, 2020. The Board determined

 

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not to send Party F a process letter at this time, given the relatively low level of their initial expression of interest and the fact that it had indicated it anticipated providing an updated proposal in the near future.

Later on December 9, 2019, representatives of Morgan Stanley and Moelis held a call with representatives of Party H, during which call Party H requested the Company’s consent to partner with Party E. Representatives of Morgan Stanley and Moelis informed Mr. Fox and Ms. Wentworth of Party H’s request.

On December 10, 2019, Mr. Fox and Ms. Wentworth discussed with members of the Company’s management and representatives of Morgan Stanley, Moelis and Cravath Party H’s request to partner with Party E, including the benefits of keeping Party E as an independent bidder or allowing Party E to partner with Party H. Morgan Stanley, Moelis and Mr. Fox expressed their view that, based on prior discussions with Party E, during which Party E expressed little to no interest in acquiring the Company, it was unlikely that Party E would submit a proposal to acquire the Company on its own, if at all, and that allowing Party E to partner with Party H had the potential to provide the most value to the process. Ms. Wentworth directed the representatives of Morgan Stanley and Moelis to indicate a willingness to allow Party H and Party E to partner, subject to Party E’s entry into a suitable confidentiality agreement.

On December 12, 2019, Brookfield Infrastructure submitted an updated proposal to acquire the Company at a price of $8.40 per Company common share in cash, which was scheduled to expire at 12:00 noon Eastern Time on December 16, 2019, a draft equity funding letter which would provide equity financing for the full amount in cash necessary to fund the aggregate merger consideration from the Brookfield Funds and a mark-up of the last draft of the merger agreement the Company had sent to Brookfield Infrastructure during the 2018 Process, which was substantially similar to the auction draft previously circulated. The closing price per Company common share as of the close of trading on December 12, 2019 was $7.48.

Shortly after the receipt of the December 12 proposal, Mr. Fox and Ms. Wentworth discussed with members of the Company’s management and representatives of Morgan Stanley, Moelis and Cravath the terms of the proposal and how to respond to Brookfield Infrastructure. Following discussions, representatives of Morgan Stanley, at the direction of the Company, informed Brookfield Infrastructure that the December 12 proposal did not represent a basis for the Company to consider shortening its existing sale process.

Also on December 12, 2019, Morgan Stanley and Moelis informed Party H that the Company approved their request to partner with Party E, subject to Party E entering into a confidentiality agreement.

Also on December 12, 2019, representatives of Morgan Stanley and Moelis sent to each of Brookfield Infrastructure and Party H a process letter setting forth the procedures for the final round of the process and the submission of final binding offers with committed financing by mid January 2020.

On December 13, 2019, representatives of Morgan Stanley received a call from representatives of Brookfield Infrastructure, during which call Brookfield Infrastructure communicated an updated proposal to acquire the Company for $9.50 per Company common share and requested that the Company enter into an exclusivity agreement through a targeted signing date of December 19, 2019. Representatives of Brookfield Infrastructure noted that Brookfield Infrastructure’s debt financing commitments were scheduled to expire prior to Christmas and that Brookfield Infrastructure would not be interested in pursuing further discussions if a definitive agreement in respect of transaction was not executed prior to the expiration of its debt financing commitments. The closing price per Company common share as of the close of trading on December 13, 2019 was $7.52.

Also on December 13, 2019, representatives of Morgan Stanley and Moelis called representatives of Party H to discuss their ability to accelerate their due diligence timeline and to narrow their November 15 preliminary valuation range of $9.00 to $11.00 per Company common share included in Party H’s initial proposal. Representatives of Party H informed representatives of Morgan Stanley and Moelis that they would provide a

 

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valuation update following due diligence sessions scheduled for December 17, 2019 and December 18, 2019. They indicated, however, that they would not be able to accelerate finalizing an offer earlier than mid January 2020, and indicated it could slip by a week or so. They also indicated that they still needed to have conversations with their various limited partners in order to finalize a bid.

Also on December 13, 2019, representatives of Morgan Stanley and Moelis called Party F during which call representatives of Party F noted they anticipated being able to provide an update on valuation by Friday, December 20, 2019.

On December 14, 2019, Brookfield Infrastructure submitted a proposal to acquire the Company at a price of $9.50 per Company common share in cash, which was conditioned on the Company agreeing to exclusivity with Brookfield Infrastructure and which was scheduled to expire at 12:00 noon, Eastern Time, on December 16, 2019. The closing price per Company common share as of the close of trading on December 13, 2019, the last full trading day prior to the December 14 proposal, was $7.52.

Shortly after the receipt of the December 14 proposal, Ms. Wentworth, members of the Company’s management and representatives of Morgan Stanley, Moelis and Cravath discussed the terms of the proposal and Brookfield Infrastructure’s request for exclusivity. Following discussions, representatives of Morgan Stanley, at the direction of the Company, informed Brookfield Infrastructure that the Board would review Brookfield Infrastructure’s revised proposal but would be unable to respond prior to the expiration of the offer at 12:00 noon, Eastern Time, on December 16, 2019.

Also on December 14, 2019, representatives of Morgan Stanley and Moelis received a call from Party H, during which call Party H requested that the Company enter into an agreement pursuant to which the Company would reimburse expenses incurred by Party H in connection with its due diligence review of the Company.

On December 15, 2019, the Company entered into a confidentiality agreement with Party E and the Company subsequently officially approved Party H’s request to partner with Party E.

On December 16, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. Representatives of Morgan Stanley and Moelis reviewed the proposals received from each of Brookfield Infrastructure, Party F and Party H and each presented to the Board their respective updated preliminary financial analyses.

The Board then met in executive session, with representatives of Morgan Stanley, Moelis and Cravath participating. The Board evaluated the proposals from each of Brookfield Infrastructure, Party F and Party H and discussed considerations in determining how to engage with Brookfield Infrastructure and Party H moving forward in light of the deal certainty Brookfield Infrastructure offered due to its proposed backstop of the full amount in cash necessary to fund the aggregate merger consideration with equity commitments from the Brookfield Funds and the fact that the Company’s management and Cravath believed that the draft definitive agreements proposed by Brookfield Infrastructure could be finalized in short order (and that no contract markup or any of the feedback on the draft merger agreement had been received from Party H), that Party H continued to require due diligence and did not have committed financing (which would expose the Company to market uncertainties as were experienced by the Company in the 2018 Process) and the incremental value a transaction with Party H could provide if it were to submit a proposal at the top end of its valuation range. The Board also considered the circumstances under which the Board would be comfortable accelerating the process with Brookfield Infrastructure. The Board discussed taking steps to seek increased value indications from each party, and further evaluating next steps. The Board agreed that if Brookfield Infrastructure were to submit a proposal to acquire the Company at a price of $10.50 per Company common share, it would consider accelerating the process, but that any decision to accelerate the process would be impacted by any revised proposals received from Party F and Party H. The Board also considered Party H’s request for expense reimbursement and

 

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determined to delay consideration of Party H’s request until Party H had provided a clearer sense of what price it would be willing to offer to acquire the Company.

On December 17 and 18, 2019, members of the Company’s management and representatives of Morgan Stanley and Moelis held in-person due diligence sessions with representatives of Party H and Party E. Representatives of Morgan Stanley and Moelis reminded Party H of the need to receive an updated valuation indication.

On December 17, 2019, representatives of Morgan Stanley, at the direction of the Company, provided feedback on the December 14 proposal to representatives of Brookfield Infrastructure, noting that the Board was interested in evaluating a potential transaction with Brookfield Infrastructure given the deal certainty they offered but that the December 14 proposal was inadequate relative to the other bids the Company had received and did not form the basis to shorten the Company’s existing sale process.

Later on December 17, 2019, a representative of Brookfield Infrastructure contacted a representative of Morgan Stanley to indicate that it was not prepared to participate in a process that extended beyond its expiring debt commitments. Furthermore, the representatives of Brookfield Infrastructure informed Morgan Stanley that Brookfield Infrastructure was not prepared to continue to bid against itself without some guidance as to a price level at which the Board would be willing to accelerate the sale process. Following the call, Ms. Wentworth and Mr. Fox met telephonically with representatives of Morgan Stanley, Moelis and Cravath to discuss Brookfield Infrastructure’s inquiry.

Early on December 18, 2019, representatives of Morgan Stanley, at the direction of the Company and consistent with the direction of the Board, informed Brookfield Infrastructure that the Company would only be willing to consider accelerating the process at a proposed price of at least $10.50 per Company common share. Shortly thereafter, representatives of Brookfield Infrastructure informed representatives of Morgan Stanley that it would need to review certain documentation, including the revised drafts of the merger agreement and equity funding letter, and certain confirmatory due diligence items before proceeding at the valuation guidance Morgan Stanley provided at the direction of the Company. Shortly thereafter, Mr. Fox and Ms. Wentworth discussed with representatives of Morgan Stanley, Moelis and Cravath Brookfield Infrastructure’s feedback and Ms. Wentworth directed Morgan Stanley, Moelis and Cravath to provide Brookfield Infrastructure with the requested documentation and due diligence information.

Later on December 18, 2019, Cravath, at the direction of the Company, sent Brookfield Infrastructure revised drafts of the merger agreement and equity funding letter. From this time until the execution of the merger agreement, the Company and Brookfield Infrastructure held various discussions on, and exchanged multiple drafts of, the merger agreement and related documents.

On December 19, 2019, representatives of Morgan Stanley and Moelis informed each of Brookfield Infrastructure, Party F and Party H that a Board call was scheduled for the upcoming weekend to review where each potential counterparty to a transaction stood and that they should each submit updated valuations by the close of business on December 20, 2019.

Also on December 19, 2019, representatives of Brookfield Infrastructure informed representatives of Morgan Stanley that it was willing to proceed at $10.50 per Company common share, predicated on the execution of definitive documentation in respect of a transaction by December 23, 2019, and would submit a formal proposal, including a request for exclusivity, later that evening or the following morning.

Also on December 19, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. Representatives of Moelis provided the Board with an overview of recent interactions with each of Brookfield Infrastructure, Party F and Party H. The Board discussed considerations in respect of evaluating any updated value indications the Company

 

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received in light of the deal certainty that Brookfield Infrastructure offered. The Board also discussed how to respond to Brookfield Infrastructure’s request for exclusivity and the importance of receiving a revised valuation range from Party H in order to better assess any Brookfield Infrastructure offer and agreed not to grant exclusivity prior to receiving Party H’s revised proposal.

Later on December 19, 2019, representatives of Party H sent representatives of Morgan Stanley and Moelis an updated non-binding preliminary value indication at a tightened range of $9.50 to $10.50 per Company common share. Party H’s updated value indication indicated that in order for Party H to submit a final, binding offer, it would need additional time to complete its due diligence and would be subject to the receipt of internal approvals. The updated value indication also noted that in order for Party H to continue its due diligence review of the Company and negotiate definitive transaction documentation, it would require full cost reimbursement in the event that the Company and Party H did not execute definitive transaction documentation.

Later on December 19, 2019, Brookfield Infrastructure submitted an updated proposal to acquire the Company at a price of $10.50 per Company common share in cash, which was described as Brookfield Infrastructure’s best and final offer (the “Final Offer”), a revised draft of the merger agreement, and a requirement to enter into exclusive negotiations. The Final Offer was scheduled to expire by 11:59 p.m., Eastern Time unless the Company agreed to enter into an exclusivity agreement with Brookfield Infrastructure. Brookfield Infrastructure also confirmed that it had financing commitments in hand from its debt financing sources. Brookfield Infrastructure reiterated to representatives of Morgan Stanley and Moelis that it would not participate in a process that continued into January. The closing price per Company common share as of the close of trading on December 19, 2019 was $7.49.

Later on December 19, 2019, Ms. Wentworth, members of the Company’s management and representatives of Morgan Stanley, Moelis and Cravath discussed the Final Offer, Brookfield Infrastructure’s request for exclusivity, Party H’s updated value indication and Party H’s request for expense reimbursement. They believed that the Final Offer was Brookfield Infrastructure’s best and final offer, that Brookfield Infrastructure would not increase the Final Offer price and that there was a material risk that Brookfield Infrastructure would drop out of the process if the Company did not proceed with their offer. Ms. Wentworth and members of the Company’s management also concluded that the Final Offer was more favorable to the Company’s shareholders than Party H’s updated value indication both in terms of value and deal certainty given the fact that Party H had indicated it would need additional time to conduct due diligence before submitting a final offer and that proceeding to engage in exclusive negotiations with Brookfield Infrastructure was in the best interests of the Company and its shareholders. After consultation with members of the Board, the Company agreed to grant Brookfield Infrastructure’s request for exclusivity until 11:59 p.m. Eastern time on December 22, 2019. Later on December 19, 2019, the Company and Brookfield Infrastructure entered into the exclusivity agreement. Party F did not submit a revised proposal prior to the execution of the merger agreement.

On December 21, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance. Representatives of Cravath reviewed with the Board its fiduciary duties in the context of a review of a potential sale transaction. Representatives of Morgan Stanley and Moelis reviewed for the Board the terms of the Final Offer and compared the Final Offer with the non-binding proposals from each of Party F and Party H. Members of the Company’s management presented to the Board updates to the September Forecasts in line with the preliminary updates presented to the Board in October 2019 reflecting changes and developments since the preparation of the September Forecasts (the December Forecasts, as described further in the section entitled “—Certain Unaudited Prospective Financial Information” beginning on page [    ]). The Board reviewed and approved the December Forecasts.

Following the Board’s approval of the December Forecasts, representatives of Morgan Stanley reviewed with the Board its financial analyses of the merger consideration and rendered the oral opinion of Morgan Stanley, which was subsequently confirmed by delivery of a written opinion, dated December 21, 2019, to the Board, and attached to this proxy statement as Annex B, that, based on and subject to the factors and assumptions

 

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outlined therein, it was their opinion that, on December 21, 2019, the consideration to be received by the holders of Company common shares pursuant to the merger agreement is fair from a financial point of view to the holders of Company common shares (other than Brookfield Infrastructure and its affiliates). Next, representatives of Moelis reviewed with the Board Moelis’ financial analyses of the merger consideration and rendered the oral opinion of Moelis, which was subsequently confirmed by delivery of a written opinion, dated December 21, 2019, to the Board, and attached to this proxy statement as Annex C, that, based on and subject to the factors and assumptions outlined therein, it was their opinion that, as of December 21, 2019, the consideration to be received by holders of Company common shares in the merger is fair from a financial point of view to such holders. Representatives of Cravath reviewed the terms of the near final draft of the merger agreement and described the resolutions before the Board. After discussion and consideration of a variety of factors, including those described in “—Reasons for the Merger” beginning on page [    ], the Board unanimously (i) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (ii) determined that entering into the merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, the Company and its shareholders, (iii) declared the merger agreement, the merger and the other transactions contemplated by the merger agreement advisable and (iv) recommended that the holders of Company common shares and 6 34% preferred shares (voting as a single class) adopt the merger agreement.

Following the meeting of the Board, the parties executed the merger agreement, the equity funding letter and the other transaction documentation related to the merger.

On December 23, 2019, the Company and Brookfield Infrastructure issued a joint press release announcing the merger and their execution of the merger agreement.

On January 22, 2019, Party H sent representatives of Morgan Stanley and Moelis an unsolicited, non-binding proposal to acquire the Company at a price of $12.00 per Company common share in cash. Party H had indicated in its proposal that it believed it would be able to submit a binding offer with financing commitments within three weeks, it was willing to proceed on substantially similar terms as provided in the merger agreement, it did not believe a transaction with Party H would require any regulatory approvals beyond what are required for a transaction with Brookfield Infrastructure and a transaction with Party H would not be subject to any financing conditions. The closing price per Company common share as of the close of trading on January 22, 2019 was $11.41.

On January 23, 2019, the Board met telephonically with members of the Company’s management and representatives of each of Morgan Stanley, Moelis and Cravath in attendance to discuss Party H’s January 22 proposal. After discussion and consultation with representatives of Morgan Stanley, Moelis and Cravath, the Board made the required determinations under the merger agreement to allow the Company to commence discussions with Party H regarding its proposal. The Board also reaffirmed its existing recommendation in support of the transaction with Brookfield Infrastructure.

Later on January 23, 2019, a representative of Cravath informed Brookfield Infrastructure of the Board’s determinations.

Later on January 23, 2019, the Company and its advisors commenced discussions with Party H.

Recommendation of the Board

At the special meeting of the Board on December 21, 2019, after careful consideration, including detailed discussions with the Company’s management and its legal and financial advisors, the Board unanimously:

 

   

approved the merger agreement, the merger and the other transactions contemplated by the merger agreement;

 

   

determined that entering into the merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to, and in the best interests of the Company and its shareholders;

 

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declared the merger agreement, the merger and the other transactions contemplated by the merger agreement advisable; and

 

   

recommended that the holders of Company common shares and 6 34% preferred shares (voting as a single class) adopt the merger agreement.

Reasons for the Merger

As described above in the section entitled “—Background of the Merger”, prior to and in reaching its determination, the Board consulted with and received the advice of its financial advisors and outside counsels, discussed certain issues with the Company’s management and considered a variety of factors weighing positively in favor of the merger, including the following material factors:

 

   

the $10.50 per share price to be paid in cash for each Company common share, which represented a premium of approximately:

 

   

36% over the closing price of the Company common shares on December 20, 2019, the last trading day prior to the date when the merger agreement was executed;

 

   

61% over the 30-trading-day volume weighted average price of the Company common shares up to and including December 20, 2019; and

 

   

84% over the 60-trading-day volume weighted average price of the Company common shares up to and including December 20, 2019;

 

   

the Board’s understanding of the Company’s business, operations, financial condition, earnings, prospects, competitive position and the nature of the industry in which the Company competes;

 

   

the Board’s understanding of the risks, uncertainties and challenges facing the Company and the industry in which the Company competes, including the risks that the Company would face if it continued to operate on a stand-alone basis. These risks, uncertainties and challenges included:

 

   

risks relating to the Company’s ability to grow its revenues and cash flows, continue to make new fiber investments in accordance with its strategic plan, refinance its existing indebtedness on favorable terms and keep pace with technological advances, including potential competition from 5G wireless networks, and changing consumer preferences;

 

   

the Board’s belief that the Company’s stand-alone strategic plan involved significant risks in light of the industry and competitive and financial leverage pressures the Company was facing and the Board’s concerns with respect to the risks relating to the Company’s ability to execute on its strategic plan, including the possibility that the strategic plan may not produce the intended results on the targeted timing or at all;

 

   

the continued decline in earnings multiples and equity valuations among telecommunications companies and volatile market conditions;

 

   

the impact of high levels of leverage and financial distress amongst certain of the Company’s industry peers, including Windstream Holdings Inc.’s bankruptcy, on equity valuations in the sector and on the availability and terms of future financing and leverage levels;

 

   

the risk that the Company will no longer have access to capital sufficient to fund necessary capital investments essential to keep the Company competitive and to avoid revenue and cash flow declines; and

 

   

other risks and uncertainties, including the risk factors set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and on Form 10-Q for the fiscal quarters ending March 31, 2019, June 30, 2019 and September 30, 2019;

 

   

the Board’s belief that other alternatives to a sale of the entire company, including divesting certain assets or business units, such as CBTS or the Company’s Hawaii assets, and entering into financing

 

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transactions, which alternatives the Board evaluated with the assistance of the Company’s financial advisors and outside legal counsel, did not represent a more attractive alternative to a sale in light of, among other factors, the potential risks, rewards and uncertainties associated with those alternatives;

 

   

the financial analysis reviewed and discussed with the Board by representatives of Morgan Stanley as well as the oral opinion of Morgan Stanley rendered to the Board on December 21, 2019 (which was subsequently confirmed in writing by delivery of Morgan Stanley’s written opinion dated the same date) that, based on and subject to the factors and assumptions outlined therein, it was their opinion that, on December 21, 2019, the consideration to be received by the holders of Company common shares pursuant to the merger agreement is fair from a financial point of view to the holders of Company common shares (other than Brookfield Infrastructure and its affiliates). The foregoing is more fully described below in the section entitled “—Opinion of the Company’s Financial Advisors”;

 

   

the financial analysis reviewed and discussed with the Board by representatives of Moelis as well as the oral opinion of Moelis rendered to the Board on December 21, 2019 (which was subsequently confirmed in writing by delivery of Moelis’s written opinion dated the same date) that, based on and subject to the factors and assumptions outlined therein, it was their opinion that, as of December 21, 2019, the consideration to be received by holders of Company common shares in the merger is fair from a financial point of view to such holders. The foregoing is more fully described below in the section entitled “—Opinion of the Company’s Financial Advisors”;

 

   

the Board’s assessment, taking into account the foregoing factors, of the Company’s value on a stand-alone basis relative to the $10.50 per Company common share to be paid in cash in the merger;

 

   

the possibility that the trading price of the Company common shares would not reach and sustain at least the offer price of $10.50 per Company common share or that doing so could take a considerable period of time;

 

   

the Board’s process for soliciting offers from the third parties that were believed to be the most able and willing to pay the highest price for the Company, which included providing such parties with an opportunity to conduct due diligence and conduct meetings with members of the Company’s management, as described above in the section entitled “—Background of the Merger”;

 

   

the fact that the Company engaged in, or attempted to initiate, discussions regarding a potential sale transaction with numerous third parties, none of which had expressed a willingness, as of December 21, 2019, to pay the Company’s shareholders more than the $10.50 per Company common share offer from Brookfield Infrastructure;

 

   

the course and history of competitive negotiations with Brookfield Infrastructure which, among other things, resulted in an increase in the merger consideration to $10.50 per Company common share from $8.40 per Company common share, as described above in the section entitled “—Background of the Merger”;

 

   

the Board’s belief that, based on discussions with Brookfield Infrastructure and other potential counterparties, the merger consideration represented Brookfield Infrastructure’s best and final offer and the highest price per Company common share that Brookfield Infrastructure or other potential counterparties would be willing to pay, and any request for a further price increase or solicitation of additional bids from other third parties would have created a meaningful risk that Brookfield Infrastructure might determine not to enter into the transaction and to terminate negotiations, in which event the Company’s shareholders would lose the opportunity to obtain the $10.50 per share in cash being offered;

 

   

the fact that the consideration to be paid by Brookfield Infrastructure is all cash, which provides certainty, immediate value and liquidity to holders of Company common shares, while avoiding long-term business risk, including the risks and uncertainties relating to the Company’s prospects (including the prospects described in the management’s forecasts summarized in the section below entitled “—Financial Forecasts”), immediately upon the closing of the merger;

 

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the fact that the financial, management, and other resources made available to the Company through the merger will enhance the Company’s networks and services to the benefit of its customers in Hawaii, Ohio, Kentucky, and Indiana, and across the nation;

 

   

Brookfield Infrastructure’s track record in successfully acquiring other companies, consolidated financial strength, industry expertise and track record of investment in critical data service and infrastructure;

 

   

the fact that the merger is not subject to a financing condition, that Brookfield Infrastructure obtained committed debt financing for the merger from reputable financing sources and that the Brookfield Funds committed to make available and provide to Brookfield Infrastructure, pursuant to the equity funding letter, the full amount in cash necessary to fund the aggregate merger consideration;

 

   

the fact that the Company is entitled to seek specific performance to cause Brookfield Infrastructure to draw down the full proceeds of the equity funding letter in connection with the consummation of the merger, as described below in the section entitled “—Financing of the Merger”;

 

   

the fact that the Brookfield Funds have provided a guaranty in favor of the Company, covering the payment of the Guaranteed Costs, subject to an aggregate cap of $578,017,192, as described below in the section entitled “—Financing of the Merger”;

 

   

the provisions of the merger agreement that permit the Company to explore an unsolicited superior proposal, including:

 

   

the Company’s ability to, subject to certain conditions, furnish information to and engage in negotiations with third parties that have made an unsolicited takeover proposal if the Board determines in good faith (after consultation with its outside counsel and financial advisor) that the failure to do so would reasonably be expected to be inconsistent with its fiduciary duties under applicable law, and that such takeover proposal constitutes or is reasonably likely to lead to a superior proposal, as more fully described in “The Merger Agreement—No Solicitation by the Company; Company Board Recommendation” beginning on page [    ];

 

   

the Board’s ability to consider, and under certain conditions, to accept, a superior proposal in order to comply with the Board’s fiduciary duties, and the Company’s corresponding right to terminate the merger agreement upon the payment of a termination fee of $17.97 million to Parent in order to enter into a definitive agreement providing for such superior proposal; and

 

   

the $17.97 million termination fee, which the Board believed, after consultation with the Company’s advisors, was reasonable and not likely to preclude a superior proposal for a business combination with the Company;

 

   

the Board’s ability, under certain circumstances, to withhold or withdraw the Board’s recommendation to holders of Company common shares and 6 34% preferred shares (voting as a single class) that they vote in favor of the adoption of the merger agreement;

 

   

the belief that the terms of the merger agreement, taken as a whole, provide protection against the risk that the consummation of the merger is delayed or that the merger cannot be completed, including due to required regulatory approvals, based on, among other things:

 

   

the covenants contained in the merger agreement obligating each of the parties to use reasonable best efforts to cause the merger to be consummated;

 

   

the covenant in the merger agreement pursuant to which Parent has agreed to promptly take any and all actions necessary to obtain all required governmental consents or approvals, including (i) contesting and resisting legal actions challenging the merger agreement and the transactions contemplated by the merger agreement as violative of any law, (ii) attempting to repeal laws and challenging any judgment, injunction or other restraint, (iii) entering into a consent decree, hold separate order, or otherwise committing to divest businesses, product lines, assets or operations,

 

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(iv) agreeing to operational restrictions and (v) otherwise taking actions that would limit its or its affiliates’ ability to retain any businesses, product lines, assets or operations of Parent or any of its affiliates or the Company or any of its subsidiaries, in each case, subject to a limit on taking or refraining from taking certain actions that individually or in the aggregate, would be reasonably likely to have a material adverse effect on Parent and its affiliates (taken as a whole) or the Company and its subsidiaries (taken as a whole);

 

   

the provision of the merger agreement that allows the end date for completing the merger to be extended from March 20, 2021 to June 20, 2021 if the merger has not been completed by the initial end date because the required regulatory approvals have not been obtained;

 

   

the Board’s belief that the end date for completing the merger under the merger agreement on which either party, subject to certain exceptions, can terminate the merger agreement allows for sufficient time to consummate the merger and consummate the transactions contemplated by the merger agreement;

 

   

the likelihood and anticipated timing of consummating the merger in light of the scope of the conditions to closing; and

 

   

the Company’s ability to seek specific performance to prevent breaches of the merger agreement and to enforce specifically the terms of the merger agreement;

 

   

the fact that resolutions approving the merger agreement were unanimously approved by the Board, which is comprised of a majority of independent directors who are not affiliated with the Company and are not employees of the Company or any of its subsidiaries;

 

   

the fact that the merger is not conditioned upon any member of the Company’s management or Board entering into any employment, equity contribution or other agreement or arrangement with the Company or Brookfield Infrastructure, and that no such agreement or arrangement existed as of the date of the merger agreement;

 

   

the belief that the terms of the merger agreement, taken as a whole, including the parties’ representations, warranties and covenants, and the conditions to the parties’ respective obligations, are reasonable;

 

   

the fact that the merger is subject to the vote of shareholders holding at least two thirds of the outstanding Company common shares and 6 34% preferred shares (voting as a single class), enabling the Company’s shareholders to evaluate the merger and ultimately decide whether the merger is consummated;

 

   

the availability of appraisal rights and payment of fair value under Ohio law to record holders of Company common shares and 6 34% preferred shares who follow the required statutory procedures and who do not vote in favor of the proposal to adopt the merger agreement, as described further in the section entitled “The Merger—Appraisal Rights” beginning on page [    ];

 

   

the risk that pursuing other potential alternatives, including continuing to operate on a stand-alone basis, could have resulted in the loss of an opportunity to consummate a transaction with Brookfield Infrastructure, particularly if the markets for debt fluctuated in a manner that made it more difficult to finance the acquisition; and

 

   

the concern regarding the potential impact of any potential economic downturn on the price of Company common shares and the terms of and availability of financing.

In the course of its deliberations, the Board also considered a variety of risks and other countervailing factors related to the merger agreement and the merger, including the following material factors:

 

   

the potential upside in the Company’s stand-alone strategic plan;

 

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the possibility that the merger might not be consummated in a timely manner or at all due to a failure of certain conditions, including with respect to the required approval of the transaction by the required regulatory authorities;

 

   

the limitations on Parent’s commitments under the merger agreement to take certain actions necessary to obtain the required governmental consents or approvals if such commitments would be reasonably likely to have a material adverse effect on Parent and its affiliates (taken as a whole) or the Company and its subsidiaries (taken as a whole);

 

   

the risks and costs to the Company if the merger does not close in a timely manner or at all, including the potential negative impact on the Company’s ability to retain key employees, the diversion of management and employee attention and the potential disruptive effect on the Company’s day-to-day operations and the Company’s relationships with customers, suppliers and other third parties;

 

   

the fact that the holders of Company common shares will have no ongoing equity interest in the surviving corporation following the merger, meaning that the holders of Company common shares will not (by virtue of their holding Company common shares) participate in Brookfield Infrastructure’s or the Company’s potential future earnings or growth;

 

   

the restrictions on the conduct of the Company’s business prior to the consummation of the merger, which may delay or prevent the Company from undertaking business opportunities that may arise or any other action that it might otherwise take with respect to the operations and strategy of the Company;

 

   

the risk that the parties may incur significant costs and delays resulting from seeking governmental consents and approvals necessary for completion of the merger;

 

   

the provisions of the merger agreement that restrict the Company’s ability to solicit or participate in discussions or negotiations regarding alternative business combination transactions, subject to specified exceptions, and that require the Company to negotiate with Brookfield Infrastructure (if Brookfield Infrastructure desires to negotiate) prior to the Company being able to terminate the merger agreement to accept a superior proposal;

 

   

the possibility that the Company’s obligation to pay Parent a termination fee of $17.97 million upon the termination of the merger agreement under certain circumstances could discourage other potential acquirors from making an alternative proposal to acquire the Company;

 

   

the significant costs involved in connection with negotiating the merger agreement and completing the merger, including in connection with any litigation that may result from the announcement or pendency of the merger, and the fact that if the merger is not consummated, the Company may be required to bear such costs;

 

   

the risk of litigation in connection with the execution of the merger agreement and the completion of the merger; and

 

   

the fact that an all-cash transaction would be taxable to the holders of Company common shares that are U.S. holders for U.S. federal income tax purposes.

In addition, the Board was aware of and considered the fact that the Company’s executive officers have financial interests in the merger that may be different from, or in addition to, those of the Company’s shareholders generally, including those interests that are a result of employment and compensation arrangements with the Company, as described more fully below in the section entitled “—Interests of the Company’s Directors and Executive Officers in the Merger”.

The foregoing discussion of the factors considered by the Board is not intended to be exhaustive, but rather includes the material factors considered by the Board. The Board collectively reached the conclusion to adopt the merger agreement and recommend that the shareholders holding Company common shares and 6 34% preferred

 

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shares (voting as a single class) vote to approve the proposal to adopt the merger agreement, in light of the various factors described above and other factors that the members of the Board believed were appropriate. In view of the wide variety of factors considered by the Board in connection with its evaluation of the merger and the complexity of these matters, the Board did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the Board. Rather, the Board made its recommendation based on the totality of the information available to the Board, including discussions with, and questioning of, the Company’s management and its financial and legal advisors. In considering the factors discussed above, individual members of the Board may have given different weights to different factors.

This explanation of the Board’s reasons for recommending the approval of the merger agreement and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors described in the section of this proxy statement entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [    ].

Financial Forecasts

Other than annual guidance—including the guidance included in the Company’s earnings release dated February 14, 2019 and the reaffirmation of such guidance in the Company’s earnings releases dated May 8, 2019, August 8, 2019 and November 7, 2019 (the “2019 earnings guidance”), with respect to consolidated revenues and certain other performance measures, which guidance the Company presents as a range—the Company does not, as a matter of course, publicly disclose forecasts as to future performance, earnings or other results due to the unpredictability of the underlying assumptions and estimates. However, the Company has included below certain financial forecasts of the Company that, to the extent described below, were furnished to the Board, the Company’s financial advisors, Brookfield Infrastructure and certain other parties potentially interested in a transaction with the Company, in connection with the discussions concerning the proposed merger.

These Financial Forecasts (as defined below) were not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial data, published guidelines of the SEC regarding forward-looking statements or generally accepted accounting principles in the United States (“GAAP”). A summary of this information is presented below.

No assurances can be made regarding future events and the estimates and assumptions underlying these financial forecasts involve judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among other things, the inherent uncertainty of the business and economic conditions affecting the industries in which the Company operates, and the risk and uncertainties described under “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [    ], all of which are difficult to predict and many of which are outside the control of the Company and, upon consummation of the merger, will be beyond the control of Brookfield Infrastructure and the surviving corporation. The Company’s shareholders are urged to review the Company’s SEC filings for a description of risk factors with respect to the Company’s business. There can be no assurance that the underlying assumptions will prove to be accurate or that the projected results will be realized. Actual results likely will differ, and may differ materially, from those reflected in the Financial Forecasts, whether or not the merger is completed. The inclusion in this proxy statement of the Financial Forecasts below should not be regarded as an indication that the Company, Brookfield Infrastructure, their respective boards of directors or their respective financial advisors considered, or now considers, these forecasts to be a reliable predictor of future results. Neither the Financial Forecasts nor any of the assumptions on which they are based are fact. They should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement are cautioned not to place undue, if any, reliance on this information. The

 

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Financial Forecasts assume that the Company would continue to operate as a standalone company and do not reflect any impact of the merger.

The Financial Forecasts include certain non-GAAP financial measures, including Adjusted EBITDA and unlevered free cash flow (in each case, as defined below). The Company’s management included forecasts of Adjusted EBITDA in the Financial Forecasts because the Company’s management believes that Adjusted EBITDA could be useful in evaluating the business, potential operating performance and cash flow of the Company and because it is commonly used by investors to assess financial performance and operating results of ongoing business operations. The Company’s management included forecasts of unlevered free cash flow in the Financial Forecasts because the Company’s management believes that unlevered free cash flow could be useful in evaluating the future cash flows generated by the Company without including in such calculation any debt servicing costs.

Investors should also note that these non-GAAP financial measures presented in this proxy statement are not prepared under any comprehensive set of accounting rules or principles and do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. Investors should also note that these non-GAAP financial measures presented in this proxy statement have no standardized meaning prescribed by GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, the non-GAAP financial measures as used by the Company in this proxy statement and the accompanying footnotes may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by the Company’s competitors and other companies, or any similarly titled measures used by Brookfield Infrastructure, which prepares and publishes its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Due to the inherent limitations of non-GAAP financial measures, investors should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP. The footnotes to the tables below provide certain supplemental information with respect to the calculation of these non-GAAP financial measures. All of the financial forecasts summarized in this section were prepared by the Company’s management. Neither Deloitte & Touche LLP (the Company’s independent registered public accounting firm) (“Deloitte”) nor any other independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the prospective financial information contained in these financial forecasts and, accordingly, neither Deloitte nor any other independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto and no independent registered public accounting firm assumes any responsibility for the prospective financial information. The Deloitte reports incorporated by reference in this proxy statement relate to the historical financial information of the Company. Those reports do not extend to the Financial Forecasts and should not be read to do so.

At the direction of the Board, the non-GAAP financial measures included in the Financial Forecasts were relied upon by Morgan Stanley and Moelis for purposes of their respective financial analyses and opinions. These non-GAAP financial measures were also relied on by the Board in connection with its consideration of the merger. Financial measures provided to a financial advisor in connection with a business combination transaction are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Reconciliations of non-GAAP financial measures were not provided to and were not relied upon by Morgan Stanley and Moelis for purposes of their respective financial analyses and opinions or by the Board in connection with its consideration of the merger. In addition, Brookfield Infrastructure and the other potentially interested parties that received the Financial Forecasts were not provided with any such reconciliation. Accordingly, we have not provided a reconciliation of the financial measures.

By including in this proxy statement the Financial Forecasts below, neither the Company nor Brookfield Infrastructure nor any of their respective representatives has made or makes any representation to any person

 

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regarding the ultimate performance of the Company compared to the information contained in the Financial Forecasts. Accordingly, the Financial Forecasts should not be construed as financial guidance, nor relied upon as such, and the Financial Forecasts may differ in important respects from the 2019 earnings guidance, which are presented as a range and which the Company’s management prepared based on a more conservative set of assumptions. Further, the inclusion of the Financial Forecasts in this proxy statement does not constitute an admission or representation by the Company that this information is material. The Financial Forecasts summarized in this section reflected the opinions, estimates and judgments of the Company’s management at the time they were prepared and have not been updated to reflect any changes since such financial forecasts were prepared. Neither the Company, Brookfield Infrastructure nor, after completion of the merger, the surviving corporation undertakes any obligation, except as required by law, to update or otherwise revise the Financial Forecasts to reflect circumstances existing since their preparation, changes in general economic or industry conditions or the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error.

The summary of the Financial Forecasts is not included in this proxy statement to induce any shareholder to vote in favor of the adoption of the merger agreement or any other proposals to be voted on at the special meeting, but because the Financial Forecasts were made available to the Board, the Company’s financial advisors and certain parties potentially interested in a transaction with the Company, including Brookfield Infrastructure.

As described further in “The Merger—Background of the Merger” beginning on page [    ], as part of the development of the Company’s long term plan and in connection with the Company’s review of strategic alternatives, including a potential sale of the Company, in September 2019 the Company’s management prepared certain financial projections for the fiscal years 2020 through 2023 (the “September Forecasts”). The September Forecasts were presented to the Board at the October 3, 2019 meeting, and were made available to Brookfield Infrastructure and certain other third parties that participated in the sale process in the course of their due diligence review of the Company.

The following table sets forth a summary of the September Forecasts:

Fiscal Year ending December 31,

 

     2020E      2021E      2022E      2023E  
($ millions)                            

Revenue

   $ 1,580      $ 1,598      $ 1,631      $ 1,674  

Adjusted EBITDA(1)

     418        431        453        474  

Capital Expenditures

     246        238        236        236  

Unlevered Free Cash Flow(2)

   $ 172      $ 193      $ 217      $ 237  

 

(1)

“Adjusted EBITDA” is defined as operating income plus depreciation, amortization, stock based compensation, restructuring and severance related charges, any gains or losses on the sale or disposal of assets, transaction and integration costs, asset impairments and other special items.

(2)

“Unlevered Free Cash Flow” is defined as Adjusted EBITDA less capital expenditures.

In December 2019, the Company’s management performed its annual, normal course five year planning process. As a result of this process, the Company’s management made certain updates to the September Forecasts to reflect the actual business results for the fiscal quarter ended September 30, 2019, the competitive landscape and the business opportunities available to the Company (such updated forecasts, the “December Forecasts”, and together with the September Forecasts, the “Financial Forecasts”). Consistent with the new five-year plan, the December Forecasts also included projections for the 2024 fiscal year. The December Forecasts were made available to Brookfield Infrastructure and certain other third parties that participated in the sale process in the course of their diligence review. The Board reviewed the assumptions underlying the December Forecasts and the differences between the December Forecasts and the September Forecasts with management and approved

 

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the December Forecasts for Morgan Stanley and Moelis’s use for purposes of its financial analysis summarized in the section entitled “The Merger—Opinion of the Company’s Financial Advisors” beginning on page [    ].

The following table sets forth a summary of the December Forecasts:

Fiscal Year ending December 31,

 

     2020E      2021E      2022E      2023E      2024E  
($ millions)                                   

Revenue

   $ 1,562      $ 1,591      $ 1,646      $ 1,707      $ 1,775  

Adjusted EBITDA(1)

     411        430        446        463        479  

Capital Expenditures

     245        236        234        234        237  

Unlevered Free Cash Flow(2)(3)

   $ 166      $ 194      $ 212      $ 229      $ 242  

 

(1)

“Adjusted EBITDA” is defined as operating income plus depreciation, amortization, stock based compensation, restructuring and severance related charges, any gains or losses on the sale or disposal of assets, transaction and integration costs, asset impairments and other special items.

(2)

“Unlevered Free Cash Flow” is defined as Adjusted EBITDA less capital expenditures.

(3)

For purposes of their respective discounted cash flow analyses the Company’s financial advisors, using the Financial Forecasts, calculated Unlevered Free Cash Flow as: Adjusted EBITDA less stock based compensation and less depreciation and amortization, then subtracting for taxes, plus depreciation and amortization, less capital expenditures, less pension and OPEB payments, less changes in working capital, less restructuring and severance costs, less integration costs. This resulted in the following calculations of Unlevered Free Cash Flow: $103 for 2020E, $108 for 2021E, $135 2022E, $147 for 2023E and $159 for 2024E.

Opinion of the Company’s Financial Advisors

Opinion of Morgan Stanley & Co. LLC

Morgan Stanley was retained by the Board to act as its financial advisor in connection with a potential sale of the Company. The Board selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of and involvement in recent transactions in the Company’s industry and its knowledge and understanding of the business and affairs of the Company. On December 21, 2019, Morgan Stanley rendered its oral opinion, which was subsequently confirmed in writing, to the Board to the effect that, as of that date, and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in Morgan Stanley’s written opinion, the merger consideration to be received by the holders of Company common shares, pursuant to the merger agreement was fair, from a financial point of view, to the holders of Company common shares (other than Brookfield Infrastructure and its affiliates).

The full text of the written opinion of Morgan Stanley delivered to the Board, dated December 21, 2019, is attached as Annex B and incorporated by reference into this proxy statement in its entirety. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. Shareholders of the Company are urged to, and should, read the opinion carefully and in its entirety. Morgan Stanley’s opinion is directed to the Board and addresses only the fairness, from a financial point of view, of the merger consideration to be paid to the holders of Company common shares (other than Brookfield Infrastructure and its affiliates), pursuant to the merger agreement. Morgan Stanley’s opinion did not address any other aspect of the transactions contemplated by the merger agreement and did not address any other aspects or implications of the merger. Morgan Stanley’s opinion was not intended to, and does not constitute advice or a recommendation as to how shareholders of the Company should vote at the special meeting or to take any other action with respect to the merger. The

 

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summary of Morgan Stanley’s opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of Morgan Stanley’s opinion.

For purposes of rendering its opinion, Morgan Stanley, among other things:

 

   

reviewed certain publicly available financial statements and other business and financial information of the Company;

 

   

reviewed certain internal financial statements and other financial and operating data concerning the Company;

 

   

reviewed certain financial projections prepared by the management of the Company as further described in the section of this proxy statement entitled “The Merger—Financial Forecasts” beginning on page [    ];

 

   

discussed the past and current operations and financial condition and the prospects of the Company with senior executives of the Company;

 

   

reviewed the reported prices and trading activity for the Company common shares;

 

   

compared the financial performance of the Company and the prices and trading activity of the Company common shares with that of certain other publicly traded companies comparable with the Company, and their securities;

 

   

reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;

 

   

participated in certain discussions and negotiations among representatives of the Company and Brookfield Infrastructure and certain parties and their financial and legal advisors;

 

   

reviewed the merger agreement; the draft equity funding letter substantially in the form of the draft dated December 19, 2019; and the draft debt commitment letter from Bank of America, N.A., BofA Securities, Inc., Bank of Montreal, BMO Capital, Citigroup Global Markets Inc., The Toronto-Dominion Bank, New York Branch and TD Securities (USA) LLC, substantially in the form of the draft dated December 20, 2019 (the “debt commitment letter” and, together with the equity funding letter, the “commitment letters”); and certain related documents; and

 

   

performed such other analyses, reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.

In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Morgan Stanley by the Company, and formed a substantial basis for Morgan Stanley’s opinion. With respect to the December Forecasts, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the then best currently available estimates and judgments of the management of the Company of the future financial performance of the Company. In addition, Morgan Stanley assumed that the merger will be consummated in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that Parent and Merger Sub will obtain financing in accordance with the terms set forth in the commitment letters and that the merger agreement would not differ in any material respects from the draft thereof furnished to Morgan Stanley. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the merger, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the merger. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of the Company and its legal, tax and regulatory advisors with respect to legal, tax and regulatory matters. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of the Company’s officers, directors or employees, or any class of such

 

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persons, relative to the merger consideration to be received by the holders of Company common shares in the merger. Morgan Stanley also expressed no opinion as to the fairness of any consideration payable to holders of any class of securities of the Company other than the Company common shares (including, without limitation, any series of preferred stock of the Company). Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of the Company, nor was Morgan Stanley furnished with any such valuations or appraisals. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of, December 21, 2019. Events occurring after such date may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion.

Summary of Financial Analyses

The following is a summary of the material financial analyses performed by Morgan Stanley in connection with its oral opinion delivered on December 21, 2019 and the preparation of its written opinion letter dated December 21, 2019 to the Board. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The analyses listed in the tables and described below must be considered as a whole; considering any portion of such analyses and of the factors, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before December 20, 2019, which was the last full trading day prior to the meeting of the Board to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement and is not necessarily indicative of current market conditions.

In performing the financial analysis summarized below and arriving at its opinion, Morgan Stanley used and relied upon the December Forecasts, which are more fully described above under the section of this proxy statement entitled “The Merger—Financial Forecasts.”

Public Trading Comparable Companies Analysis

Morgan Stanley performed a public trading comparable companies analysis, which attempts to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley reviewed and compared certain financial estimates for the Company with comparable publicly available consensus equity analyst research estimates for certain selected companies (the “Comparable Companies”) that Morgan Stanley determined, upon the application of its professional judgment and experience with companies in the wireline, cable and information technology services industries, to be similar to the Company’s current and anticipated operations for purposes of this analysis. The following list sets forth the Comparable Companies that were reviewed in connection with this analysis:

Entertainment & Communications (“E&C”) Comparable Companies

 

   

Altice USA, Inc.

 

   

Cable One, Inc. (pro forma financial information adjusted to reflect acquisition of Fidelity Communications Co.)

 

   

CenturyLink, Inc.

 

   

Charter Communications, Inc.

 

   

Consolidated Communications Holdings, Inc.

 

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Frontier Communications Corporation

 

   

WideOpenWest, Inc.

Information Technology Services (“ITS”) Comparable Companies

 

   

CDW Corporation

 

   

ePlus inc.

 

   

Insight Enterprises, Inc.

For purposes of this analysis, Morgan Stanley analyzed the ratio of aggregate value (“AV”) (calculated as fully diluted market capitalization unadjusted for net operating losses and pension liabilities plus debt, preferred equity and non-controlling interest (as applicable) less cash, cash equivalents and marketable securities) to EBITDA (calculated as earnings before interest, tax, depreciation and amortization) (the “AV / EBITDA Ratio”) for calendar year 2020 for each of the Comparable Companies based on publicly financial information for comparison purposes. For purposes of this analysis of the Comparable Companies, Morgan Stanley utilized publicly available estimates of EBITDA as compiled by Capital IQ, prepared by equity research analysts, available as of December 20, 2019 (the last full trading day prior to the date on which Morgan Stanley rendered its opinion).

The Comparable Companies and their applicable ratios were the following:

 

Comparable Company (E&C)

   Market Cap
($ in millions)
     Enterprise
Value

($ in millions)
     2020
AV/EBITDA
 

CenturyLink, Inc.

   $ 14,638      $ 48,647        5.4x  

Consolidated Communications Holdings, Inc.

   $ 268      $ 2,486        4.9x  

Frontier Communications Corporation

   $ 68      $ 15,553        5.3x  

Altice USA, Inc.

   $ 17,452      $ 41,731        9.3x  

Cable One, Inc.

   $ 8,837      $ 10,531         16.5x 5 

Charter Communications, Inc.

   $ 117,414      $ 190,698        10.5x  

WideOpenWest, Inc.

   $ 559      $ 2,873        6.4x  

Comparable Company (ITS)

   Market Cap
($ in millions)
     Enterprise
Value

($ in millions)
     2020
AV/EBITDA
 

CDW Corporation

   $ 21,212      $ 24,349        16.2x  

ePlus inc.

   $ 1,195      $ 1,370        11.3x  

Insight Enterprises, Inc.

   $ 2,482      $ 3,386        8.4x  

Based on its analysis of the relevant metrics for each of the Comparable Companies and upon the application of its professional judgment and experience, Morgan Stanley selected a representative range of the AV / EBITDA Ratio for the calendar year 2020 as noted below based on the multiples for CenturyLink, Inc., Consolidated Communications Holdings, Inc. and WideOpenWest, Inc. and applied this range of multiples to the Company’s 2020 Adjusted EBITDA as set forth in the December Forecasts. Morgan Stanley focused on these three Comparable Companies because Morgan Stanley determined that each such company had a business model, asset base and financial performance history most similar to that of the Company.

Based on the outstanding Company common shares on a fully diluted basis of 52.7 million shares as of December 17, 2019 (calculated using the treasury stock method), net debt of $1,945 million and preferred equity

 

5 

Pro forma for acquisition of Fidelity Communications.

 

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of $155 million as of December 31, 2019, in each case per Company management, Morgan Stanley calculated an estimated implied value per Company common share, rounded to the nearest $0.25, as follows:

 

     Selected Comparable
Companies Multiples Range
     Implied Value
Per Share
 

2020 AV / EBITDA

     5.5x - 6.25x      $ 3.00 - $9.00  

No company utilized in the public trading comparable companies analysis is identical to the Company and hence the foregoing summary and underlying financial analyses involved complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which the Company was compared. In evaluating comparable companies, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company. These include, among other things, the impact of competition on the business of the Company and the industry generally, industry growth and the absence of any adverse material change in the financial condition and prospects of the Company or the industry or in the financial markets in general. Mathematical analysis is not in itself a meaningful method of using selected company data.

Discounted Future Equity Value Analysis

Morgan Stanley performed a discounted equity value analysis, which is designed to provide insight into the potential future equity value of a company as a function of that company’s EBITDA. The resulting equity value is subsequently discounted to arrive at an estimate of the implied present value. In connection with this analysis, Morgan Stanley calculated a range of implied present equity values per Company common share on a standalone basis.

To calculate the discounted equity value using the Company’s Adjusted EBITDA, Morgan Stanley used Adjusted EBITDA from the December Forecasts for 2023. Based upon the application of its professional judgment and experience, Morgan Stanley applied a range of AV / EBITDA Ratios (based on the range of AV / EBITDA Ratios for the Comparable Companies) to this estimate. Morgan Stanley then subtracted the future amount of net debt and preferred equity as provided by Company management in order to calculate the implied future equity value. Morgan Stanley’s calculations did not account for any potential refinancings over the course of the projection period. Morgan Stanley then applied a range of discount rates between 11.7% and 12.9%, which range was selected based on the estimated cost of equity to calculate the discounted equity value and upon the application of Morgan Stanley’s professional judgment and experience, to calculate the discounted share price rounded to the nearest $0.25.

Morgan Stanley calculated an implied present value per share range of $7.25—$12.00.

 

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Sum-of-the-Parts Analysis

Morgan Stanley performed a sum-of-the-parts valuation analysis on the Company. A sum-of-the-parts analysis involves a valuation of a company on a segment-by-segment basis to determine an implied value for the enterprise as a whole. Morgan Stanley performed the sum-of-the-parts valuation analysis for the following business segments of the Company based on the Company’s estimated 2020 Adjusted EBITDA: E&C, ITS and corporate overhead. Based on its review and professional judgment, Morgan Stanley selected reference ranges of AV / EBITDA Ratio for the Company’s E&C, ITS and corporate overhead segments as noted below and applied these ranges to the estimated Adjusted EBITDA of the respective business segments of the Company for 2020.

 

            Selected Multiple
Reference Range
    

Implied Value

($ in millions)

 

Segment

   2020 Adjusted
EBITDA

($ in millions)
     Low      High      Low     High  

E&C

     369        5.50x        6.25x        2,030       2,306  

ITS

     62        7.0x        9.0x        436       561  

Corporate

     (20      5.72x        6.65x        (116     (135

Morgan Stanley then aggregated the implied values for each business segment based on the analysis above and deducted the projected net debt of the Company as of year end 2019 (estimated by Company management to be $1,945 million) and value of preferred equity (estimated by Company management to be $155 million) to derive an implied equity value reference range per Company common share on a fully diluted basis, rounded to the nearest $0.25, of $4.75 to $12.00. Morgan Stanley noted that the closing price per Company common share on December 20, 2019 was $7.72.

Discounted Cash Flow Analysis

Morgan Stanley performed a discounted cash flow analysis, which is designed to provide an implied value of a company by calculating the present value of future unlevered free cash flows and terminal value of that company. The “unlevered free cash flows” refers to a calculation of the future cash flows generated by a company without including in such calculation any debt servicing costs. The present value of a terminal value, representing the value of unlevered free cash flows beyond the end of the forecast period, is added to arrive at a total aggregate value. Outstanding debt and preferred equity is subtracted to arrive at an equity value. For purposes of the DCF analysis, estimated net debt of $1,945 million and preferred equity of $155 million, as of December 31, 2019 and provided by Company management, was utilized. The equity value was then divided by the fully diluted share count as of December 17, 2019, as provided by Company management, in order to arrive at an implied value per Company common share.

Morgan Stanley used estimates from the December Forecasts for purposes of the discounted cash flow analysis, as more fully described below. Morgan Stanley first calculated the estimated unlevered free cash flows, which it defined as Adjusted EBITDA less stock-based compensation and less depreciation and amortization, then subtracting for taxes, plus depreciation and amortization, less capital expenditures, less pension and OPEB payments, less changes in working capital, less restructuring and severance costs, less integration costs. The estimated unlevered free cash flows were then discounted to present values as of December 31, 2019 using a range of discount rates from 7.4% to 7.8%, which range of discount rates were selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect an estimate of the Company’s weighted average cost of capital (“WACC”). Morgan Stanley then calculated a range of implied terminal values for the Company by applying a range of exit multiples from 5.5x to 6.25x to the Company’s terminal year estimated Adjusted EBITDA.

This analysis reflected a range of implied equity value per Company common share, rounded to the nearest $0.25, of $5.25 to $11.00. In addition, Morgan Stanley conducted an illustrative calculation of the cash flow impact from the Company’s utilization of net operating losses (“NOLs”) for such period, as provided by

 

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Company management, discounted at the Company’s estimated WACC. In calculating the cash flow impact of NOLs, Morgan Stanley noted that the value of NOLs was subject to substantial revision based on further input from Company management. At the Company’s direction, Morgan Stanley assumed that NOL usage would be kept constant until the NOL balance was fully depleted. Morgan Stanley noted for the reference of the Board, and not as part of Morgan Stanley’s financial analysis at arriving at its opinion, that the illustrative calculation of NOLs indicated a range of implied equity value per Company common share, rounded to the nearest $0.25, of $5.25 to $13.50.

Other Information

Morgan Stanley observed additional factors that were not considered part of Morgan Stanley’s financial analysis with respect to its opinion, but which were noted as reference data for the Board, including the following.

Historical Trading Range

For reference only, and not as a component of its fairness analysis, Morgan Stanley reviewed the historical trading range of the Company common shares for the period commencing on December 20, 2018, and ending on December 20, 2019 (the last trading day prior to the meeting of the Board at which Morgan Stanley rendered its opinion). Morgan Stanley observed that, during this period, the high and low intraday prices of the Company common shares, rounded to the nearest $0.25, were $11.00 (on February 20, 2019) and $3.25 (on August 7, 2019) per share, respectively.

Equity Research Analysts’ Price Targets

For reference only, and not as a component of its fairness analysis, Morgan Stanley reviewed and analyzed the future public market trading price targets for the Company common shares prepared and published by three equity research analysts as of November 7, 2019 and by one equity research analyst as of November 11, 2019. These targets reflected each analyst’s estimate of the future public market trading price of the Company common shares. The range of undiscounted analyst price targets for the Company common shares, rounded to the nearest $0.25, was $4.00 to $8.00. Morgan Stanley then discounted the range of analyst price targets for Company common shares to present value by applying, for a one year discount period, a discount rate of 11.7%, selected by Morgan Stanley based on the application of its professional judgment and experience to reflect the Company’s cost of equity. This analysis resulted in a discounted analyst price target range for the Company common shares, rounded to the nearest $0.25, of $3.75 to $7.25.

The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for the Company common shares, and these estimates are subject to uncertainties, including the future financial performance of the Company and future financial market conditions.

Precedent Transactions Analysis

For reference only, and not as a component of its fairness analysis, Morgan Stanley performed a precedent transactions analysis, which is designed to imply a value of a company based on publicly available financial terms that share some characteristics with the merger. Morgan Stanley compared publicly available statistics for the following transactions involving businesses that Morgan Stanley judged to be similar in certain respects to the Company’s business or aspects thereof based on Morgan Stanley’s professional judgment and experience:

 

Date Announced

  

Acquirer

  

Target

   Enterprise
Value
(in billions)
December 2016    Consolidated Communications, Inc.    FairPoint Communications, Inc.    $1.5
July 2017    Cincinnati Bell Inc.    Hawaiian Telcom Holdco Inc.    $0.7
May 2019    Searchlight Capital Partners, LLC    Frontier Communications Corp. (northwest operations)    $1.4

 

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For each transaction, Morgan Stanley noted the ratio of the AV of the transaction to each of the target company’s EBITDA for the 12-month period prior to the announcement date of the applicable transaction (“LTM EBITDA,” and the ratio of AV to LTM EBITDA, the “AV / LTM EBITDA Ratio”). Based on its analysis of the relevant metrics for the comparable transactions and upon the application of its professional judgment, Morgan Stanley then applied AV / LTM EBITDA Ratios of 5.0x, 5.6x and 5.9x, representing the AV / LTM EBITDA Ratios for the three recent transactions in the local exchange carrier industry noted above that Morgan Stanley determined to be most relevant, to the Company’s projected LTM EBITDA as provided by Company management. Based on the outstanding Company common shares on a fully diluted basis of 52.7 million shares as of December 17, 2019 (calculated using the treasury stock method), net debt of $1,945 million and preferred equity of $155 million as of December 31, 2019, in each case per Company management, Morgan Stanley calculated an estimated implied present value per Company common share, rounded to the nearest $0.25, of ($1.75), $3.25 to $5.50.

No company or transaction utilized in the precedent transactions analysis is identical to the Company or the merger. In evaluating the precedent transactions, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond the control of the Company. These include, among other things, the impact of competition on the Company’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of the Company and the industry, and in the financial markets in general, which could affect the public trading value of the companies and the aggregate value and equity value of the transactions to which they are being compared.

General

In connection with the review of the merger by the Board, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of the Company.

In performing its analyses, Morgan Stanley made numerous assumptions with regard to industry performance, general business, regulatory, economic, market and financial conditions and other matters, which are beyond the control of the Company. These include, among other things, the impact of competition on the business of the Company and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of the Company and the industry, and in the financial markets in general. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view, of the merger consideration to be received by the holders of Company common shares (other than Brookfield Infrastructure and its affiliates) pursuant to the merger agreement and in connection with the delivery of its oral opinion on December 21, 2019 to the Board (and subsequently delivered written opinion dated December 21, 2019). These analyses do not purport to be appraisals or to reflect the prices at which the Company common shares might actually trade.

The merger consideration was determined through arm’s-length negotiations between the Company and Brookfield Infrastructure and was approved by the Board. Morgan Stanley acted as financial advisor to the Board

 

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during these negotiations but did not, however, recommend any specific form or amount of consideration to the Company or the Board, nor did Morgan Stanley opine that any specific form or amount of consideration constituted the only appropriate consideration for the merger. Morgan Stanley’s opinion was not intended to, and does not, constitute advice or a recommendation as to how shareholders should vote at the special meeting, or whether shareholders should take any other action in connection with the merger. In addition, Morgan Stanley’s opinion did not in any manner address the prices at which the Company common shares will trade at any time.

Morgan Stanley’s opinion and its presentation to the Board was one of many factors taken into consideration by the Board in deciding to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement and to declare the advisability of the merger and the other transactions contemplated by the merger agreement. Consequently, the analyses as described above should not be viewed as determinative of the opinion of the Board with respect to the consideration pursuant to the merger agreement or of whether the Board would have been willing to agree to different consideration. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with Morgan Stanley’s customary practice.

Morgan Stanley, together with its affiliates, is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of Brookfield Infrastructure or any of its affiliates, the Company, or any other company, or any currency or commodity, that may be involved in the merger, or any related derivative instrument.

Under the terms of its engagement letter, Morgan Stanley provided the Company financial advisory services and a financial opinion, described in this section and attached to this proxy statement as Annex B, in connection with the merger, and the Company has agreed to pay Morgan Stanley a fee of approximately $25 million for its financial advisory services, approximately $5 million of which was payable in connection with the delivery of the fairness opinion and approximately $20 million of which is contingent upon consummation of the merger. The Company has also agreed to reimburse Morgan Stanley for its reasonable and documented expenses incurred from time to time in connection with this engagement. In addition, the Company has agreed to indemnify Morgan Stanley and its affiliates, its and their respective directors, officers, employees and agents and each other person, if any, controlling Morgan Stanley or any of its affiliates, against any losses, claims, damages or liabilities, relating to, arising out of or in connection with Morgan Stanley’s engagement and to reimburse certain expenses relating to such indemnity.

In the two years prior to the date of its opinion, Morgan Stanley has provided financial advisory and financing services for the Company and has received aggregate fees in connection with such services of approximately $10 million. In the two years prior to the date of its opinion, Morgan Stanley has provided financial advisory and financing services for Brookfield Infrastructure and its affiliates and has received aggregate fees in connection with such services of approximately $61 million. In addition, Morgan Stanley, its affiliates, directors or officers, including individuals working with the Company in connection with this transaction, may have committed and may commit in the future to invest in private equity funds managed by affiliates of Brookfield Infrastructure.

Opinion of Moelis & Company LLC

At a meeting of the Board held on December 21, 2019 to evaluate and approve the merger, Moelis rendered its oral opinion to the Board, confirmed by the delivery of a written opinion dated December 21, 2019, addressed to the Board to the effect that, as of the date of such opinion and based upon and subject to the conditions and

 

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limitations set forth in the opinion, the merger consideration to be received in the merger by the holders of the Company common shares was fair, from a financial point of view, to such holders.

The full text of Moelis’ written opinion dated December 21, 2019, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of the Board (solely in its capacity as such) in its evaluation of the merger. Moelis’ opinion is limited solely to the fairness, from a financial point of view, of the merger consideration to be received by the holders of the Company common shares and does not address the Company’s underlying business decision to effect the merger or the relative merits of the merger as compared to any alternative business strategies or transactions that might be available to the Company. Moelis’ opinion does not constitute a recommendation as to how any holder of securities should vote or act with respect to the merger or any other matter. Moelis’ opinion was approved by a Moelis fairness opinion committee.

In arriving at its opinion, Moelis, among other things:

 

   

reviewed certain publicly available business and financial information relating to the Company;

 

   

reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of the Company furnished to Moelis by the Company, including the December Forecasts;

 

   

reviewed capitalization information for the Company provided by the Company;

 

   

conducted discussions with members of the senior management and representatives of the Company concerning the information described in the three immediately preceding bullets, as well as the business and prospects of the Company generally;

 

   

reviewed publicly available financial and stock market data of certain other companies in lines of business that Moelis deemed relevant;

 

   

reviewed the financial terms of certain other transactions that Moelis deemed relevant;

 

   

reviewed a draft, dated December 21, 2019, of the merger agreement;

 

   

participated in certain discussions and negotiations among representatives of the Company and Brookfield Infrastructure and their advisors; and

 

   

conducted such other financial studies and analyses and took into account such other information as Moelis deemed appropriate.

In connection with its review, with the consent of the Board, Moelis relied on the information supplied to, discussed with or reviewed by it for purposes of its opinion being complete and accurate in all material respects. Moelis did not assume any responsibility for independent verification of, and did not independently verify, any of such information. With the consent of the Board, Moelis relied upon, without independent verification, the assessment of the Company and its legal, tax, regulatory and accounting advisors with respect to legal, tax, regulatory and accounting matters. With respect to the December Forecasts referred to above Moelis assumed, at the direction of the Board, that they were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the Company’s management as to the future performance of the Company. Moelis expressed no views as to the reasonableness of the December Forecasts or the assumptions on which they were based. In addition, with the consent of the Board, Moelis did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of the Company, nor was Moelis furnished with any such evaluation or appraisal.

Moelis’ opinion did not address the Company’s underlying business decision to effect the merger or the relative merits of the merger as compared to any alternative business strategies or transactions that might be

 

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available to the Company and did not address any legal, regulatory, tax or accounting matters. At the direction of the Board, Moelis was not asked to, nor did it, offer any opinion as to any terms of the merger agreement or any aspect or implication of the merger, except for the fairness of the merger consideration from a financial point of view to the holders of the Company common shares. In addition, Moelis noted that pursuant to the merger agreement, Company common shares owned by the Company, Brookfield Infrastructure, Merger Sub or any of their wholly-owned subsidiaries and dissenting shares will not be converted into the right to receive the merger consideration and Moelis expressed no opinion with respect to such shares or as to the fairness of the merger consideration to holders thereof. In addition, Moelis noted that the 634% preferred shares will remain outstanding immediately following the merger and Moelis expressed no opinion with respect to such shares, the treatment thereof in the merger, or the fairness of the merger consideration relative to the treatment of such shares. In rendering its opinion, Moelis assumed, with the consent of the Board, that the final executed form of the merger agreement would not differ in any material respect from the draft that Moelis reviewed, that the merger would be consummated in accordance with its terms without any waiver or modification that could be material to Moelis’ analysis, and that the parties to the merger agreement would comply with all the material terms thereof. Moelis assumed, with the consent of the Board, that all governmental, regulatory or other consents or approvals necessary for the completion of the merger would be obtained, except to the extent that could not be material to Moelis’ analysis.

Moelis’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Moelis as of, the date of its opinion, and Moelis assumed no responsibility to update its opinion for developments after the date of its opinion.

Moelis’ opinion did not address the fairness of the merger or any aspect or implication of the merger to, or any other consideration of or relating to, the holders of any class of securities, creditors or other constituencies of the Company, other than the fairness of the merger consideration from a financial point of view to the holders of the Company common shares. In addition, Moelis did not express any opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the merger consideration or otherwise. Moelis’ opinion was approved by a Moelis fairness opinion committee. Except as described in this summary, the Company and the Board imposed no limitations on Moelis with respect to the investigations made or procedures followed by Moelis in rendering its opinion.

Summary of Financial Analyses

The following is a summary of the material financial analyses presented by Moelis to the Board at a meeting held on December 21, 2019, in connection with its opinion. Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand Moelis’ analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Moelis’ analyses.

Unless the context indicates otherwise, stock prices are based on closing stock prices on December 20, 2019. For purposes of, among other things, deriving per share implied equity values for the Company, Moelis calculated certain per share amounts for the Company based on diluted shares outstanding as of December 18, 2019, using the treasury stock method, based on share count information for the Company provided by Company management on December 18, 2019. For purposes of Moelis’ analyses, Moelis also used Company management’s projected December 31, 2019 balance sheet, as set forth in the December Forecasts.

 

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For purposes of its analyses, Moelis reviewed a number of financial metrics, including the following:

EBITDA: generally calculated as the relevant company’s earnings before interest, taxes, depreciation and amortization, as adjusted to exclude one-time charges and benefits and to reflect full-year impact of material M&A transactions.

Enterprise Value (or EV): which (a) with respect to the Company, was calculated as the market value of the Company’s fully diluted common equity based on its closing stock price on December 20, 2019 and share count information provided by Company management on December 18, 2019 (i) plus preferred stock, if any, (ii) plus debt, (iii) less cash and cash equivalents, (iv) less unconsolidated assets and (v) plus book value of non-controlling interests (in each of the foregoing clauses (i) through (v), as projected by Company management as of December 31, 2019), and (b) with respect to other companies, was calculated as the market value of the relevant company’s fully diluted common equity based on its closing stock price as of December 20, 2019 (i) plus preferred stock, if any, (ii) plus debt, (iii) less cash and cash equivalents, (iv) less unconsolidated assets and (v) plus book value of non-controlling interests (in each of the foregoing clauses (i) through (v), as of the relevant company’s most recently reported quarter end).

Unless the context indicates otherwise, (i) the estimates of the future financial performance for the selected companies listed below were based on certain publicly available research analyst estimates for those companies, and (ii) the estimates of the future financial performance of the Company relied upon for the financial analyses described below were based on the December Forecasts.

Discounted Cash Flow Analysis

Moelis performed a discounted cash flow (“DCF”) analysis of the Company using the December Forecasts and other information and data provided by the Company’s management to calculate an estimate of the present value of the estimated future unlevered after-tax free cash flows projected to be generated by the Company and an estimate of the present value of the Company’s estimated terminal value, taking into account the present value of the Company’s net operating losses (“NOLs”). For purposes of the DCF analysis, Moelis calculated unlevered free cash flow as Adjusted EBITDA less stock based compensation and less depreciation and amortization, then subtracting for taxes, plus depreciation and amortization, less capital expenditures, less pension and OPEB payments, less changes in working capital, less restructuring and severance costs, less integration costs.

In performing the DCF analysis, Moelis utilized a range of discount rates of 8.00% to 9.25% based on an estimated range of the Company’s weighted average cost of capital (the “WACC”). The estimated WACC range was derived using the Capital Asset Pricing Model and a size premium. In performing the DCF analysis of the Company, Moelis used a range of estimated terminal values (based on the selected publicly traded companies) of 5.75x to 6.50x estimated terminal year Adjusted EBITDA. The foregoing range of discount rates was used to calculate (i) the estimated present values as of December 31, 2019 of the Company’s estimated after-tax unlevered free cash flows for fiscal years 2020 through 2024 using the mid-year convention and (ii) a range of estimated terminal values based on the estimated terminal multiples described above. In calculating Enterprise Value, Moelis separately valued and discounted at the cost of equity of approximately $825 million to $850 million of NOLs as provided by Company management on September 18, 2019.

Based on the foregoing, Moelis derived implied per share reference ranges for the Company common shares of $5.33 to $12.45. Moelis compared the implied per share reference ranges to the merger consideration of $10.50 per share.

Selected Publicly Traded Companies Analysis

Moelis reviewed financial and stock market information of the selected publicly traded companies noted below that are in the local exchange carrier (“LEC”), cable and IT services businesses listed on a major U.S. exchange deemed relevant by Moelis in certain respects to the Company.

 

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Moelis reviewed, among other things, Enterprise Value of the selected publicly traded companies as a multiple, to the extent information was publicly available, of estimated adjusted EBITDA for fiscal years 2019 and 2020. Financial data for the selected companies was based on publicly available median consensus research analysts’ estimates and public filings. In the case of projected Adjusted EBITDA for the Company, Moelis reviewed both (i) median consensus research analyst estimates and (ii) the December Forecasts.

The results of this analysis are summarized in the following table:

 

     Market Cap
($ in millions)
     Enterprise
Value
($ in millions)
     EV / Adj. EBITDA
2020E
 

LEC

        

CenturyLink, Inc.

   $ 14,638      $ 48,647        5.4x  

Consolidated Communications Holdings, Inc.

   $ 268      $ 2,486        4.9x  

Frontier Communications Corporation

   $ 68      $ 15,553        5.3x  

Average

           5.2x  

Median

           5.3x  

Cable

        

Charter Communications Inc.

   $ 117,414      $ 190,698        10.5x  

Altice USA, Inc.

   $ 17,452      $ 41,731        9.3x  

Cable One Inc.

   $ 8,837      $ 10,531        16.5x  

WideOpenWest, Inc.

   $ 559      $ 2,873        6.4x  

Average

           10.7x  

Median

           9.9x  

IT Services

        

CDW Corporation

   $ 21,212      $ 24,349        16.2x  

Insight Enterprises Inc.

   $ 2,482      $ 3,386        8.4x  

ePlus Inc.

   $ 1,195      $ 1,370        11.3x  

PC Connection, Inc.

   $ 1,394      $ 1,295        10.1x  

Average

           11.5x  

Median

           10.7x  

For purposes of this analysis, Moelis considered CenturyLink and Consolidated Communications to be more relevant due to growth profile and a higher share of broadband (particularly fiber optic) revenue, which is projected to increase over the projected period. As a result, Moelis considered the Company to be at a premium to CenturyLink and Consolidated Communications on the low end and at a slight premium to WideOpenWest on the high end.

Based on the foregoing analysis and its professional judgment and experience, Moelis selected a multiple range of 5.75x to 6.5x estimated EBITDA for fiscal year 2020. Moelis then applied this multiple range to the Company’s estimated Adjusted EBITDA for fiscal year 2020 provided by the Company’s management. This analysis indicated an implied per share reference range for the Company common shares of $4.99 to $10.84 per share. Moelis compared the implied per share reference range to the merger consideration of $10.50 per share.

Selected Precedent Transactions Analysis

Moelis reviewed financial information for transactions in the LEC, cable, fiber optic and IT services industries with an Enterprise Value of at least approximately $100 million. Moelis reviewed, among other things, transaction values of the selected precedent transactions as a multiple, to the extent information was publicly available, of last 12 month (“LTM”) EBITDA of the target company. Financial data for the relevant transactions was based on publicly available information at the time of announcement of the relevant transaction. In certain

 

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circumstances in which full year EBITDA amounts were not available, Moelis used its judgment to approximate full year EBITDA by annualizing available quarterly information. The selected precedent transactions used in this analysis and their implied transaction value to LTM EBITDA multiples are summarized below:

 

Date Announced

  

Target

  

Acquiror

   Enterprise
Value (in
billions)
     EV /
LTM
EBITDA
 

LEC

           

May 2019

   Frontier Communications Corporation – Northwest Assets    Searchlight Capital Partners, LLC    $ 1.4        5.0x  

July 2017

   Hawaiian Telcom Holdco Inc.    Cincinnati Bell Inc.    $ 0.7        5.6x  

December 2016

   FairPoint Communications, Inc.    Consolidated Communications Holdings, Inc.    $ 1.5        5.9x  

February 2015

   Verizon Communications, Inc.    Frontier Communications Corporation    $ 10.5        4.6x  

June 2014

   Enventis Corporation    Consolidated Communications Holdings, Inc.    $ 0.4        7.3x  

December 2013

   AT&T, Inc. – Wireline Assets    Frontier Communications Corporation    $ 2.0        4.8x  

February 2012

   SureWest Communications, Inc.    Consolidated Communications Holdings, Inc.    $ 0.5        6.3x  

April 2010

   Qwest Communications International, Inc.    CenturyLink, Inc.    $ 22.4        5.1x  

November 2009

   Iowa Telecommunications Services, Inc.    Windstream Corporation    $ 1.1        8.7x  

September 2009

   Lexcom, Inc.    Windstream Corporation    $ 0.1        6.1x  

May 2009

   Verizon Communications, Inc. – Spin-Off Assets    Frontier Communications Corporation    $ 8.6        4.5x  

May 2009

   D&E Communications, Inc.    Windstream Corporation    $ 0.3        5.2x  

October 2008

   Embarq Corporation    CenturyLink, Inc.    $ 11.6        4.5x  

Mean

              5.6x  

Median

              5.2x  

Cable

           

April 2019

   Fidelity Communications Co.    Cable One Inc.    $ 0.4        9.8x  

July 2017

   MetroCast Cable    Cogeco Communications Inc.    $ 1.1        9.0x  

May 2017

   WaveDivision Holdings, LLC    RCN Telecom Services, LLC    $ 2.4        11.8x  

April 2017

   General Communication, Inc.    Liberty Interactive Corporation    $ 2.7        9.3x  

January 2017

   NewWave Communications    Cable One Inc.    $ 0.7        9.1x  

 

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Date Announced

  

Target

  

Acquiror

   Enterprise
Value (in
billions)
     EV /
LTM
EBITDA
 

August 2016

   RCN Telecom Services, LLC / Grande Communications Networks LLC    TPG Capital    $ 2.3        8.4x  

September 2015

   Cablevision Systems Corporation    Altice USA, Inc.    $ 17.7        8.8x  

May 2015

   Time Warner Cable Inc.    Charter Communications Inc.    $ 77.0        9.1x  

May 2015

   Suddenlink Communications (Cequel Corporation)    Altice USA, Inc.    $ 9.1        9.3x  

May 2015

   Bright House Networks LLC    Charter Communications Inc.    $ 10.4        7.6x  

February 2013

   Bresnan Communications Company Limited Partnership    Charter Communications Inc.    $ 1.6        8.9x  

Mean

              9.2x  

Median

              9.1x  

Fiber

           

May 2019

   Zayo Group Holdings, Inc.    Digital Colony Partners LP and EQT Partners    $ 14.1        11.1x  

November 2017

   Spread Holdings, LLC    Zayo Group Holdings, Inc.    $ 0.1        16.9x  

August 2017

   WideOpenWest, Inc., Fiber-Optic Network Assets    Verizon Communications, Inc.    $ 0.2        20.8x  

July 2017

   LTS Group Holdings LLC    Crown Castle International Corp.    $ 7.1        16.2x  

April 2017

   Wilcon Holdings LLC    Crown Castle International Corp.    $ 0.6        20.0x  

April 2017

   Southern Light, LLC    Uniti Group Inc.    $ 0.7        17.2x  

February 2017

   Hunt Telecommunications, LLC    Uniti Group Inc.    $ 0.2        11.5x  

February 2017

   Lumos Networks Corp.    EQT Partners    $ 1.0        9.3x  

November 2016

   FPL FiberNet Holdings, LLC    Crown Castle International Corp.    $ 1.5        16.7x  

November 2016

   Electric Lightwave Holdings Inc.    Zayo Group Holdings, Inc.    $ 1.4        7.9x  

October 2016

   Level 3 Communications, Inc.    CenturyLink, Inc.    $ 34.0        12.0x  

June 2016

   Tower Cloud Inc.    Uniti Group Inc.    $ 0.2        12.4x  

February 2016

   XO Communications LLC    Verizon Communications, Inc.    $ 1.8        9.3x  

January 2016

   PEG Bandwidth IL, LLC    Uniti Group Inc.    $ 0.5        12.8x  

April 2015

   Quanta Fiber Networks, Inc.    Crown Castle International Corp.    $ 1.0        15.0x  

 

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Date Announced

  

Target

  

Acquiror

   Enterprise
Value (in
billions)
     EV /
LTM
EBITDA
 

April 2015

   Fibertech Networks, L.L.C.    Lightower Fiber Networks I, LLC    $ 1.9        12.8x  

June 2014

   TW Telecom Inc.    Level 3 Communications, Inc.    $ 7.3        13.2x  

March 2012

   AboveNet, Inc.    Zayo Group Holdings, Inc.    $ 2.2        8.9x  

Mean

              13.6x  

Median

              12.8x  

IT Services

           

August 2019

   Presidio, Inc.    BC Partners    $ 2.1        8.9x  

June 2019

   PCM, Inc.    Insight Enterprises Inc.    $ 0.6        9.2x  

April 2019

   Sirius Computer Solutions, Inc.    Clayton, Dubilier & Rice    $ 1.6        8.2x  

November 2018

   ConvergeOne Holdings, Inc.    CVC Fund VII    $ 1.8        9.7x  

December 2017

   ConvergeOne Holdings, Inc.    Forum Merger Corp.    $ 1.2        9.5x  

October 2017

   CompuCom Systems, Inc.    Office Depot, Inc.    $ 1.0        10.2x  

July 2017

   OnX Enterprise Solutions    Cincinnati Bell Inc.    $ 0.2        6.9x  

December 2016

   Optiv Security, Inc.    KKR & Co.    $ 1.9        11.7x  

November 2016

   Datalink Corporation    Insight Enterprises, Inc.    $ 0.2        9.6x  

September 2015

   One Source Networks Inc.    GTT Communications, Inc.    $ 0.2        12.6x  

September 2015

   Sirius Computer Solutions, Inc.    Kelson & Company    $ 0.8        9.4x  

December 2014

   Presidio Holdings, Inc.    Apollo Global Management, LLC    $ 1.3        7.8x  

November 2014

   Fishnet Security    Accuvant Inc.    $ 0.4        11.7x  

March 2014

   Accuvant Inc.    The Blackstone Group and Sverica Capital Management LLC    $ 0.2        11.7x  

Mean

              9.8x  

Median

              9.6x  

Moelis considered the transactions in the LEC industry to be more relevant than certain other industries, in particular the recent sale of Frontier Communications’ Northwest Assets, which is the most recent LEC precedent transaction, and had a multiple of 5.0x to LTM EBITDA. Moelis also determined that the transactions in the LEC industry listed above to be the most relevant to its analysis, and valued the Company at a premium to those transactions, as the Company has a greater density of fiber optic cable than certain other LEC companies involved in such transactions.

Based on the foregoing analysis and its professional judgment and experience, including given the nature of the Company’s operations, with particular emphasis on transactions in the LEC industry, Moelis selected a multiple range of 5.75x to 6.75x LTM Adjusted EBITDA. Moelis then applied such multiple range to the Company’s estimated Adjusted EBITDA for fiscal year 2019 provided by the Company’s management. This analysis indicated an implied per share reference range for the Company common shares of $4.38 to $12.08 per share. Moelis compared the implied per share reference range to the merger consideration of $10.50 per share.

 

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Other Information

Moelis also noted for the Board the following additional factors that were not considered part of Moelis’ financial analyses with respect to its opinion, but were referenced for informational purposes: (i) the historical closing trading prices for the Company common shares during the 52-week period ended December 20, 2019, which reflected low and high stock prices during such period of $3.19 and $11.00 per share, as compared to the merger consideration of $10.50 per share, (ii) the one-year forward stock price targets for the Company common shares in recently published, publicly available Wall Street research analysts’ reports, which indicated undiscounted low and high stock price targets ranging from $4.00 to $8.00 per share, as compared to the merger consideration of $10.50 per share and (iii) a sum-of-the-parts analysis that reviewed the Company based on its entertainment and communications business, IT services and hardware business and corporate which, based on the high and low of the implied enterprise value, reflected a range of implied share price of $4.73 to $13.66 as compared to the merger consideration of $10.50 per share.

Miscellaneous

This summary of the analyses is not a complete description of Moelis’ opinion or the analyses underlying, and factors considered in connection with, Moelis’ opinion. The preparation of a fairness opinion is a complex analytical process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Moelis’ opinion. In arriving at its fairness determination, Moelis considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Rather, Moelis made its fairness determination on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the analyses described above is identical to the Company or the merger. In addition, such analyses do not purport to be appraisals, nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because the analyses described above are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, neither the Company nor Moelis or any other person assumes responsibility if future results are materially different from those forecast.

The merger consideration was determined through arms’ length negotiations between the Company and Brookfield Infrastructure and was approved by the Board. Moelis did not recommend any specific consideration to the Company or the Board, or that any specific amount or type of consideration constituted the only appropriate consideration for the transaction. Moelis acted as financial advisor to the Company in connection with the transaction and will receive a fee for its services, currently estimated to be approximately $15,900,000 in the aggregate, $2,000,000 of which became payable in connection with the delivery of its opinion, regardless of the conclusion reached therein, and the remainder of which is contingent upon completion of the transaction. Furthermore, the Company has agreed to indemnify Moelis for certain liabilities, including liabilities under the federal securities laws, arising out of its engagement.

Moelis’ affiliates, employees, officers and partners may at any time own securities (long or short) of the Company and Brookfield Infrastructure. Moelis provided investment banking and other services to the Company and Brookfield Infrastructure or its affiliates unrelated to the Transaction and in the future may provide such services to the Company and Brookfield Infrastructure or its affiliates and have received and may receive compensation for such services. In 2018, Moelis acted as financial advisor to an affiliate of Brookfield Infrastructure in connection with a buy-side transaction, and in 2016 Moelis acted as financial advisor to an Ad Hoc Group of Secured Senior Second Lien Noteholders of which an affiliate of Brookfield Infrastructure was a member in connection with a transaction which closed in 2017, and Moelis earned fees aggregating approximately $11 million in connection with these engagements. In 2017, Moelis acted as financial advisor to the Company in connection with its acquisition in 2017 of Hawaiian Telecom Holdco, Inc. and OnX Holdings

 

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LLC, for which Moelis earned fees aggregating approximately $9.5 million. In addition, Moelis has provided investment banking and other services to Oaktree Capital Management, L.P. and its affiliates (“Oaktree”) unrelated to the merger prior to its becoming affiliated with Brookfield Infrastructure, for which Moelis earned fees aggregating approximately $47 million in the past three years, and Moelis is currently acting as financial advisor to an Oaktree portfolio company unrelated to the merger.

Certain Effects of the Merger

If the Company shareholder approval is obtained, and the other conditions to the closing of the merger are either satisfied or (to the extent permitted by law) waived, Merger Sub will be merged with and into the Company upon the terms set forth in the merger agreement. As the surviving corporation in the merger, the Company will continue to exist following the merger as a subsidiary of Parent.

At the effective time of the merger, each Company common share issued and outstanding immediately prior to the effective time (other than excluded shares and dissenting shares) will be canceled and converted into the right to receive $10.50 in cash, without interest and less any applicable withholding taxes. Following the merger, all of the Company common shares will be beneficially owned by Parent, and none of the current holders of Company common shares will, by virtue of the merger, have any ownership interest in, or be a shareholder of, the Company, the surviving corporation or Parent after the consummation of the merger. As a result, the current holders of Company common shares will no longer benefit from any increase in the value, nor will they bear the risk of any decrease in the value, of Company common shares. Following the merger, Parent will benefit from any increase in the Company’s value and also will bear the risk of any decrease in the Company’s value.

At the effective time of the merger, each 6 34% preferred share and depositary share representing interests in the 6 34% preferred shares issued and outstanding immediately prior to the effective time of the merger will remain issued and outstanding immediately following the effective time of the merger. After the effective time of the merger, the Company will be required either to (i) offer to repurchase the 6 34% preferred shares on the date that is 75 days after the Company gives notice of the merger for their liquidation preference of $1,000 per share (or $50 per depositary share) plus any accrued and unpaid dividends or, if such offer is not made or (ii) modify the conversion ratio applicable to the 6 34% preferred shares so that upon conversion the holders of the 6 34% preferred shares will have the right to receive an amount in cash equal to the liquidation preference of $1,000 per share (or $50 per depositary share) plus any accrued and unpaid dividends. Parent intends to cause the surviving corporation to redeem the 6 34% preferred shares (and the depositary shares representing interests in such 6 34% preferred shares) in accordance with the Articles as promptly as practicable following the completion of the merger.

Please see the sections of this proxy statement entitled “The Merger Agreement—Consideration to be Received in the Merger” and “The Merger Agreement—Cancellation of Shares” beginning on pages [    ] and [    ], respectively.

For information regarding the effects of the merger on the Company’s outstanding equity awards, please see the section below entitled “—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page [    ] and the section of this proxy statement entitled “The Merger Agreement—Treatment of Equity and Equity-Based Awards” beginning on page [    ].

The Company common shares are currently registered under the Exchange Act and trade on the NYSE under the symbol “CBB”. Following the consummation of the merger, Company common shares will no longer be traded on the NYSE or any other public market. In addition, the registration of Company common shares under the Exchange Act will be terminated and the Company will no longer be required to file periodic and other reports with the SEC with respect to the Company common shares. Termination of registration of the Company common shares under the Exchange Act will reduce the information required to be furnished by the Company to the Company’s shareholders and the SEC. The depositary shares trade on the NYSE under the trading symbol “CBB.PB”. Immediately following the consummation of the merger, the 6 34% preferred shares will remain

 

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outstanding and the depositary shares representing interests in such 6 34% preferred shares will remain outstanding and continue to be listed on the NYSE. Parent intends to cause the surviving corporation to redeem the 6 34% preferred shares (and the depositary shares representing interests in such 6 34% preferred shares) in accordance with the Articles as promptly as practicable following the completion of the merger.

Effects on the Company if the Merger Is Not Completed

In the event that the Company shareholder approval is not obtained or if the merger is not completed for any other reason, the holders of Company common shares will not receive any payment for their Company common shares in connection with the merger. Instead, the Company will remain an independent public company, the Company common shares will continue to be listed and traded on the NYSE, the Company common shares will continue to be registered under the Exchange Act and the Company’s shareholders will continue to own their Company common shares and will continue to be subject to the same general risks and opportunities as they currently are with respect to ownership of Company common shares.

If the merger is not completed, there is no assurance as to the effect of these risks and opportunities on the future value of your Company common shares, including the risk that the market price of Company common shares may decline to the extent that the current market price of the Company common shares reflect a market assumption that the merger will be completed. If the merger is not completed, there is no assurance that any other transaction acceptable to the Company will be offered or that the business, operations, financial condition, earnings or prospects of the Company will not be adversely impacted. Pursuant to the merger agreement, under certain circumstances the Company is permitted to terminate the merger agreement in order to enter into an alternative transaction. Please see the section of this proxy statement entitled “The Merger Agreement—Termination” beginning on page [    ].

Under certain circumstances, if the merger is not completed, the Company may be obligated to pay to Parent a $17.97 million termination fee. Please see the section of this proxy statement entitled “The Merger Agreement—Termination Fee” beginning on page [    ].

Financing of the Merger

We anticipate that the total funds needed to complete the merger (including the funds necessary to pay the aggregate merger consideration, repay or redeem any indebtedness to be repaid or redeemed by the Company and its subsidiaries pursuant to the merger agreement and pay all fees, costs and expenses required to be paid by Parent or Merger Sub at or prior to the closing of the merger in connection with the transactions contemplated by the merger agreement), which would be approximately $2.652 billion, will be funded through equity financing in an aggregate amount of the Commitment. Parent has received equity commitments for the equity financing from the Brookfield Funds as described below in the section entitled “ —Equity Financing.

The completion of the merger is not conditioned upon Parent’s receipt of financing.

Equity Financing

Parent has received the equity funding letter, pursuant to which the Brookfield Funds have committed, subject to the conditions of the equity funding letter, to provide the full amount in cash necessary to fund the Commitment.

Funding of the equity financing is subject to the terms, conditions and limitations set forth in the equity funding letter, which include: (i) with respect to the merger consideration, the substantially simultaneous closing of the merger and the other transactions contemplated by the merger agreement in accordance with the merger agreement and (ii) with respect to the Expense Amount, such obligations becoming due.

 

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The obligation of the Brookfield Funds to fund the equity financing will terminate automatically and immediately upon the earliest to occur of (i) the funding of the Commitment in full; (ii) the valid termination of the merger agreement and (iii) the assertion by the Company or any of its affiliates, or any of their respective agents or representatives acting on their behalf, in any action of any claim against any of the Brookfield Funds, Parent, Merger Sub or certain parties related to Parent and its affiliates relating to (a) the equity funding letter (other than any action to specifically enforce the guaranty or the equity commitment in accordance with the equity funding letter or to enforce the Company’s right to consent to certain matters as provided in the equity funding letter) or (b) the merger agreement or any of the transactions contemplated by the merger agreement, the equity funding letter or the confidentiality agreement between Brookfield Infrastructure and the Company (in the case of each of clause (a) and clause (b), other than any action (x) against Parent or Merger Sub permitted by the merger agreement, or (y) against any counterparty to the confidentiality agreement for breach of the confidentiality agreement).

Pursuant to the terms and conditions of the merger agreement, Parent shall (and shall cause its affiliates to) use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and obtain the equity financing on the terms and subject only to the conditions set forth in the equity funding letter.

The Company is a beneficiary of the rights granted to Parent under the equity funding letter and is entitled to enforce Parent’s rights under the equity funding letter.

Debt Financing

In connection with entering into the merger agreement, Merger Sub received a debt commitment letter, dated December 30, 2019 (the “Commitment Letter”), from debt financing sources. Pursuant to the Commitment Letter, the debt financing sources have committed to provide the Facilities.

The commitment of the debt financing sources under the Commitment Letter is subject to the satisfaction (or waiver by the debt financing sources) of certain conditions precedent, including, without limitation:

 

   

since December 21, 2019, there shall not have occurred any event or development that, individually or in the aggregate, has had or would reasonably be expected to have, a Material Adverse Effect (as defined in the section entitled “The Merger Agreement—Representations and Warranties”); and

 

   

other customary conditions precedent set forth in the Commitment Letter.

The commitments under the Commitment Letter terminate automatically on the earlier of (i) 11:59 p.m. New York City time on the fifth business day following March 30, 2021 (the “Commitment Expiration Date”); provided, that (x) the Commitment Expiration Date may be extended automatically upon written notice from each of the debt financing sources to the Merger Sub or Brookfield Asset Management or Brookfield Infrastructure Fund III (including through email), and (y) if the end date for completing the merger is extended from March 20, 2021 to June 20, 2021 pursuant to the terms of the merger agreement, then Merger Sub will have the right to extend the Commitment Expiration Date accordingly but, in any event, not more than an additional three months by notifying the debt financing sources in writing (including through email) of such election (without any further action or consent by any person) and the Commitment Expiration Date will be so extended automatically upon such notice from the Merger Sub (without any further action or consent by any person), (ii) the closing of the acquisition without the use of Facilities or (iii) the date of the termination of the merger agreement other than with respect to provisions that survive termination in accordance with its terms.

Guaranty

Subject to the terms and conditions set forth in the equity funding letter executed concurrently with the execution of the merger agreement, the Brookfield Funds have each guaranteed the payment obligations of Parent with respect to the Guaranteed Costs. The Brookfield Funds’ obligations under the guaranty are subject to an aggregate cap of $578,017,192.

 

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The guaranty will automatically and immediately terminate, and the Brookfield Funds will have no further obligation under the guaranty, as of the earliest to occur of (i) the closing of the merger, (ii) 30 days following the termination of the merger agreement unless by such date the Company has commenced an action against the Brookfield Funds, Parent or Merger Sub alleging that any Guaranteed Costs are due and owed, in which case the guaranty will automatically terminate when such claim is resolved or otherwise finally satisfied and (iii) the receipt by the Company of the Guaranteed Costs.

Dissenters’ Rights for Company Shareholders

Under Ohio law, if the merger agreement is adopted by the Company’s shareholders, Company shareholders who do not vote in favor of the adoption of the merger agreement and who properly demand payment of fair cash value of their shares are entitled to certain dissenters’ rights pursuant to Sections 1701.84 and 1701.85 of the OGCL. Section 1701.85 generally provides that Company shareholders will not be entitled to such rights without strict compliance with the procedures set forth in Section 1701.85, and failure to timely take any one of the required steps may result in the termination or waiver of such rights. Specifically, any Company shareholder who is a record holder of Company common shares or 6 34% preferred shares on [                    ], 2020, the record date for the special meeting, and whose shares are not voted in favor of the adoption of the merger agreement may be entitled to be paid the “fair cash value” of such shares after the completion of the merger in lieu of any applicable merger consideration.

To perfect dissenters’ rights, a dissenting shareholder must satisfy each of the following conditions and otherwise comply with Section 1701.85 of the OGCL:

 

   

Must be a shareholder of record. A dissenting shareholder must be a record holder of the shares as to which such shareholder seeks to exercise dissenters’ rights on the record date. Because only shareholders of record on the record date may exercise dissenters’ rights, any person or entity who beneficially owns shares that are held of record by a bank, broker, trust, fiduciary, nominee or other holder and who desires to exercise dissenters’ rights must, in all cases, instruct the record holder of the shares to satisfy all of the requirements outlined under Section 1701.85 of the OGCL. The Company may make a written request for evidence of authority if the dissenting demand is executed by a signatory who was designated and approved by the shareholder. The shareholder must provide the evidence within a reasonable time to the Company but not sooner than 20 days after receipt of the Company’s written request.

 

   

Must not vote in favor of adopting the merger agreement. A dissenting shareholder must not vote his, her or its shares in favor of the adoption of the merger agreement at the special meeting. Failing to vote does not waive a dissenting shareholder’s dissenters’ rights. However, a proxy submitted but not marked to specify voting instructions will be voted in favor of the adoption of the merger agreement and will be deemed a waiver of dissenters’ rights. A dissenting shareholder may revoke his, her or its proxy at any time before its exercise by filing with the Company an instrument revoking it, delivering a duly executed proxy bearing a later date, voting by telephone or over the Internet at a later date than the date of the previous proxy or by attending and giving notice of the revocation of the proxy at the special meeting.

 

   

Must file a written demand. A dissenting shareholder must deliver a written demand for payment of the fair cash value of such shareholder’s shares to the Company prior to the shareholder vote on the merger agreement at the special meeting (a “written demand”). Any written demand must specify the shareholder’s name and address, the number and class of the shares held by the shareholder on the record date, and the amount claimed by the shareholder as the fair cash value of the dissenting shares. Voting against the merger agreement is not a written demand as required under Section 1701.85 of the OGCL. Because the written demand must be delivered to the Company prior to the shareholder vote at the special meeting, it is recommended, although it is not required, that a shareholder use certified or registered mail, return receipt requested, to confirm that the shareholder has made a timely delivery.

 

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Upon request, must deliver certificates for placement of a legend. If the Company sends a request to a dissenting shareholder at the address specified in the written demand for the certificates representing the dissenting shares, the dissenting shareholder, within 15 days from the date on which the Company sends such request, must deliver to the Company the certificates requested so that the Company may endorse on them a legend to the effect that demand for the fair cash value of such shares has been made. Such a request is not an admission by the Company that a dissenting shareholder is entitled to relief. The Company will promptly return the endorsed share certificates to the dissenting shareholder. At the option of the Company, a dissenting shareholder who fails to deliver his, her or its share certificates upon request from the Company may have his, her or its dissenters’ rights terminated upon delivery by the Company of written notice to such dissenting shareholder within 20 days after the lapse of the 15-day period, unless a court for good cause shown otherwise directs.

The Company and a dissenting shareholder may come to an agreement as to the fair cash value of the dissenting shares. If the Company and the dissenting shareholder cannot agree upon the fair cash value of the dissenting shares, then either the Company or the dissenting shareholder may, within three months after service of the written demand by the dissenting shareholder, file a complaint in the Court of Common Pleas of Hamilton County, Ohio for a determination of whether the dissenting shareholder is entitled to be paid the fair cash value of any shares and, if so, the number and class of such shares. The complaint must contain a brief statement of the facts, including the vote and the facts entitling the dissenting shareholder to the relief demanded. If the court finds the dissenting shareholder is entitled to be paid the fair cash value of any dissenting shares, the court may appoint one or more appraisers to receive evidence and recommend a fair cash value. The court will then make a finding as to the fair cash value of a share and will render judgment against the Company for the payment of it. Interest on the fair cash value and the costs of the proceeding, including reasonable compensation to the appraisers to be fixed by the court, will be assessed as the court considers equitable.

Fair cash value for purposes of Section 1701.85 of the OGCL is the amount that a willing seller who is under no compulsion to sell would be willing to accept and that a willing buyer who is under no compulsion to purchase would be willing to pay, but in no event will the fair cash value exceed the amount specified in the written demand of the dissenting shareholder. The fair cash value is to be determined as of the day prior to the vote of the Company’s shareholders on the adoption of the merger agreement. For shares listed on a national securities exchange (such as the NYSE, on which the Company common shares are currently listed), the fair cash value will be the closing sale price of the shares as of the close of trading on the day before the vote of the Company’s shareholders on the adoption of the merger agreement. Investment banker opinions to company boards of directors regarding the fairness from a financial point of view of the consideration payable in a transaction, such as the merger, are not opinions regarding, and do not address, “fair cash value” under Section 1701.85. Shareholders holding Company common shares considering seeking payment of fair cash value of their shares should be aware that the “fair cash value” of their shares as determined pursuant to Section 1701.85 of the OGCL could be more than, the same as, or less than the value of the consideration they would receive pursuant to the merger if they did not seek payment of fair cash value of their shares.

Unless a dissenting shareholder’s rights to receive the fair cash value of its shares is terminated, payment of the fair cash value must be made within 30 days after the later of the final determination of such value or the effective time of the merger. Such payment must be made only upon simultaneous surrender to the Company of the dissenting shareholder’s share certificates for which such payment is made.

A dissenting shareholder’s rights to receive the fair cash value of his, her or its shares will automatically terminate if:

 

   

the dissenting shareholder has not complied with Section 1701.85 of the OGCL, unless the Board waives such non-compliance;

 

   

the merger is abandoned or is finally enjoined or prevented from being carried out, or the Company shareholders rescind their adoption of the merger agreement;

 

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the dissenting shareholder withdraws his, her or its demand with the consent of the board of directors of the Company; or

 

   

the dissenting shareholder and the Company have not agreed on the fair cash value per share and neither has filed a timely complaint in the Court of Common Pleas of Hamilton County, Ohio within three months after the dissenting shareholder delivered a written demand.

All rights accruing to holders of shares, including voting and dividend or distribution rights, are suspended from the time a dissenting shareholder submits a written demand with respect to any dissenting shares until the termination or satisfaction of the rights and obligations of the dissenting shareholder and the Company arising from the written demand. During this period of suspension, any dividend or distribution paid on the dissenting shares will be paid to the record owner as a credit upon the fair cash value thereof. If dissenters’ rights are terminated other than by purchase by the Company of the dissenting shares, then at the time of termination all rights will be restored and all distributions that would have been made, but for suspension, will be made.

If you wish to exercise your dissenters’ rights, you should carefully review the text of Sections 1701.84 and 1701.85 of the OGCL set forth in Annex D to this proxy statement and consider consulting your legal advisor.

If you fail to timely and properly comply with the requirements of Sections 1701.84 and 1701.85 of the OGCL, your dissenters’ rights will be lost. To exercise such dissenters’ rights with respect to your shares, you must:

 

   

NOT vote your shares in favor of the adoption of the merger agreement;

 

   

deliver to the Company a written demand for appraisal of your shares before the taking of the vote on the proposal to adopt the merger agreement at the special meeting, as described further below;

 

   

continuously hold your shares through the effective time of the merger; and

 

   

otherwise comply with the procedures set forth in Sections 1701.84 and 1701.85 of the OGCL.

All written demands for appraisal should be addressed to Cincinnati Bell Inc., 221 East Fourth Street, Cincinnati, Ohio 45202. Such demand must specify the shareholder’s name and address, that the shareholder intends thereby to demand dissenters’ rights of such shareholder’s shares, the number and class of the Company shares held by such shareholder on the record date and the amount claimed by such shareholder as the fair cash value of the dissenting shares. Voting against the merger agreement is not a written demand as required under Section 1701.85 of the OGCL.

If a dissenting holder of Company common shares withdraws its demand for appraisal or fails to perfect or otherwise loses its right of appraisal pursuant to the OGCL, then the right of such shareholder to be paid the fair cash value of such Company common shares shall cease, and such holder’s Company common shares shall be deemed to be converted into the right to receive the merger consideration.

If a dissenting holder of 6 34% preferred shares withdraws its demand for appraisal or fails to perfect or otherwise loses its right of appraisal pursuant to the OGCL, then the right of such shareholder to be paid the fair cash value of such 6 34% preferred shares shall cease, and such holder’s 6 34% preferred shares shall remain outstanding immediately following the effective time of the merger.

The foregoing description of the procedures to be followed in exercising dissenters’ rights available to shareholders holding Company common shares or 6 34% preferred shares pursuant to Sections 1701.84 and 1701.85 of the OGCL may not be complete and is qualified in its entirety by reference to the full text of Sections 1701.84 and 1701.85 of the OGCL, which is attached as Annex D to this proxy statement and incorporated herein by reference. The foregoing summary does not constitute any legal or other advice and does not constitute a recommendation that shareholders exercise their dissenters’ rights under the OGCL. Shareholders who wish to

 

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seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of dissenters’ rights due to the complexity of the appraisal process and because failure to follow fully and precisely the procedural requirements of the statute may result in termination or waiver of such rights.

Interests of the Company’s Directors and Executive Officers in the Merger

The Company’s directors and executive officers have financial interests in the merger that may be different from, or in addition to, the interests of the Company’s shareholders generally. The members of the Board were aware of and considered these interests in reaching the determination to approve the merger agreement and recommend that the holders of Company common shares and 6 34% preferred shares (voting as a single class) vote their Company common shares or 6 34% preferred shares, as applicable, to adopt the merger agreement.

Treatment of Equity and Equity-Based Awards

For information regarding beneficial ownership of Company common shares and 6 3/4% preferred shares, other than the equity-based awards described below, by each of the Company’s directors and named executive officers and all of such directors and executive officers as a group, please see the section entitled “Security Ownership of Certain Beneficial Owners and Management”, beginning on page [ ]. Each of the Company’s directors and executive officers will be entitled to receive, for each Company common share he or she holds, the same per share merger consideration in cash in the same manner as other shareholders. As of January 15, 2020, (i) Phillip R. Cox, who is a former director of the Board, did not beneficially own any Company common shares or 6 34% preferred shares and (ii) Shannon M. Mullen, who is a former executive officer of the Company, beneficially owned 126 Company common shares and no 6 34% preferred shares.

As described further in the section entitled “The Merger Agreement—Treatment of Equity and Equity-Based Awards” beginning on page [    ], each outstanding Company PSU, Company RSU, Company Stock Option, Company SAR and Company Phantom Share will fully vest and be cashed out upon the effective time of the merger.

 

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The following table sets forth the number of Company PSUs, Company RSUs, and Company Phantom Shares held by each of the Company’s directors and executive officers as of January 15, 2020, the latest practicable date to determine such amounts before the filing of this proxy statement, and the cash amounts payable (on a pre-tax basis) in respect thereof. The amounts reflected in the table below exclude any grants that may be made following January 15, 2020 and any Company awards that are expected to vest or be paid in accordance with their terms prior to December 31, 2020 (the assumed date of the completion of the merger solely for purposes of this transaction-related compensation disclosure). In addition, depending on when the merger occurs, certain equity awards that are included in the table below may be forfeited pursuant to their terms, without regard to the merger. Company Stock Options and Company SARs are valued based on the difference between the per share exercise price or base price, as applicable, of such Company award and the merger consideration of $10.50 per share. As a result, no Company Stock Options or Company SARs are included in the table below because they all have an exercise price or base price that is greater than the merger consideration. Company RSUs, Company PSUs and Company Phantom Shares are valued based on the merger consideration of $10.50 per share and, in the case of Company PSUs, assuming maximum level of performance.

 

Name

   Company RSUs      Company Phantom
Shares
     Total  
     (#)      ($)      (#)      ($)      ($)  

Directors

              

Meredith J. Ching

     12,485        131,093        0        0        131,093  

Walter A. Dods, Jr.

     12,485        131,093        0        0        131,093  

John W. Eck

     12,485        131,093        0        0        131,093  

Jakki L. Haussler

     12,485        131,093        3,600        37,800        168,893  

Craig F. Maier

     12,485        131,093        3,600        37,800        168,893  

Russel P. Mayer

     12,485        131,093        0        0        131,093  

Theodore H. Torbeck

     12,485        131,093        0        0        131,093  

Lynn A. Wentworth

     16,458        172,809        3,600        37,800        210,609  

Martin J. Yudkovitz

     12,485        131,093        0        0        131,093  

Name

   Company PSUs      Company RSUs      Total  
     (#)      ($)      (#)      ($)      ($)  

Executive Officers

              

Leigh R. Fox

     375,502        3,942,771        215,857        2,266,499        6,209,270  

Andrew R. Kaiser

     84,004        882,042        48,226        506,373        1,388,415  

Thomas E. Simpson

     98,599        1,035,290        55,734        585,207        1,620,497  

Christi H. Cornette

     41,809        438,995        23,428        245,994        684,989  

Christopher J. Wilson

     72,088        756,924        39,394        413,637        1,170,561  

Joshua T. Duckworth

     32,943        345,902        18,627        195,584        541,485  

Suzanne E. Maratta

     0        0        0        0        0  

Former Executive Officer

              

Shannon M. Mullen

     16,251        170,636        16,251        170,636        341,271  

Severance Entitlements

Each executive officer is party to an individual employment agreement. The employment agreements provide for severance payments and other benefits in the event of a “qualifying termination”, which constitutes a termination of employment by the Company without “cause” or by the executive for “constructive termination” (in each case, within the meaning of the executive officer’s employment agreement), in each case, within one year following a change in control of the Company. The merger will constitute a change of control of the Company for purposes of the executive officers’ employment agreements.

In the event of a qualifying termination, each executive officer will be entitled to receive: (i) a lump-sum cash payment equal to the product of 2.99 times (in the case of Mr. Fox), 2.50 times (in the case of Messrs.

 

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Kaiser, Simpson, Wilson and Duckworth and Ms. Cornette), or 2.00 times (in the case of Mses. Maratta and Mullen) the sum of the executive officer’s base salary and annual bonus target, plus interest on such amount; (ii) accelerated vesting of all outstanding Company awards; and (iii) continued medical, dental and vision coverage at the active employee rate for two years following termination (in the case of Messrs. Fox, Kaiser, Simpson, Wilson and Duckworth and Ms. Cornette) and one year following termination (in the case of Mses. Maratta and Mullen). Receipt of the above-described payments and benefits is conditioned upon the executive officer executing a release of claims in favor of the Company. The estimated aggregate value of the cash severance payments the Company’s executive officers would receive in the event of a qualifying termination following the completion of the merger is $14,478,980. The foregoing estimate is based on compensation and benefit levels in effect as of December 31, 2019.

The employment agreements provide that in the event that any payment or benefit payable to each of the executive officers in connection with his or her separation with the Company would constitute a parachute payment within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), then the payments will be reduced to the largest amount which would result in no portion of the payments being subject to the excise tax if such reduction will provide the executive officer with the best net after-tax result. The employment agreements do not provide for a gross-up in the event the executive officer is subject to the “golden parachute” excise tax under Section 4999 of the Code.

New Management Arrangements

As of the date of this proxy statement, there are no employment, retention or other agreements, arrangements or understandings between any of the Company’s directors or executive officers, on the one hand, and Parent, on the other hand, and the merger is not conditioned upon any of the Company’s directors or executive officers entering into any such agreement, arrangement or understanding.

Parent and the Company have agreed that for the benefit of the Company employees and service providers, including the Company’s executive officers, the Company may grant (i) cash-based long-term incentive awards in respect of fiscal year 2020 with an aggregate value up to $11.0 million, (ii) cash retention bonuses not to exceed $500,000 individually, and (iii) completion bonuses to employees and directors of the Company and its subsidiaries; provided that the aggregate value of such awards and bonuses described in clauses (i)-(iii) do not exceed $17.5 million. Each cash-based long-term incentive award and each cash retention bonus will be payable as follows: (a) 25% within 15 days following the closing of the merger, (b) 25% on the six-month anniversary of the closing of the merger, and (c) 50% on the 18-month anniversary of the closing of the merger, generally subject to the employee’s continued employment on each payment date. Upon a termination without “cause” or the employee’s resignation for “good reason” following the closing of the merger, such cash-based long-term incentive award or cash retention bonus will immediately accelerate and become payable. Each completion bonus to employees and directors of the Company and its subsidiaries will be payable as of the closing of the merger. On January 30, 2020, the Board approved the following cash-based long-term incentive awards to the Company’s executive officers: Mr. Fox—$3,100,000; each of Messrs. Kaiser and Simpson $650,000; Mr. Wilson—$400,000; Ms. Cornette—$280,000; Mr. Duckworth—$250,000; and Ms. Maratta—$200,000. As of the date of this proxy statement, no determinations have been made as to whether any executive officer will receive any such bonuses, the payment and other terms of any such potential bonuses or the amounts of any such potential bonuses to any particular individual.

Continuing Employee Benefits

The merger agreement provides that for a period of one year following the effective time of the merger, Parent will provide each individual who was an employee of the Company or any of its subsidiaries immediately prior to the effective time of the merger (a “Continuing Employee”), with (i) a base salary or wages (as applicable) and target annual incentive opportunities that are no less favorable in the aggregate than those provided to such Continuing Employee immediately prior to the effective time of the merger and (ii) other

 

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employee benefits that are substantially comparable in the aggregate to those provided to such Continuing Employee immediately prior to the effective time of the merger (excluding for purposes of determining comparability any retention bonus, defined benefit pension or retiree or post-employment welfare benefits).

In addition, as soon as practicable and in no event more than five days after the closing of the merger, each Continuing Employee will receive an amount in respect of such Continuing Employee’s cash bonus for the fiscal year in which the closing of the merger occurs, prorated to reflect the number of days elapsed from the commencement of the applicable performance period through the closing of the merger, based on the achievement of target level of performance.

Director and Officer Indemnification

Pursuant to the terms of the merger agreement, members of the Board and executive officers of the Company will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies following the merger. For a more detailed description of the provisions of the merger agreement relating to director and officer indemnification, please see the section of this proxy statement entitled “The Merger Agreement—Indemnification” beginning on page [    ].

Quantification of Payments and Benefits

In accordance with Item 402(t) of Regulation S-K, the table below sets forth for each of the Company’s named executive officers estimates of the amounts of compensation that are based on or otherwise relate to the merger and that will or may be paid or become payable to the named executive officer either immediately at the effective time of the merger (i.e., on a “single-trigger” basis) or in the event of a qualifying termination of employment following the merger (i.e., on a “double-trigger” basis). The holders of Company common shares and 6 34% preferred shares (voting as a single class) are being asked to approve, on a non-binding, advisory basis, such compensation for these named executive officers. Because the vote to approve such compensation is advisory only, it will not be binding on either the Company, the Board or Parent. Accordingly, if the proposal to adopt the merger agreement is approved by the holders of Company common shares and 6 34% preferred shares and the merger is completed, the compensation will be payable regardless of the outcome of the vote to approve such compensation, subject only to the conditions applicable thereto, which are described in the footnotes to the tables below and above under “—Interests of the Company’s Directors and Executive Officers in the Merger”.

The potential payments in the tables below are quantified in accordance with Item 402(t) of Regulation S-K. The estimated values are based on (i) an assumption that the merger is completed on December 31, 2020, (ii) the per share merger consideration of $10.50, (iii) the named executive officers’ salary and total eligible bonus levels as in effect as of the date of this proxy statement, (iv) the number of unvested Company awards held by the named executive officers as of January 15, 2020, the latest practicable date to determine such amounts before the filing of this proxy statement, and excluding any additional grants that may occur following such date and any Company awards that are expected to vest or be paid in accordance with their terms prior to December 31, 2020, and (v) an assumption that each named executive officer experiences a “qualifying termination” immediately following the completion of the merger. Depending on when the merger occurs, certain Company awards that are included in the tables below may be forfeited pursuant to their terms, without regard to the merger. In addition, the amounts indicated below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement, and do not reflect certain compensation actions that may occur before completion of the merger. As a result, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below.

The amounts shown below do not attempt to quantify any reduction that may be required as a result of a Section 280G cutback; therefore, actual payments to the named executive officers may be less than the amounts indicated below. The amounts shown below do not attempt to quantify any cash retention bonuses or completion

 

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bonuses the named executive officers may receive, as described in the section entitled “Interests of the Companys Directors and Executive Officers in the Merger —New Management Arrangements beginning on page [    ].

Potential Payments to Named Executive Officers

 

Name

   Cash ($)(1)      Equity ($)(2)      Pension ($)(3)      Perquisites /
Benefits ($)(4)
     Total ($)  

Leigh R. Fox

   $ 7,776,600      $ 6,209,270      $ 136,761      $ 31,186      $ 14,153,817  

Andrew R. Kaiser

   $ 3,122,000      $ 1,388,415      $ 0      $ 31,186      $ 4,541,601  

Thomas E. Simpson

   $ 3,431,000      $ 1,620,497      $ 119,131      $ 29,995      $ 5,200,623  

Christi H. Cornette

   $ 2,628,400      $ 684,989      $ 557,840      $ 9,742      $ 3,880,971  

Christopher J. Wilson

   $ 2,674,240      $ 1,170,561      $ 552,239      $ 31,186      $ 4,428,226  

 

(1)

The estimated amounts shown in this column represent the value of cash severance payments (assuming annual base salary and target bonus amounts in effect as of December 31, 2019) that would be provided to the named executive officer upon a termination of employment by the Company without “cause” or by the named executive officer for “constructive termination”, in each case, within one year following the closing of the merger. Each named executive officer would be entitled to receive a lump-sum cash payment equal to the product of 2.99 times (in the case of Mr. Fox) or 2.50 times (in the case of Messrs. Kaiser, Simpson, and Wilson and Ms. Cornette), the sum of the named executive officer’s base salary and annual bonus target, plus interest on such amount (interest is not included in these calculations). These payments are “double-trigger”, as they will only be payable in the event of a “qualifying termination” following the effective time of the merger. The estimated amounts shown in this column also include the named executive officer’s cash-based long-term incentive awards payable as follows: (a) 25% within 15 days following the closing of the merger, (b) 25% on the six-month anniversary of the closing of the merger, and (c) 50% on the 18-month anniversary of the closing of the merger. The first tranche of these cash-based long-term incentive awards are “single trigger”, as it will be payable shortly following the effective time of the merger, whether or not the named executive officer’s employment is terminated, and the second two tranches of these cash-based long-term incentive awards are “double-trigger”, as they will be payable to the named executive officer upon a termination of employment by the Company without “cause” or by the named executive officer for “good reason” following the effective time of the merger. In accordance with the merger agreement, the estimated amounts shown in this column also include the named executive officer’s pro-rated target bonus which is a “single-trigger” benefit as it will be payable shortly following the effective time of the merger, whether or not the named executive officer’s employment is later terminated.

(2)

The estimated amounts shown in this column represent the aggregate value of the named executive officers’ unvested Company PSUs and Company RSUs, assuming, in the case of company PSUs, the maximum level of performance. The estimated payments in respect of the named executive officers’ unvested Company awards shown in the above table are “single-trigger” benefits in that they will be payable shortly following the effective time of the merger, whether or not the named executive officer’s employment is later terminated. The estimated amounts shown in this column do not include the value of Company Stock Options or Company SARs because they all have an exercise price or base price that is greater than the merger consideration of $10.50.

(3)

The estimated amounts shown in this column represent the present value of the named executive officers’ accumulated vested benefits under the Company’s management pension plan (the “Management Pension Plan”), (including under the nonqualified excess provisions of the Management Pension Plan) as of December 31, 2019 (assuming that such amounts would be paid out in a lump sum in connection with the

  closing of the merger). The named executive officers may elect such amounts to be paid out in a lump-sum or an equivalent annuity. Mr. Kaiser is not eligible to participate in the Management Pension Plan.
(4)

The estimated amounts shown in this column represent the company-paid portion of the continued medical, dental and vision coverage at the active employee rate for two years following termination. These are “double-trigger” benefits as they will be paid to the named executive officer only if the named executive officer experiences a qualifying termination of employment following the effective time of the merger.

 

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Material U.S. Federal Income Tax Consequences of the Merger

The following discussion summarizes the material U.S. federal income tax consequences to holders with respect to the disposition of the Company common shares pursuant to the merger. It is not intended to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. This discussion is based upon the provisions of the Code, the U.S. Treasury Regulations promulgated thereunder and judicial and administrative rulings, all as in effect as of the date of this proxy statement and all of which are subject to change or varying interpretation, possibly with retroactive effect. Any such changes could affect the accuracy of the statements and conclusions set forth herein. The Internal Revenue Service may not agree with the tax consequences described in this discussion.

This discussion assumes that holders of Company common shares hold their shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a holder of Company common shares in light of such holder’s particular circumstances, nor does it discuss the special considerations applicable to holders of Company common shares subject to special treatment under the U.S. federal income tax laws, such as, for example, financial institutions or broker-dealers, mutual funds, partnerships or other pass-through entities and their partners or members, tax-exempt organizations, retirement or other tax-deferred accounts, insurance companies, dealers in securities or non-U.S. currencies, traders in securities who elect mark-to-market method of accounting, controlled foreign corporations, passive foreign investment companies, U.S. expatriates, holders who acquired their Company common shares through the exercise of Company stock options or otherwise as compensation, holders subject to the alternative minimum tax, holders who hold their Company common shares as part of a hedge, straddle, constructive sale or conversion transaction, U.S. holders (as defined below) whose functional currency is not the U.S. dollar, accrual method holders who prepare an “applicable financial statement” (as defined in Section 451 of the Code) and holders who own or have owned (directly, indirectly or constructively) 5% or more of the Company’s shares (by vote or value). In addition, this discussion does not address any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction or U.S. federal non-income tax consequences (e.g., the federal estate or gift tax or the application of the Medicare tax on net investment income under Section 1411 of the Code).

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Company common shares, the tax treatment of a partner in such partnership generally will depend on the status of the partner and activities of the partnership. If you are a partner of a partnership holding Company common shares, you should consult your own tax advisor.

All holders should consult their own tax advisor to determine the particular tax consequences to them (including the application and effect of any state, local or non-U.S. income and other tax laws) of the receipt of cash in exchange for Company common shares pursuant to the merger.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Company common shares, that is, for U.S. federal income tax purposes:

 

   

an individual citizen or resident of the United States;

 

   

a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

   

a trust if (1) its administration is subject to the primary supervision of a court within the United States and one or more U.S. persons, within the meaning of Section 7701(a)(30) of the Code, have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes; or

 

   

an estate, the income of which is subject to U.S. federal income tax regardless of its source.

 

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A “non-U.S. holder” is a beneficial owner (other than a partnership or an entity classified as a partnership for U.S. federal income tax purposes) of Company common shares that is not a U.S. holder.

U.S. Holders

The receipt of cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. A U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received pursuant to the merger and such U.S. holder’s adjusted tax basis in the shares converted into cash pursuant to the merger. Such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the holder’s holding period for such shares exceeds one year as of the date of the merger. Long-term capital gains for certain non-corporate U.S. holders, including individuals, are generally eligible for a reduced rate of U.S. federal income taxation. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of Company common shares at different times or at different prices, such U.S. holder must determine its tax basis, holding period, and gain or loss separately with respect to each block of Company common shares.

A U.S. holder may, under certain circumstances, be subject to information reporting and backup withholding (at a rate of 24%) with respect to the cash received pursuant to the merger, unless such holder properly establishes an exemption or provides its correct tax identification number and otherwise complies with the applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules can be refunded or credited against a U.S. holder’s U.S. federal income tax liability, if any; provided that such U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner.

Non-U.S. Holders

Any gain recognized on the receipt of cash pursuant to the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:

 

   

the gain is effectively connected with a U.S. trade or business of such non-U.S. holder (and, if required by an applicable income tax treaty, is also attributable to a permanent establishment or, in the case of an individual, a fixed base in the United States maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be subject to tax on such gain in the same manner as a U.S. holder and, if the non-U.S. holder is a non-U.S. corporation, such corporation may be subject to branch profits tax at the rate of 30% on the effectively connected gain (or such lower rate as may be specified by an applicable income tax treaty);

 

   

the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the merger and certain other conditions are met, in which case the non-U.S. holder generally will be subject to tax at a 30% rate (or a lower applicable income tax treaty rate) on any U.S. source gain derived from the disposition of the Company common shares pursuant to the merger (other than gain effectively connected with a U.S. trade or business), which may be offset by U.S. source capital losses; or

 

   

the Company is or has been a “United States real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of (i) the five-year period ending on the date of the merger and (ii) the non-U.S. holder’s holding period in the Company common shares, in which case the consequences will be as described below.

We believe we may be, or may have been during the applicable period described in the third bullet point above, a USRPHC for U.S. federal income tax purposes. Assuming we are or have been during the applicable period a USRPHC, any gain recognized by a non-U.S. Holder on the receipt of cash pursuant to the merger may be subject to U.S. federal income tax in the same manner as gain recognized by a U.S. Holder. However, so long

 

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as the Company common shares are considered to be “regularly traded on an established securities market”, as defined by applicable Treasury regulations, at any time during the calendar year, a non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain recognized on the receipt of cash pursuant to the merger, unless the non-U.S. Holder owned (directly, indirectly or constructively) more than 5% of the total outstanding Company common shares at any time during the applicable period. Although no assurance can be given, we believe that the Company common shares will be considered “regularly traded on an established securities market”. Additionally, assuming we are, or have been during the applicable period, a USRPHC, a non-U.S. Holder may be subject to withholding in an amount equal to 15% of the gross proceeds on the sale or disposition of shares. However, if the Company common shares are “regularly traded on an established securities market”, as we believe they are, no withholding should be required under these rules upon the receipt of cash pursuant to the merger.

A non-U.S. holder will be subject to information reporting and, in certain circumstances, backup withholding will apply with respect to the cash received by such holder pursuant to the merger, unless such non-U.S. holder certifies under penalties of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the holder is a United States person as defined under the Code) or such holder otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any; provided that such non-U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner.

Dividends

The Company has not declared or paid any cash dividends on Company common shares since 2001. Under the terms of the merger agreement, the Company is prohibited from authorizing, declaring, setting aside or paying any dividends on, or making any other distributions (whether in cash, stock or property or any combination thereof) in respect of, any of its capital stock, other equity interests or voting securities, other than (1) regular quarterly cash dividends payable by the Company to holders of its 6 34% preferred shares and (2) dividends and distributions by a direct or indirect wholly owned subsidiary of the Company to its shareholders or other equity holders.

Regulatory Approvals Required for the Merger

The Company and Parent intend to make all required filings as promptly as practicable. The management of each of the Company and Parent currently believe that the necessary regulatory approvals can be obtained by the end of 2020; however, there can be no assurances that such approvals will be obtained in accordance with this timing or at all.

HSR Act Clearance

Completion of the merger is subject to the requirements of the HSR Act and the rules promulgated by the Federal Trade Commission (“FTC”), which prevent transactions such as the merger from being completed until (i) certain information and materials are furnished to the Department of Justice (“DOJ”) and the FTC and (ii) the applicable waiting period is terminated or expires. Both the Company and Parent are planning to file their respective Notification and Report Forms with the FTC and the Antitrust Division of the DOJ during the first half of 2020.

CFIUS Approval

Completion of the merger is also subject to receipt of approval (as defined below) from the Committee on Foreign Investment in the United States (“CFIUS”), which, pursuant to Section 721 of the Defense Production Act of 1950, as amended (the “DPA”), provides for national security reviews and, where appropriate, investigations by CFIUS of transactions in which a foreign person acquires control of a U.S. business. Under the terms of the merger agreement, consummation of the merger is subject to the satisfaction or waiver of the

 

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condition that one of the following will have occurred prior to the closing of the merger: (i) written notice that CFIUS determined that the merger and the other transactions contemplated by the merger agreement are not “covered transactions”; (ii) written notice that CFIUS has concluded all action under the DPA and that there are no unresolved national security concerns with respect to the merger and the other transactions contemplated by the merger agreement; or (iii) the President of the United States shall have announced a decision not to suspend, prohibit or place any limitations on the merger and other transactions contemplated by the merger agreement or the time permitted for such action shall have expired without any such action being announced or taken (“CFIUS Approval”).

Competition Act (Canada) Compliance

Completion of the merger is also subject to Competition Act (Canada) Compliance (as defined below). Prior to consummating the merger, one of the following must have occurred in accordance with the Competition Act (Canada): (i) the issuance of an advance ruling certificate by the Commissioner of Competition in Canada (the “Commissioner of Competition”) pursuant to section 102 of the Competition Act with respect to the merger and other transactions contemplated by the merger agreement; (ii) the Company and Parent have given the notice required under section 114 of the Competition Act with respect to the merger and other transactions contemplated by the merger agreement, and the applicable waiting period under section 123 of the Competition Act has expired or been waived in accordance with the Competition Act; or (iii) the obligation to give the requisite notice has been waived pursuant to subsection 113(c) of the Competition Act; provided, that in the case of clauses (ii) or (iii), the Commissioner of Competition shall have notified Parent in writing that, in effect, the Commissioner of Competition does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the merger and other transactions contemplated by the merger agreement, and the Commissioner of Competition shall not have rescinded or amended such notice (“Competition Act (Canada) Compliance”).

FCC and State Regulatory Approvals

In addition, completion of the merger is conditioned upon the receipt of approvals from the Federal Communications Commission (“FCC”) (including the Team Telecom Agencies), the California Public Utilities Commission, the Hawai’i Department of Commerce and Consumer Affairs, the Hawai’i Public Utilities Commission, the Indiana Utility Regulatory Commission, the Ohio Department of Commerce and the Ohio Public Utilities Commission. Completion of the merger is also conditioned on notifying the Kentucky Public Service Commission of the indirect transfer of control of certain company licenses upon the consummation of the merger.

There can be no assurance that the requisite approvals will be obtained on a timely basis or at all.

The Company and Parent also intend to make all required filings under the Securities Act of 1933 (the “Securities Act”) and the Exchange Act relating to the merger and obtain all other approvals and consents that may be necessary to give effect to the merger.

Delisting and Deregistration of the Company Common Shares

If the merger is completed, the Company common shares will be delisted from the NYSE and deregistered under the Exchange Act, and the Company common shares will no longer be publicly traded. If the merger is completed, each depositary share will remain listed on the NYSE and will continue to trade under the trading symbol “CBB.PB”.

 

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THE MERGER AGREEMENT

Explanatory Note Regarding the Merger Agreement

The following summarizes material provisions of the merger agreement, which is included as Annex A to this proxy statement and is incorporated herein by reference in its entirety. The rights and obligations of the Company and Parent are governed by the express terms and conditions of the merger agreement and not by this summary or any other information contained in this proxy statement. Holders of Company common shares, 6 34% preferred shares and depositary shares representing interests in such 6 34% preferred shares are urged to read the merger agreement carefully and in its entirety as well as this proxy statement before making any decisions regarding the merger.

The merger agreement is included with this proxy statement only to provide you with information regarding the terms of the merger agreement, and not to provide you with any other factual information regarding the Company, Parent, Merger Sub or their respective affiliates or businesses. The merger agreement contains representations and warranties by each of the parties to the merger agreement. These representations and warranties have been made solely for the benefit of the other parties to the merger agreement and:

 

   

have been made only for purposes of the merger agreement;

 

   

have been qualified by certain documents filed with, or furnished to, the SEC by the Company, prior to the date of the merger agreement;

 

   

have been qualified by confidential disclosures made to the Company or Parent and Merger Sub, as applicable, in connection with the merger agreement;

 

   

are subject to materiality qualifications contained in the merger agreement that may differ from what may be viewed as material by investors;

 

   

were made only as of the date of the merger agreement or such other date as is specified in the merger agreement; and

 

   

have been included in the merger agreement for the purpose of allocating risk between the Company, on the one hand, and Parent and Merger Sub, on the other hand, rather than establishing matters as facts.

You should not rely on the representations and warranties or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Parent or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in the Company’s or Parent’s public disclosures.

Accordingly, the representations and warranties and other provisions of the merger agreement should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement and in the documents incorporated by reference into this proxy statement. See “Where You Can Find Additional Information” beginning on page [    ] of this proxy statement.

This summary is qualified in its entirety by reference to the merger agreement, which is included as Annex A to this proxy statement.

Effects of the Merger

The merger agreement provides for the merger of Merger Sub with and into the Company. The Company will be the surviving corporation in the merger and will become a direct subsidiary of Parent. Following the consummation of the merger, Parent shall cause the board of directors of the surviving corporation to include at least two individuals who are domiciled in Hawaii.

 

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Closing and Effective Time of the Merger

Unless the parties agree otherwise, the closing of the merger will take place at 10:00 a.m. (New York City time) on a date to be no later than the third business day after all conditions to the completion of the merger have been satisfied or (to the extent permitted by law) waived. The merger will be effective when the parties file a certificate of merger with the Secretary of State of the State of Ohio, unless the parties agree to a later time for the effectiveness of the merger prior to the filing of such certificate of merger and so specify that time in the certificate of merger.

The Company and Parent currently expect to complete the merger by the end of 2020, subject to receipt of the Company shareholder approval and the required regulatory approvals and the satisfaction or waiver of the conditions to the merger described in the merger agreement. For additional information, please see the section of this proxy statement entitled “The Merger—Regulatory Approvals Required for the Merger” beginning on page [    ].

Consideration To Be Received in the Merger

The merger agreement provides that, at the effective time of the merger, each Company common share issued and outstanding immediately prior to the effective time of the merger (other than the excluded shares and dissenting shares), will be converted into the right to receive $10.50 in cash, without interest and less any applicable withholding taxes. Following the effective time of the merger, each holder of Company common shares will cease to have any rights with respect to such Company common shares, except for the right to receive the merger consideration therefor.

Each 6 34% preferred share issued and outstanding immediately prior to the effective time of the merger shall remain issued and outstanding immediately following the effective time as one 6 34% cumulative convertible preferred share, of the surviving corporation, and shall not be affected by the merger (except for the effects specifically set forth in the Articles). Parent intends to cause the surviving corporation to redeem the 6 34% preferred shares (and the depositary shares representing interests in such 6 ¾% preferred shares) in accordance with the Articles as promptly as practicable following the completion of the merger.

If, between December 21, 2019 and the effective time of the merger, the number of outstanding Company common shares changes into a different number of shares or a different class, by reason of any share split, reverse share split, share dividend (including any dividend or other distribution of securities convertible into Company common shares), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change, then the merger consideration and any other amounts payable pursuant to the merger agreement will be appropriately adjusted to provide to the holders of Company common shares the same economic effect as contemplated by the merger agreement prior to such event.

Appraisal Shares

Company common shares that are issued and outstanding immediately prior to the effective time of the merger and held by a shareholder who is entitled to demand, and has properly demanded, appraisal for such shares, in accordance with the OGCL, will not be converted into the right to receive the merger consideration as provided in the merger agreement, but will instead be converted into the right to receive such consideration as may be determined to be due to such shareholder pursuant to the procedures set forth in the OGCL.

34% preferred shares that are issued and outstanding immediately prior to the effective time of the merger and held by a shareholder who is entitled to demand, and has properly demanded, appraisal for such shares, in accordance with the OGCL, will not remain outstanding as provided in the merger agreement, but will instead be converted into the right to receive such consideration as may be determined to be due to such shareholder pursuant to the procedures set forth in the OGCL. For additional information, please see the section of this proxy statement entitled “The Merger—Appraisal Rights” beginning on page [    ].

 

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Excluded Shares

Company common shares owned by the Company as treasury shares or held by Parent or Merger Sub will be automatically canceled and extinguished at the effective time of the merger and will not be entitled to any merger consideration. Company common shares owned by any subsidiary of the Company or Parent (other than Merger Sub) will be, at the election of Parent, either (i) converted into shares of common stock of the surviving corporation or (ii) canceled.

Treatment of Equity and Equity-Based Awards

At the effective time of the merger, subject to all required withholding taxes:

 

   

each Company PSU outstanding immediately prior to the effective time of the merger, whether vested or unvested, will become fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company PSU, with the number of Company common shares determined based on the greater of target performance and actual performance as determined by the Board (or appropriate committee thereof) prior to the closing date of the merger, and (y) the merger consideration;

 

   

each Company RSU outstanding immediately prior to the effective time of the merger, whether vested or unvested, will become fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company RSU and (y) the merger consideration;

 

   

each Company Stock Option outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be deemed to be fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company Stock Option and (y) the excess (if any) of the merger consideration over the per share exercise price of each Company Stock Option, provided that each Company Stock Option that has an exercise price that is greater than or equal to the merger consideration will be canceled for no consideration;

 

   

each Company SAR outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be deemed to be fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company SAR and (y) the excess (if any) of the merger consideration over the per share base price of such Company SAR, provided that each Company SAR that has a base price that is greater than or equal to the merger consideration will be canceled for no consideration; and

 

   

each Company Phantom Share outstanding immediately prior to the effective time of the merger, whether vested or unvested, will become fully vested and will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (x) the number of Company common shares underlying such Company Phantom Share and (y) the merger consideration.

Payment for Shares

Parent will appoint a paying agent reasonably acceptable to the Company to make payment of the merger consideration as contemplated by the merger agreement. At or prior to the effective time of the merger, Parent will cause to be deposited with the paying agent funds sufficient to pay the aggregate merger consideration.

From and after the effective time of the merger, there will be no further registration or transfers on the stock transfer books of the surviving corporation of Company common shares that were outstanding immediately prior to the effective time of the merger. If, after the effective time of the merger, any certificates formerly representing Company common shares (or Company common shares held in book-entry form) are presented to Parent or the paying agent for any reason, they will be canceled and exchanged pursuant to and in accordance with the merger agreement.

 

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As promptly as practicable after the effective time of the merger, and in any event not later than the third business day after the effective time of the merger, Parent will cause the paying agent to mail to each holder of Company common shares entitled to the merger consideration a letter of transmittal and instructions advising such shareholder how to surrender its Company common shares in exchange for the merger consideration. Each holder of Company common shares will be entitled to receive the merger consideration upon (i) in the case of Company common shares represented by a certificate, the surrender of such certificate for cancelation to the paying agent or (ii) in the case of Company common shares held in book-entry form, the receipt of an “agent’s message” by the paying agent, in each case together with the associated letter of transmittal, duly completely and validly executed in accordance with the instructions thereto, and such other documents as may be reasonably required by the paying agent. Interest will not be paid or accrue in respect of any of the merger consideration, and the amount of any merger consideration paid to holders of Company common shares may be reduced by the amount of applicable withholding taxes. HOLDERS OF COMPANY COMMON SHARES SHOULD NOT FORWARD THEIR COMPANY COMMON SHARE CERTIFICATES TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND SHOULD NOT RETURN THEIR COMPANY COMMON SHARE CERTIFICATES WITH THE ENCLOSED PROXY.

The transmittal instructions will tell holders of Company common shares what to do if they have lost a certificate, or if a certificate has been stolen or destroyed. A holder of Company common shares will have to provide an affidavit to that fact and, if required by Parent, post a bond in such reasonable and customary amount as Parent directs as indemnity against any claim that may be made against it with respect to such certificate, upon which the paying agent shall issue the merger consideration to be paid in respect of the shares represented by such lost, stolen or destroyed certificate.

Representations and Warranties

The merger agreement contains representations and warranties, that the Company, on the one hand, and Parent and Merger Sub, on the other hand, have made to one another, many of which are qualified by materiality or Material Adverse Effect standards.

A “Material Adverse Effect” with respect to the Company and its subsidiaries is defined in the merger agreement to mean any state of facts, change, effect, condition, development, event or occurrence that, individually or in the aggregate, materially and adversely affects the business, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, excluding any such state of facts, change, effect, condition, development, event or occurrence to the extent arising out of or in connection with (A) any change generally affecting the economic, financial, regulatory or political conditions in the United States or elsewhere in the world, (B) the outbreak or escalation of hostilities or any acts of war, sabotage or terrorism, or any earthquake, hurricane, tornado, tsunami or other natural disaster, (C) any change that is generally applicable to the industries or markets in which the Company and its subsidiaries operate, (D) any change in applicable laws or applicable accounting regulations or principles or authoritative interpretations thereof, in each case arising after the date of the merger agreement, (E) any failure, in and of itself, to meet projections, forecasts, estimates or predictions in respect of revenues, EBITDA, free cash flow, earnings or other financial or operating metrics for any period (it being understood that the underlying facts or occurrences giving rise to or contributing to such failure shall be taken into account in determining whether there has been a Material Adverse Effect (except to the extent such underlying facts or occurrences are excluded from being taken into account by clauses (A) through (G) of this definition)), (F) any termination of, reduction in or similar negative impact on relationships, contractual or otherwise, with customers, suppliers, distributors, partners or employees of the Company and its subsidiaries due to the announcement and performance of the merger agreement or the identity of the parties to the merger agreement, or (G) any action taken by the Company or any of its subsidiaries that is expressly required by the merger agreement to be taken by the Company or any of its subsidiaries, or that is taken or not taken with the prior express written consent or at the express written direction of Parent; provided, that any state of facts, change, effect, condition, development, event or occurrence referred to in clause (A), clause (B) or clause (D) may be taken into account in determining whether there has been, or would reasonably

 

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be expected to be, a Material Adverse Effect to the extent such effect, change, event or occurrence has a disproportionate adverse effect on the Company and its subsidiaries, taken as a whole, as compared to other participants in the industry in which the Company and its subsidiaries operate (in which case the incremental disproportionate impact or impacts may be taken into account in determining whether there has been, or would reasonably be expected to be, a Material Adverse Effect).

A “Material Adverse Effect” with respect to Parent and Merger Sub is defined in the merger agreement to mean any state of facts, change, circumstance, effect, condition, development, event or occurrence that would prevent or materially delay, interfere with, hinder or impair (i) the consummation by Parent or Merger Sub of the transactions contemplated by the merger agreement or (ii) the compliance by Parent or Merger Sub with its obligations under the merger agreement.

The representations and warranties made by the Company relate to, among other topics, the following:

 

   

organization, standing and corporate power;

 

   

ownership of its subsidiaries;

 

   

capital structure;

 

   

authority relative to the execution and delivery of the merger agreement, and the enforceability of the merger agreement;

 

   

absence of conflicts with, or violations of, organizational documents and other agreements or obligations in connection with the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby and required governmental filings and consents;

 

   

SEC documents and financial statements;

 

   

internal controls and disclosure controls and procedures;

 

   

absence of undisclosed liabilities and off-balance-sheet arrangements;

 

   

accuracy of information supplied or to be supplied for use in this proxy statement;

 

   

absence of certain changes and events and the conduct of business in the ordinary course of business from January 1, 2019 to the date of execution of the merger agreement;

 

   

tax matters;

 

   

employee compensation and benefits matters;

 

   

absence of certain litigation;

 

   

compliance with applicable laws and permits;

 

   

environmental matters;

 

   

material contracts;

 

   

owned and leased real property;

 

   

intellectual property;

 

   

labor matters;

 

   

broker’s, finder’s, financial advisor’s or similar fees payable in connection with the merger;

 

   

opinions from the Company’s financial advisors;

 

   

communications regulatory matters;

 

   

insurance policies;

 

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compliance with anti-bribery, anti-corruption and anti-money laundering laws; and

 

   

absence of affiliate transactions.

The representations and warranties made by Parent and Merger Sub relate to, among other topics, the following:

 

   

organization, standing and corporate power;

 

   

authority relative to the execution and delivery of the merger agreement, and the enforceability of the merger agreement;

 

   

absence of conflicts with, or violations of, organizational documents and other agreements or obligations in connection with the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby and required government filings and consents;

 

   

accuracy of information supplied or to be supplied for use in this proxy statement;

 

   

absence of certain litigation;

 

   

broker’s, finder’s, financial advisor’s or similar fees payable in connection with the merger;

 

   

Parent’s financing commitments under the equity funding letter and sufficiency of funds to pay the merger consideration;

 

   

absence of certain arrangements with the Company management, the Board or any beneficial owner of Company capital stock;

 

   

ownership of Company stock.

The merger agreement also contains certain representations and warranties of Parent with respect to its direct wholly owned subsidiary, Merger Sub, including its lack of prior business activities.

Covenants Regarding Conduct of Business by the Company Pending the Effective Time

The Company has undertaken certain covenants in the merger agreement restricting the conduct of its business between the date of the merger agreement and the effective time of the merger. The Company has agreed to conduct its business in the ordinary course in all material respects and use commercially reasonable efforts to preserve intact its business organization and business relationships. In addition, the Company has agreed to various specific restrictions relating to the conduct of its business between the date of the merger agreement and the effective time of the merger.

The Company has agreed that, unless Parent consents in writing (which consent may not be unreasonably withheld, conditioned or delayed) or as otherwise permitted or contemplated by the merger agreement, it will not, and will cause its subsidiaries not to, do the following:

 

   

amend its Articles, Regulations or equivalent organizational documents;

 

   

authorize, declare, set aside or pay dividends or make any other distributions (other than (i) regular quarterly cash dividends payable by the Company to holders of 6 34% preferred shares and (ii) dividends and distributions by a wholly owned subsidiary of the Company to its stockholders or other equity holders);

 

   

split, combine, subdivide or reclassify any of its capital stock, other equity interests or voting securities or securities convertible into or exchangeable for capital stock or other equity interests or voting securities or issue any other securities in substitution for shares of its capital stock;

 

   

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or exchangeable or exercisable for capital stock or voting securities of, or equity interests in, the Company or its subsidiaries, or any warrants, calls, options or other rights to acquire any such capital stock, securities or interests;

 

   

authorize for issuance, issue or sell, grant, pledge or otherwise encumber or subject to any lien shares of capital stock, voting securities or other equity interests;

 

   

except to the extent required to comply with applicable law or to comply with any Company benefit plan as in effect as of the date of the merger agreement (i) establish, adopt, enter into, terminate or materially amend, or take any action to accelerate the vesting or payment of, any compensation or benefits under, any Company benefit plan (or any award thereunder), (ii) grant or increase in any manner the salaries, bonuses, or incentive-based compensation or benefits of or pay any bonus to, or grant any loan to any current or former directors, officers, employees, independent contractors or consultants of the Company or any of its subsidiaries (a “Company Participant”), other than increases in annual salary or benefits made in the ordinary course of business consistent with past practice to Company Participants who have an annual base salary of less than $250,000, (iii) grant, amend or modify any equity or equity-based awards, (iv) grant, pay or increase in any manner any change in control, retention, severance, termination or similar compensation or benefits, (v) take any action to fund or in any other way secure the payment of compensation or benefits under any Company benefit plan, (vi) change any actuarial or other assumption used to calculate funding obligations with respect to any Company pension plan, except to the extent required by applicable law or Generally Accepted Accounting Principles (“GAAP”), (vii) change the manner in which contributions to any Company pension plan are made or the basis on which such contributions are determined or (viii) hire or terminate without cause any Company Participant, other than in the ordinary course of business, who is not an “executive officer” as defined in Rule 3b-7 of the Exchange Act;

 

   

make any material change in financial accounting methods, except as required by (i) GAAP or any applicable law or (ii) a governmental entity or quasi-governmental authority;

 

   

take certain material actions with respect to taxes;

 

   

make or agree to make any acquisition of, or investment in, any properties, assets, securities or business (including by merger, sale of stock, sale of assets or otherwise) if the amount of consideration paid by the Company or its subsidiaries in connection with (i) any single such transaction would exceed $1 million or (ii) all such transactions would exceed $10 million;

 

   

sell or lease in a single transaction or series of related transactions any of its properties or assets having a value in excess of $1 million individually or $10 million in the aggregate;

 

   

incur indebtedness or enter into swap or hedging transactions outside of the ordinary course of business;

 

   

make any loans, capital contributions or advances to, or investments in, any person in excess of $5,000,00 individually or $10,000,000 in the aggregate;

 

   

make capital expenditures in any fiscal year that are in the aggregate in excess of the amounts set forth in the Company’s capital expenditure plan, plus 5% of such amounts;

 

   

other than in the ordinary course of business, amend in any material respect, terminate, renew or materially extend, or waive any material noncompliance with the terms of or breaches under, certain material contracts, or enter into certain material contracts;

 

   

enter into or amend any contract to the extent that completion of the merger or compliance with the merger agreement would conflict with, cause a default under, create an obligation or lien, give rise to a right of termination, cancelation or acceleration of, or cause a loss of a benefit under such contract;

 

   

grant any liens on any material asset;

 

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sell, transfer, license, sublicense, covenant not to assert, abandon, permit to lapse or otherwise dispose of any material owned intellectual property or disclose to any person that has not entered into a reasonably protective written agreement to protect the confidentiality of any material trade secrets or other material confidential information;

 

   

compromise, settle or agree to settle any pending or threatened action;

 

   

cancel any indebtedness or waive any claims or rights, in each case exceeding $5 million individually or $10 million in the aggregate;

 

   

enter into, modify, amend or terminate any collective bargaining or other labor union contract applicable to any employees of the Company or any of its subsidiaries other than (i) the entry into new collective bargaining or other labor union contracts in the ordinary course of business required to be entered into by any non-U.S. law or (ii) any modification, amendment, renewal or termination of any collective bargaining agreement to the extent required by applicable law or the terms of any collective bargaining agreement as in effect as of the date of the merger agreement;

 

   

assign, transfer, lease, cancel, fail to renew or fail to extend any material license issued by the FCC or any state regulator or discontinue any operations that require prior regulatory approval for such discontinuance;

 

   

authorize, adopt or implement a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;

 

   

enter into any agreement with respect to the voting of any of the Company’s or its subsidiaries’ share capital, partnership interests or other equity interests; and

 

   

authorize or commit to, or participate in, any discussions with any other person regarding any of the foregoing actions.

Reasonable Best Efforts

The Company and Parent have agreed to each use, and to cause their respective affiliates to use, reasonable best efforts to:

 

   

take, or cause to be taken, all appropriate actions, and do, or cause to be done, and to assist and cooperate with the other party in doing, all things necessary, proper or advisable to complete and make effective the transactions contemplated by the merger agreement as promptly as practicable;

 

   

as promptly as practicable, obtain from any governmental entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made in connection with the transactions contemplated by the merger agreement;

 

   

defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging the merger agreement or the completion of the transactions contemplated by the merger agreement, including seeking to have any stay or temporary restraining order entered by any court or other governmental entity that would prevent or materially impede, interfere with, hinder or delay the consummation of the transactions contemplated by the merger agreement, vacated or reversed;

 

   

as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to the merger agreement and the merger required under (i) the Securities Act and the Exchange Act, and any other applicable federal or state securities laws, and (ii) any other applicable law; and

 

   

execute or deliver any additional instruments necessary to complete the transactions contemplated by, and to fully carry out the purposes of, the merger agreement.

 

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Additionally, the Company and Parent have agreed to use their reasonable best efforts to cooperate and use their respective reasonable best efforts to:

 

   

to the extent required in connection with the merger, obtain any consents, approvals, clearances, waivers or authorizations from, or make any registrations, declarations, notices or filings with (i) the FCC, (ii) any relevant state public service or state public utility commissions (“state regulators”) and (iii) any relevant governments of counties, municipalities and other subdivisions of a United States state (“localities”) in connection with the provision of telecommunication and media services;

 

   

as promptly as practicable file all applications required to be filed with the FCC, state regulators and localities to obtain the aforementioned federal, state and local consents;

 

   

respond as promptly as practicable to any requests of the FCC, any state regulator or locality for information relating to applications that are required to be filed, provided, that each of Parent and the Company have agreed to use, and to cause their respective affiliates to use, their reasonable best efforts to consult with the other before communicating with any governmental entity or attending any meeting with a governmental entity relating to the aforementioned matters, to consider in good faith all reasonable additions, deletions, or changes suggested in connection with any submissions to any governmental entity relating to the aforementioned matters, and to the extent permitted by applicable law and reasonably practicable, will notify the other party and enable the other party to participate in each such communication, meeting, or submission; and provided further that neither Parent nor the Company will have an obligation to share with the other any confidential business information, including to the extent such information is requested by any governmental entity; and

 

   

cure, not later than the effective time of the merger, any material violations or defaults under any FCC rules or the rules of any state regulator or locality.

The Company and Parent have also agreed to use, and to cause their respective affiliates to use, their respective reasonable best efforts to cooperate and use their respective best efforts to obtain the CFIUS Approval, including by:

 

   

submitting, as promptly as practicable, to CFIUS a draft notice with respect to the merger and the other transactions contemplated by the merger agreement;

 

   

filing, as promptly as practicable after responding to any comments from CFIUS staff on the draft notice (or as soon as possible after CFIUS staff confirms it has no comments on the draft notice), a notice with respect to the merger and the other transactions contemplated by the merger agreement; and

 

   

supplying, as promptly as practicable, any additional information and documentary material that may be requested in connection with the CFIUS review process, provided that each of Parent and the Company have agreed to use, and to cause their respective affiliates to use, their reasonable best efforts to consult with the other before communicating with any applicable governmental entity or attending any meetings with a governmental entity relating to these matters, to consider in good faith all reasonable additions, deletions, or changes suggested in connection with any submissions to any governmental entity relating to these matters, and to the extent permitted by applicable law and reasonably practicable will notify the other party of and enable the other party to participate in each such communication, meeting, or submission; and provided further that neither Parent nor the Company will have an obligation to share with the other any confidential business information, including to the extent such information is requested by any governmental entity

 

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For purposes of obtaining the aforementioned regulatory consents and approvals, the “reasonable best efforts” of Parent and Merger Sub includes taking any and all actions necessary to obtain the consents of any governmental entity required to complete the merger and the other transactions contemplated by the merger agreement prior to the end date, including:

 

   

contesting and resisting any lawsuit or other legal action, investigation, claim or proceeding, whether judicial or administrative, instituted (or threatened to be instituted) challenging the merger agreement, the merger and the other transactions contemplated by the merger agreement as violative of any law;

 

   

attempting to have repealed, rescinded or made inapplicable any applicable law, and to have vacated, lifted, reversed or overturned any judgment or temporary, preliminary or permanent injunction or other restraint or prohibition, that is enacted, entered, promulgated or enforced by a governmental entity that would make any of the transactions contemplated by the merger agreement illegal or would otherwise prohibit or impair or delay the consummation of any of the transactions contemplated by the merger agreement;

 

   

proposing, negotiating, committing to and effecting, by consent decree, hold separate order, or otherwise, the sale, divestiture or disposition of businesses, product lines, assets or operations of Parent or any of its affiliates or of the Company or any Company subsidiary;

 

   

conducting its and its affiliates businesses or the Company’s and its subsidiaries, businesses in a specified manner, or proposing and agreeing or permitting to conduct any of such businesses in a specified manner, including by agreeing to undertakings required by a governmental entity that it or any of its affiliates or the Company or any Company subsidiary will take, or refrain from taking, any action, including (w) insulating the Company or any Company subsidiary from any liability for any indebtedness incurred by Parent or any of its subsidiaries or the Company or any Company subsidiary (often referred to as “ring fencing”), (x) restricting the Company or any Company subsidiary from paying a dividend, distribution or other payment to Parent or any of its affiliates, (y) restricting Parent from paying a dividend, distribution or other payment to any equity holder of Parent and (z) committing the Company or any Company subsidiary to invest specific dollar amounts in specific geographic markets; and

 

   

otherwise taking or committing to take actions that after the effective time of the merger would limit Parent or any of its affiliates’ ability to retain one or more of the businesses, product lines, assets or operations of Parent or any of its affiliates or the Company or any Company subsidiary, in each case, to the extent necessary to obtain any such clearance, resolve any such objections or avoid or eliminate any such impediments.

Notwithstanding the foregoing, the Company and its subsidiaries will not be permitted to (without the prior written consent of Parent), and none of the Parent or its affiliates will be required to, take or refrain from taking, or agree to take or refrain from taking, any of the aforementioned action or actions that, individually or in the aggregate, would be reasonably likely to be a Burdensome Condition.

No Solicitation

The Company has agreed that, from the time of the execution of the merger agreement until the completion of the merger, it will not, and will cause its affiliates and its and their respective directors, officers and employees and each of its and their respective investment bankers, accountants, attorneys and other advisors, agents or representatives not to:

 

   

directly or indirectly solicit, initiate or knowingly encourage, induce or facilitate any takeover proposal or any inquiry, discussion or proposal that may reasonably be expected to lead to a takeover proposal;

 

   

directly or indirectly participate in any discussions or negotiations with any person regarding, or furnish to any person any information with respect to, or cooperate in any way with any person with respect to, any takeover proposal or any inquiry or proposal that may reasonably be expected to lead to a takeover proposal; or

 

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waive, terminate, modify, amend, release or assign any provisions of any confidentiality or standstill agreement (or similar agreement) to which it is a party or fail to enforce, to the fullest extent permitted under applicable law, the provisions of any such agreement, including by obtaining an injunction to prevent any breach of such agreements and to enforce specifically the terms and provisions thereof in any court having jurisdiction.

The merger agreement also requires the Company to cease and cause to be terminated all solicitation, discussions or negotiations with any person conducted prior to execution of the merger agreement with respect to any takeover proposal, or any inquiry or proposal that may reasonably be expected to lead to a takeover proposal, request the prompt return or destruction of all confidential information previously furnished in connection therewith and immediately terminate all physical and electronic data room access previously granted to any such person or its representatives.

A “takeover proposal” means any proposal or offer (whether or not in writing), with respect to any:

 

   

merger, consolidation, share exchange, other business combination or similar transaction involving the Company;

 

   

sale, lease, contribution or other disposition, directly or indirectly (including by way of merger, consolidation, share exchange, other business combination, partnership, joint venture, sale of capital stock or other equity interests in a subsidiary or otherwise) of any business or assets representing 15% or more of the consolidated revenues, net income or assets of the Company and its subsidiaries, taken as a whole;

 

   

issuance, sale or other disposition, directly or indirectly, to any person or group of securities representing 15% or more of the total outstanding voting power of the Company;

 

   

transaction in which any person would acquire, directly or indirectly, beneficial ownership, or the right to acquire beneficial ownership, or formation of any group which beneficially owns or has the right to acquire beneficial ownership of, 15% or more of the Company common shares; or

 

   

any combination of the foregoing.

Notwithstanding the restrictions set forth above, if at any time prior to obtaining the Company shareholder approval, the Company receives a bona fide oral or written takeover proposal, which takeover proposal did not result from any breach of the terms of the merger agreement, (i) the Company may contact such person making the takeover proposal to request that any bona fide takeover proposal made orally be made in writing and (ii) in response to a bona fide written takeover proposal that the Board determines in good faith (after consultation with its outside counsel and financial advisor) that the failure to take the following actions would reasonably be expected to be inconsistent with its fiduciary duties under applicable law, and that such takeover proposal constitutes or is reasonably likely to lead to a superior proposal, the Company may, subject to compliance with the merger agreement:

 

   

enter into an acceptable confidentiality agreement with the person making the takeover proposal and furnish information pursuant to an acceptable confidentiality agreement (including non-public information and data) with respect to itself and its subsidiaries to the person making such takeover proposal; provided that all such information has previously been provided to Parent or is provided to Parent prior to or substantially concurrently with the time it is provided to such person; and

 

   

participate in discussions regarding the terms of such takeover proposal and the negotiation of such terms with, and only with, the person making such takeover proposal.

An “acceptable confidentiality agreement” means (i) any confidentiality agreement entered into by the Company from and after the date of the merger agreement that contains terms and conditions, taken as a whole, that are at least as restrictive on the person entering into such confidentiality agreement with the Company as

 

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those contained in the confidentiality agreement between the Company and Brookfield Infrastructure, except that such confidentiality agreement need not include explicit or implicit standstill provisions or otherwise restrict the making of or amendment or modification to takeover proposals but shall not contain any exclusivity provision or other term that would restrict, in any manner, Parent’s ability to consummate the transactions contemplated by the merger agreement, or (ii) any confidentiality agreement entered into prior to the date of the merger agreement.

A “superior proposal” means any bona fide written offer made by a third party or group pursuant to which such third party (or, in a merger, consolidation or statutory share exchange involving such third party, the shareholders of such third party) or group would acquire, directly or indirectly, more than 50% of the Company common shares or substantially all of the assets of the Company and its subsidiaries, taken as a whole, which the Board determines in good faith (after consultation with outside counsel and a financial advisor of nationally recognized reputation) is:

 

   

on terms more favorable from a financial point of view to the holders of Company common shares than the merger, taking into account all the terms and conditions of such proposal (including the legal, financial, regulatory, timing and other aspects of the proposal and the identity of the person making the proposal) and the merger agreement (including any changes proposed by Parent to the terms of the merger agreement); and

 

   

reasonably likely to be completed on the terms proposed, taking into account all legal, financial, regulatory and other aspects of such proposal, and is fully financed or for which financing (if required) is fully committed or, in the good faith determination of the Board, is reasonably likely to be obtained.

The merger agreement requires that the Company (i) promptly, and in any event, within 24 hours of receipt of such offer by an officer or director of the Company, advise Parent orally and in writing of the receipt of any takeover proposals or any inquiry or proposal that may be reasonably expected to lead to a takeover proposal, the material terms and conditions of any such takeover proposal or inquiry or proposal and the identity of the person making such takeover proposal or inquiry or proposal , (ii) keep Parent informed in all material respects on a reasonably current basis of the status and details (including any change to the terms thereof) of any takeover proposal, and (iii) provide to Parent as soon as practicable after receipt or delivery thereof copies of all correspondence and other written and electronic material exchanged between the Company or its subsidiaries and any person that describes any of the material terms or conditions of any takeover proposal.

Change in Board Recommendation

The Board has agreed that it will not:

 

   

(i) withdraw or fail to make when required by the merger agreement (or modify in any manner adverse to Parent), or propose or agree to withdraw or fail to make when required by the merger agreement (or modify in any manner adverse to Parent), the recommendation by the Board to the Company shareholders to adopt the merger agreement or (ii) adopt, recommend or declare advisable, or propose or agree to adopt, recommend or declare advisable, any takeover proposal (any action described in this bullet being referred to as a “company adverse recommendation change”); or

 

   

adopt, recommend or declare advisable, or propose or agree to adopt, recommend or declare advisable, or allow the Company or any of its affiliates to execute or enter into, any confidentiality agreement (other than an acceptable confidentiality agreement), letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, alliance agreement, partnership agreement or other similar agreement or arrangement (an “acquisition agreement”) constituting, or that may reasonably be expected to lead to, a takeover proposal.

 

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Notwithstanding the foregoing, at any time prior to obtaining the Company shareholder approval, the Board may:

 

   

make a company adverse recommendation change in response to an intervening event, or the consequences thereof, where the failure to take such action would reasonably be expected to be inconsistent with the directors’ fiduciary duties under applicable law; or

 

   

make a company adverse recommendation change in response to a takeover proposal or cause the Company to enter into an acquisition agreement constituting or that may reasonably be expected to lead to a takeover proposal not obtained in violation of the merger agreement and terminate the merger agreement pursuant to the terms thereof, in either case if the Board determines in good faith (after consultation with outside counsel and a financial advisor of nationally recognized reputation), that such takeover proposal constitutes a superior company proposal.

Prior to taking any of the actions set forth in the immediately preceding paragraph,

 

   

the Company must give Parent at least five business days’ prior written notice (it being understood that any amendment to any material term of any superior company proposal will require a new notice period (which will be two business days instead of five business days)) advising Parent that the Board intends to take such action, which notice will specify the identity of the party making such superior company proposal and the material terms thereof and, in the case of an intervening event, specifying the details thereof,

 

   

the Company must have negotiated, and has caused its representatives to negotiate, in good faith with Parent during such notice period, to the extent Parent wishes to negotiate, to enable Parent to propose in writing a binding offer to effect revisions to the terms of the merger agreement such that it would cause such superior company proposal to no longer constitute a superior company proposal or for such intervening event to no longer warrant a company adverse recommendation change, and

 

   

following the end of such notice period, the Board or any committee thereof must have considered in good faith such binding offer or intervening event, and must have determined that the superior company proposal would continue to constitute a superior company proposal if the revisions proposed in such binding offer were to be given effect or that such intervening event continues to warrant a company adverse recommendation change.

An “intervening event” means a material event, occurrence, development or state of facts or circumstances that was not known to the Board prior to the date of the merger agreement (or if known, the consequences of which were not known or reasonably foreseeable), other than the receipt, existence or terms of, or an inquiry, proposal or offer that constitutes or could reasonably be expected to lead to, a takeover proposal, provided, however, that no state of fact, change, effect, condition, development, event or occurrence that has had or would reasonably be expected to have an adverse effect on the business, properties, financial condition or results of operations of, or the market price of the securities (including Company common shares) of, the Company or its subsidiaries shall constitute an “intervening event” unless such state of fact, change, effect, condition, development, event or occurrence has had or would reasonably be expected to have a Material Adverse Effect and provided, further, that no action taken by any party to the merger agreement pursuant to and in compliance with the affirmative covenants set forth in the merger agreement, or the consequences of any such action, will constitute an “intervening event”.

Efforts to Obtain the Company Shareholder Approval

The Company has agreed to hold its special meeting as soon as reasonably practicable and to use its commercially reasonable efforts to obtain the Company shareholder approval. The merger agreement requires the Company to submit the adoption of the merger agreement to a shareholder vote even if the Board no longer recommends that the Company’s shareholders adopt the merger agreement. The Board has declared the merger

 

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agreement, the merger and the other transactions contemplated by the merger agreement advisable and adopted resolutions directing that the merger agreement be submitted to the Company’s shareholders for their consideration.

Financing

The merger agreement provides that, subject to the terms and conditions thereof, Parent will use its commercially reasonable efforts to obtain the equity financing on the terms and subject to the conditions contained in the equity funding letter. Furthermore, Parent will (and will cause its affiliates to) use commercially reasonable efforts to:

 

   

comply with its obligations under, and maintain in effect, the equity funding letter;

 

   

satisfy on a timely basis all conditions contained in the equity funding letter applicable to Parent and its affiliates and the definitive agreements related thereto;

 

   

subject to the satisfaction of all conditions contained in the equity funding letter, cause the Brookfield Funds to fund the equity financing at the closing date; and

 

   

enforce its rights under the equity funding letter and the definitive agreements relating to the equity financing.

Prior to the effective time of the merger, the Company has agreed to use its commercially reasonable efforts to provide all cooperation reasonably requested by Parent, as more fully set forth in the merger agreement, in connection with the obtainment, arrangement and syndication of any debt financing and the payoff of all commitments in respect of the Credit Agreement between the Company and Morgan Stanley Senior Funding, Inc., dated October 2, 2017, and the amendments thereto.

Except in limited circumstances, Parent may not, without the prior written consent of the Company, amend, modify, supplement or waive any provision of the equity funding letter to the extent such amendment, modification, supplement or waiver would reasonably be expected to adversely affect the ability of Parent to timely complete the merger and other transactions contemplated by the merger agreement or delay the closing of the merger or contains conditions or other terms that would reasonably be expected to affect the availability of the equity financing that are more onerous, taken as a whole, than those conditions and terms contained in the equity funding letter as of December 21, 2019.

2024 and 2025 Notes

If requested by Parent prior to the closing of the merger, the Company will be required to deliver to holders of the Company’s 7.000% Senior Notes due 2024 and 8.000% Senior Notes due 2025 any notice required to be delivered to such holders in connection with a change of control offer or redemption specified by Parent, subject to the requirement that such change of control offer or redemption, as the case may be, is expressly conditioned on the closing of the merger having occurred.

Indemnification

Parent has agreed to assume all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the merger now existing in favor of the current or former directors or officers of the Company and its subsidiaries upon the effective time of the merger. At or prior to the effective time of the merger, the Company will purchase a “tail” directors’ and officers’ liability insurance policy for the Company and its subsidiaries and their respective current and former directors, officers and employees who are currently covered by the directors’ and officers’ liability insurance coverage currently maintained by the Company or its subsidiaries, which Parent has agreed to not amend, modify, cancel or revoke after the effective time of the merger.

 

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Employee Benefits Matters

The merger agreement provides that for a period of one year following the effective time of the merger, Parent will provide each individual who was an employee of the Company or any of its subsidiaries immediately prior to the effective time of the merger (a “Continuing Employee”), with (i) a base salary or wages (as applicable) and target annual incentive opportunities that are no less favorable in the aggregate than those provided to such Continuing Employee immediately prior to the effective time of the merger and (ii) other employee benefits that are substantially comparable in the aggregate to those provided to such Continuing Employee immediately prior to the effective time of the merger (excluding for purposes of determining comparability any retention bonus, defined benefit pension or retiree or post-employment welfare benefits).

In addition, as soon as practicable and in no event more than five days after the closing of the merger, each Continuing Employee will receive an amount in respect of such Continuing Employee’s cash bonus for the fiscal year in which the closing of the merger occurs, prorated to reflect the number of days elapsed from the commencement of the applicable performance period through the closing of the merger, based on the achievement of target level of performance.

Additional Agreements

The merger agreement contains certain other additional agreements between the Company, Parent and Merger Sub relating to, among other things:

 

   

cooperation between the Company and Parent in the preparation of this proxy statement;

 

   

confidentiality and access to certain information about the other party during the period prior to the effective time of the merger;

 

   

cooperation between the Company and Parent in connection with the defense or settlement of any shareholder litigation relating to the merger;

 

   

cooperation between the Company and Parent in connection with public announcements;

 

   

voting any Company capital stock owned by Parent in favor of the adoption of the merger agreement;

 

   

Parent not permitting any person to obtain equity interests in Parent or any person of which Merger Sub is a direct or indirect subsidiary;

 

   

Merger Sub not expending any funds other than in connection with the transactions contemplated by the merger agreement;

 

   

the delisting of Company common shares; and

 

   

notifying the other party of the receipt of certain communications from any governmental entity in connection with the transactions contemplated by the merger agreement or from any person alleging that consent of such person with respect to the transactions contemplated by the merger agreement is or may be required in connection with the transactions contemplated by the merger agreement, or the occurrence of certain events.

Conditions of the Merger

The respective obligations of the Company and Parent to complete the merger are subject to the satisfaction or waiver of the following conditions:

 

   

the receipt of the Company shareholder approval;

 

   

the expiration or early termination of any waiting period applicable to the merger under the HSR Act and Competition Act (Canada) Compliance;

 

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the receipt of CFIUS Approval;

 

   

the receipt of certain FCC consents and state regulatory consents required in connection with the merger, which consents are not subject to agency reconsideration or judicial review, and the time for any person to petition for agency reconsideration or judicial review shall have expired; and

 

   

the absence of any applicable law or judgment, whether preliminary, temporary or permanent, or other legal restraint or binding order or determination by any governmental entity that prevents, restrains, enjoins, makes illegal or otherwise prohibits the completion of the merger.

The obligation of the Company to complete the merger is subject to the satisfaction or waiver of the following additional conditions:

 

   

the representations and warranties of Parent and Merger Sub being true and correct to the extent specified in the merger agreement; and

 

   

Parent and Merger Sub having performed or complied with, in all material respects, all material obligations required to be performed or complied with by them under the merger agreement.

The obligation of Parent and Merger Sub to complete the merger is subject to the satisfaction or waiver of the following additional conditions:

 

   

the representations and warranties of the Company being true and correct to the extent specified in the merger agreement;

 

   

the Company having performed or complied with, in all material respects, all material obligations required to be performed or complied with by it under the merger agreement;

 

   

the absence, since the date of the merger agreement, of any event or development that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on the Company; and

 

   

the absence of a Burdensome Condition.

Termination

The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after receipt of the Company shareholder approval, under the following circumstances:

 

   

by mutual written consent of the Company and Parent;

 

   

by either the Company or Parent:

 

   

if the merger is not completed by March 20, 2021 (the “end date”), except that, if on March 20, 2021 the conditions to closing related to no legal restraints, antitrust clearance or other regulatory approvals have not been satisfied or waived, but all other conditions to closing have been satisfied or waived, then such date will be automatically extended to June 20, 2021; however, the right to terminate the merger agreement under this provisions will not be available to any party if such failure of the merger to occur on or before the end date is the result of a breach of the merger agreement by such party (including, in the case of Parent, Merger Sub) or the failure of any representation or warranty of such party (including, in the case of Parent, Merger Sub) contained in the merger agreement to be true and correct;

 

   

if the condition set forth in the fifth bullet point under “Conditions of the Merger” above is not satisfied and the legal restraint giving rise to such non-satisfaction has become final and non-appealable; or

 

   

if the Company shareholder approval is not obtained at the special meeting (unless the special meeting has been adjourned, in which case at the final adjournment thereof);

 

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by the Company, if Parent or Merger Sub has breached any of its representations or warranties or failed to perform any of its covenants or agreements contained in the merger agreement, which breach or failure;

 

   

would give rise to the failure of a condition set forth in the portions of the merger agreement detailing the conditions to obligations of the Company relating to representations and warranties and the performance of obligations of Parent and Merger Sub; and

 

   

is incapable of being cured or, if capable of being cured by the end date, Parent and Merger Sub (i) will not have commenced good faith efforts to cure such breach or failure to perform within 30 calendar days following receipt by Parent or Merger Sub of written notice of such breach or failure to perform from the Company stating the Company’s intention to terminate the merger agreement pursuant to the merger agreement and the basis for such termination or (ii) are not thereafter continuing to take good faith efforts to cure such breach or failure to perform;

 

   

by the Company, prior to the receipt of the Company shareholder approval, to enter into a definitive agreement constituting a superior proposal, subject to the payment of the termination fee discussed in the section of this proxy statement entitled “The Merger Agreement-Fees and Expenses” beginning on page [    ];

 

   

by Parent, if the Company shall have breached any of its representations or warranties or failed to perform any of its covenants or agreements contained in the merger agreement, which breach or failure:

 

   

would give rise to the failure of a condition set forth in the portions of the agreement detailing the conditions to obligations of the Company relating to representations and warranties and the performance of obligations of the Company; and

 

   

is incapable of being cured or, if capable of being cured by the end date, the Company (i) will not have commenced good faith efforts to cure such breach or failure to perform within 30 calendar days following receipt by the Company of written notice of such breach or failure to perform from Parent stating Parent’s intention to terminate the merger agreement pursuant to the merger agreement and the basis for such termination or (ii) is not thereafter continuing to take good faith efforts to cure such breach or failure to perform;

 

   

by Parent, prior to obtaining the Company shareholder approval, in the event that a company adverse recommendation change occurs.

Fees and Expenses

With the exception of the termination fee of $17,970,000 (the “termination fee”) to be paid by the Company under certain circumstances, all fees and expenses incurred in connection with the merger and the other transactions contemplated by the merger agreement will be paid by the party incurring such fees and expenses, whether or not such transactions are completed. For a description of certain fees and expenses incurred by the parties in connection with this proxy statement, see the section titled “The Special Meeting—Solicitation of Proxies” beginning on page [    ].

The Company is required to pay to Parent the termination fee if:

 

   

Parent terminates the merger agreement prior to obtaining the Company shareholder approval because a company adverse recommendation change occurs;

 

   

the Company terminates the merger agreement prior to obtaining the Company shareholder approval to enter into a definitive agreement with respect to a superior proposal; or

 

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the merger agreement is terminated by the Company or Parent because the merger has not been completed by the end date or the Company shareholders did not approve the merger agreement proposal at the special meeting; provided that in either case:

 

   

a takeover proposal relating to the Company was publicly made, proposed or communicated by a third party after the date of the merger agreement and (i) before the merger agreement is terminated in the case of a termination for failing to complete by the end date or (ii) before the completion of the special meeting (including any adjournment or postponement thereof) in the case of a termination for a failure to obtain the Company shareholder approval; and

 

   

within 12 months of the date the merger agreement is terminated, the Company enters into a definitive agreement with respect to a takeover proposal or a takeover proposal is completed (regardless of whether the takeover proposal was the same takeover proposal referred to in the immediately preceding bullet).

In the event the merger agreement is terminated and the termination fee is paid to Parent in circumstances for which such fee is payable pursuant to the merger agreement, payment of the termination fee will be the sole and exclusive monetary damages remedy of Parent, Merger Sub, the Brookfield Funds or any of their respective former, current or future general or limited partners, shareholders, financing sources, managers, members, directors, officers or affiliates against the Company and its subsidiaries and any of their respective former, current or future officers, directors, partners, shareholders, managers, members or affiliates for any loss suffered as a result of the failure of the merger or the other transactions contemplated by the merger agreement to be completed or for a breach or failure to perform under the merger agreement or otherwise (so long as, in the event that this merger agreement was terminated by the Company, such termination was in accordance with the applicable provisions of the merger agreement). Upon payment of the termination fee in such circumstances, none of the Company and its related parties will have any further monetary liability or obligation relating to or arising out of the merger agreement, the merger or the other transactions contemplated by the merger agreement.

Withholding Taxes

Parent, the surviving corporation and the paying agent will be entitled to deduct and withhold from the merger consideration payable to any holder of Company common shares the amounts that may be required to be withheld under any applicable tax law. Amounts withheld and paid over to the applicable governmental entity will be treated for all purposes of the merger as having been paid to the shareholders from whom such amounts were withheld.

Amendment

The merger agreement may be amended by the parties at any time before or after the receipt of the Company shareholder approval; provided, however, that: (i) after the receipt of the Company shareholder approval there may not be any amendment of the merger agreement for which applicable law requires further approval by the Company shareholders without the further approval of such shareholders; (ii) after the completion of the merger, the merger agreement cannot be amended, and (iii) except as provided in clause (i), no amendment will require the approval of the Company shareholders; provided, further, that certain provisions of the merger agreement may not be amended without the prior written consent of the debt financing sources.

Extension; Waiver

At any time prior to the effective time of the merger, with certain exceptions, the parties may: (i) extend the time for the performance of any of the obligations or other acts of the other parties, (ii) waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement, (iii) waive compliance with any covenants and agreements contained in the merger agreement or (iv) waive the satisfaction of any of the conditions contained in the merger agreement.

 

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Governing Law

The merger agreement will be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed entirely within that State, regardless of the laws that might otherwise govern under any applicable conflict of laws principles (except that the procedures of the merger and matters relating to the fiduciary duties of the directors of the Company and Merger Sub shall be subject to the internal laws of the State of Ohio).

Specific Enforcement

The parties agreed that irreparable damage for which monetary relief (including any fees payable pursuant to the merger agreement), even if available, would not be an adequate remedy, would occur in the event that any provision of the merger agreement was not performed in accordance with its specific terms or is otherwise breached, including if the parties fail to take any action required of them to complete the merger agreement, the merger and the other transactions contemplated by the merger agreement.

Subject to certain limitations, the parties acknowledged and agreed that the parties are entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of the merger agreement, that the provisions of the merger agreement relating to fees and expenses are not intended to and do not adequately compensate for the harm that would result from a breach of the merger agreement and are not to be construed to diminish or otherwise impair any party’s right to specific performance, that the right of specific enforcement is an integral part of the merger and the other transactions contemplated by the merger agreement and without that right neither the Company nor Parent would have entered into the merger agreement. The parties agreed not to assert that specific enforcement is unenforceable, invalid or otherwise contrary to law or make certain arguments about the application of monetary damages.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table and the accompanying footnotes set forth the beneficial ownership of Company common shares and 6 34% preferred shares, as of January 15, 2020 (except as otherwise noted), by each person or group who is known by the Company to be a beneficial owner of more than five percent of the Company’s common shares, each director of the Company, each of the Company’s named executive officers and all directors and executive officers of the Company as a group. The information below regarding beneficial ownership of Company common shares has been presented in accordance with SEC rules and is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership of Company common shares includes any shares as to which a person, directly or indirectly, has or shares voting power or investment power and any shares as to which a person has the right to acquire such voting or investment power within 60 days through the exercise of any stock option or other right, including through the settlement of vested restricted stock units in shares of Company common shares.

Percentage computations are based on 50,423,038 Company common shares and 155,250 6 34% preferred shares outstanding as of January 15, 2020. To the Company’s knowledge, except as otherwise noted in the footnotes to the following table, each person or entity identified below has sole voting and investment power with respect to such securities, and none of the shares owned by the Company’s directors or executive officers was pledged.

Unless otherwise noted, the address of each of the following persons is c/o Cincinnati Bell Inc., 221 East Fourth Street, Cincinnati, Ohio 45202.

Beneficial Ownership of Holders of 5% or More of Company Common Shares, Directors and Executive Officers:

 

Beneficial Owner

   Company
Common
Shares
Beneficially
Owned(a)
    Percent
of Company
Common
Shares
    34%  Preferred
Shares

Beneficially
Owned as of
January 15,
2020(b)
    Percent of 6 34%
Preferred
Shares(b)
 

Holders of 5% or more of Company common shares (excluding Directors and Executive Officers):

        

BlackRock, Inc.

     7,416,205 (c)      14.71     *     *

Nomura Holdings, Inc.

     4,865,764 (d)      9.65     *     *

Ares Management LLC and affiliates

     4,754,641 (e)      9.43     *     *

GAMCO Investors, Inc. and affiliates

     3,853,402 (f)      7.64     *     *

Credit Suisse AG/

     2,912,905 (g)      5.78     *     *

The Vanguard Group, Inc.

     2,613,451 (h)      5.18     *     *

Directors and Executive Officers:

        

Meredith J. Ching

     28,784       *       —         —    

Christi H. Cornette

     49,541       *       —         —    

Walter A. Dods, Jr.

     26,541       *       —         —    

John W. Eck

     33,726       *       —         —    

Leigh R. Fox

     353,040       *       —         —    

Jakki L. Haussler

     53,535       *       —         —    

Andrew R. Kaiser

     78,910       *       —         —    

Craig F. Maier

     53,493       *       —         —    

Russel P. Mayer

     38,115       *       —         —    

Thomas E. Simpson

     94,828       *       —         —    

Theodore H. Torbeck

     300,591       *       —         —    

Lynn A. Wentworth

     56,876       *       —         —    

Christopher J. Wilson

     126,720       *       —         —    

Martin J. Yudkovitz

     39,998       *       —         —    

All directors and executive officers as a group (consisting of 16 persons, including those directors and named executive officers listed above)

     1,373,152       2.72     —         —    

 

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*

indicates ownership of less than 1% of issued and outstanding shares.

**

indicates ownership of less than 5%, or the equivalent of 5% in share count, of the 6 34% preferred shares.

(a)

Includes Company common shares subject to outstanding vested Company Options under the Cincinnati Bell Inc. 2007 Long Term Incentive Plan (the “2007 LTIP”) as of January 15, 2020, and Company common shares subject to Company RSUs and Company PSUs (assuming performance at target) under the 2007 LTIP that are scheduled to vest in accordance with their terms within 60 days following January 15, 2020. The following Company common shares subject to outstanding vested Company Options are included in the totals: 300 Company common shares for Mr. Fox; 1,001 Company common shares for Mr. Kaiser; and 19,102 Company common shares for Mr. Wilson. The following Company common shares subject to Company RSUs and Company PSUs (assuming performance at target) that are scheduled to vest in accordance with their terms within 60 days following January 15, 2020 are included in the totals: 68,956 Company common shares for Mr. Fox; 15,555 Company common shares for Mr. Kaiser; 20,000 Company common shares for Mr. Simpson; 17,333 Company common shares for Mr. Wilson, 8,889 Company common shares for Ms. Cornette and 6,666 Company common shares for other executive officers who are not named executive officers of the Company. The Company’s Insider Trading Policy expressly prohibits ownership of derivative financial instruments or participation in investment strategies that hedge the economic risk of owning Company common shares and prohibits officers and directors from pledging Company securities as collateral for loans.

(b)

These numbers represent 6 34% preferred shares. In the aggregate, the 155,250 issued and outstanding 6 34% preferred shares are represented by 3,105,000 depositary shares, and each 6 34% preferred share is represented by 20 depositary shares.

(c)

As reported on Schedule 13F filed on November 8, 2019 by BlackRock, Inc., as of September 30, 2019, BlackRock Financial Management, Inc. had sole voting power for 1,779 Company common shares and sole dispositive power for 49,200 Company common shares, BlackRock Investment Management (Australia) Limited had sole voting and dispositive power for 377 Company common shares, BlackRock Asset Management Canada Limited had sole voting and dispositive power for 960 Company common shares, BlackRock Investment Management, LLC had sole voting and dispositive power for 221,067 Company common shares, BlackRock Advisors LLC had sole voting power for 72,869 Company common shares, BlackRock Fund Advisors had sole voting and dispositive power for 5,529,590 Company common shares, BlackRock Institutional Trust Company, N.A. had sole voting power for 1,390,368 Company common shares and sole dispositive power for 1,452,543 Company common shares, BlackRock Investment Management (UK) Limited had sole voting power for 10,420 Company common shares and sole dispositive power for 13,212 Company common shares, BlackRock (Netherlands) B.V. had sole voting and dispositive power for 5,537 Company common shares, BlackRock Asset Management Ireland Limited had sole voting and dispositive power for 66,312 Company common shares and BlackRock Asset Management Schweiz AG had sole voting and dispositive power for 4,538 Company common shares. The address of BlackRock Inc. is 55 East 52nd Street, New York, NY 10055.

(d)

As reported on Schedule 13F filed on November 14, 2019 by Nomura Holdings, Inc., as of September 30, 2019, Nomura Global Financial Products, Inc. had sole voting and dispositive power for 4,865,764 Company common shares. The address of Nomura Holdings, Inc. is 1-9-1 Nihonbashi, Chuo-ku, Tokyo 103-8645, Japan.

(e)

As reported on Schedule 13F filed on November 14, 2019 by Ares Management LLC, as of September 30, 2019, Ares Management LLC had sole voting and dispositive power for 4,754,641 Company common shares. The address of Ares Management LLC is 2000 Avenue of the Stars, 12th Floor, Los Angeles, CA 90067.

(f)

As reported on Schedule 13D filed on November 21, 2019 by GAMCO Investors, Inc., as of November 20, 2019, Gabelli Funds, LLC had sole voting and dispositive power for 1,042,745 Company common shares, GAMCO Asset Management Inc. had sole voting power for 2,618,657 Company common shares and sole dispositive power for 2,810,657 Company common shares, MJG Associates, Inc. had sole voting and dispositive power for 16,800 Company common shares, Teton Advisors, Inc. had sole voting and dispositive power for 391,800 Company common shares and Associated Capital Group, Inc. had sole voting and dispositive power for 2,000 Company common shares. In addition, on the Schedule 13D filed on November 20, 2019, Gamco Asset Management, Inc. (518) and Gabelli Funds, LLC (35,928) indicated ownership of 6 34% preferred shares that would convert into an additional 36,446 Company common shares. The number of Company common shares reported as beneficially owned in the table above assumes the conversion of such shares. The address of GAMCO Investors, Inc. is One Corporate Center, Rye, NY 10580.

(g)

As reported on Schedule 13F filed on November 12, 2019 by Credit Suisse AG/, as of September 30, 2019, Credit Suisse Funds AG had sole voting and dispositive power for 19,903 Company common shares, Credit Suisse Capital LLC/ had sole voting and dispositive power for 2,901,552 Company common shares, Credit Suisse Securities (USA) LLC had sole voting and dispositive power for 11,328 Company common shares and Credit Suisse Securities (Europe) LTD had sole voting and dispositive power for 25 Company common shares. The address of Credit Suisse AG is Uetlibergstrasse 231, PO Box 900 CH 8070, Zurich, Switzerland.

 

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(h)

As reported on Schedule 13F filed on November 14, 2019 by the Vanguard Group, Inc. as of September 30, 2019, the Vanguard Group, Inc. had sole voting power for 3,881 Company common shares and sole dispositive power for 2,556,441 Company common shares, Vanguard Advisers, Inc. had shared voting and dispositive power for 15,887 Company common shares and Vanguard Fiduciary Trust Co. had sole voting power and shared dispositive power for 41,123 Company common shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.

 

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MARKET PRICE AND DIVIDEND INFORMATION

The Company common shares trade on the NYSE under the symbol “CBB”. The table below provides the high and low trading prices of the Company common shares for the periods indicated, as reported by the NYSE.

 

     High      Low  

2020

     

January 1, 2020 through [    ], 2020

   $ [    ]      $ [    ]  

2019

     

Fourth quarter

   $ 10.52      $ 4.16  

Third quarter

   $ 7.64      $ 3.19  

Second quarter

   $ 10.54      $ 4.78  

First quarter

   $ 11.00      $ 7.59  

2018

     

Fourth quarter

   $ 16.10      $ 6.60  

Third quarter

   $ 17.60      $ 9.90  

Second quarter

   $ 17.50      $ 11.65  

First quarter

   $ 21.20      $ 13.30  

2017

     

Fourth quarter

   $ 22.20      $ 18.45  

Third quarter

   $ 22.00      $ 16.40  

Second quarter

   $ 19.90      $ 16.05  

First quarter

   $ 24.45      $ 17.40  

On December 20, 2019, the last trading day prior to the Board’s adoption of the merger agreement, the reported closing price for the Company common shares was $7.72 per share. The $10.50 per share to be paid for each Company common share in the merger represents a premium of approximately 36% over the closing price on December 20, 2019. On [            ], 2020, the latest practicable trading date before the filing of this proxy statement, the reported closing price for the Company common shares was $[            ]. You are encouraged to obtain current market quotations for Company common shares in connection with voting your Company common shares.

As of the close of business on the record date, there were [ ] Company common shares outstanding and entitled to vote, held by [    ] shareholders of record and [    ] 6 34% preferred shares outstanding and entitled to vote, held by [    ] shareholders of record. The number of holders is based upon the actual number of holders registered in our records at such date and excludes holders of shares in “street name” or persons, partnerships, associations, corporations or other entities identified in security positions listings maintained by depository trust companies.

The Company has not declared or paid any cash dividends on Company common shares since 2001. The Company does not anticipate paying cash dividends on Company common shares in the foreseeable future, and under the terms of the merger agreement, the Company is prohibited from authorizing, declaring, setting aside or paying any dividends on, or making any other distributions (whether in cash, stock or property or any combination thereof) in respect of, any of its capital stock, other equity interests or voting securities, other than (1) regular quarterly cash dividends payable by the Company to holders of its 6 34% preferred shares and (2) dividends and distributions by a direct or indirect wholly owned subsidiary of the Company to its shareholders or other equity holder.

 

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HOUSEHOLDING

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single proxy statement addressed to those shareholders. This process, which is commonly referred to as “householding”, potentially means extra convenience for shareholders and cost savings for companies.

Brokers with account holders who are Company shareholders may be “householding” our proxy materials. A single proxy statement will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, please notify your broker and direct your written request to Cincinnati Bell Inc., Attention: Investor Relations, 221 East Fourth Street, Cincinnati, Ohio 45202 or call 1-800-345-6301. Shareholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should contact their broker.

 

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SHAREHOLDER PROPOSALS

The Company plans to hold its 2020 annual meeting of shareholders as promptly as reasonably practicable following the special meeting. Until the merger is completed, you will continue to be entitled to attend and participate in the Company’s annual meetings of shareholders, and we will provide notice of or otherwise publicly disclose the date on which the 2020 annual meeting will be held. Shareholder proposals will be eligible for consideration for inclusion in the Company proxy statement and form of proxy for the Company’s 2020 annual meeting of shareholders in accordance with Rule 14a-8 under the Exchange Act and the Company’s Amended and Restated Regulations (the “Regulations”), as described below.

SEC rules permit Company shareholders to submit proposals to be included in the Company’s proxy materials if the shareholder and the proposal satisfy the requirements specified in Rule 14a-8 of the Exchange Act. To be submitted for inclusion in the proxy statement for the 2020 annual meeting, shareholder proposals must have satisfied all applicable requirements of Rule 14a-8 and must have been received by Connie M. Vogt, Corporate Secretary, Cincinnati Bell Inc., 221 East Fourth Street, Cincinnati, Ohio 45202, no later than the close of business on November 20, 2019, or if the 2020 annual meeting does not take place within 30 days from May 2, 2020, then the deadline will be a reasonable time before the Company begins to print and send its proxy materials (which deadline we would announce when we announce the date of the annual meeting). If the Company does not receive written notice by February 3, 2020 of a proposal from a shareholder who intends to propose any other matter to be acted upon at the 2020 annual meeting, the persons named in the Company’s proxy for the 2020 annual meeting will be allowed to exercise their discretionary authority to vote upon any such proposal.

The Regulations permit an eligible shareholder to include shareholder-nominated candidates in the Company’s proxy materials for the 2020 annual meeting if the shareholder satisfies the requirements and complies with the procedures set forth in the Regulations. In order for an eligible shareholder to include any shareholder-nominated candidates in the Company’s proxy materials for the 2020 annual meeting, such shareholder must have submitted the required nomination notice and supporting documents between October 21, 2019 and November 20, 2019. However, in the event that the annual meeting is not scheduled to be held between February 18, 2020 and April 18, 2020, an eligible shareholder must submit the required nomination notice in the manner provided in the Regulations by the later of the close of business on the date that is 180 days prior to the annual meeting or the tenth day following the date the annual meeting is first publicly announced or disclosed. Any shareholder considering introducing a nomination should carefully review the Regulations.

 

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WHERE YOU CAN FIND ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Exchange Act. We file reports, proxy statements and other information with the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains our reports, proxy and information statements and other information at www.sec.gov.

The Company will make available a copy of the documents we file with the SEC on investor.cincinnatibell.com as soon as reasonably practicable after filing these materials with the SEC. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference. Copies of any of these documents may be obtained free of charge either on our website, or by directing a request to the Company’s Investor Relations Department at 1-800-345-6301 or investorrelations@cinbell.com.

Statements contained in this proxy statement, or in any document incorporated in this proxy statement by reference, regarding the contents of any contract or other document, are not necessarily complete and each such statement is qualified in its entirety by reference to that contract or other document filed as an exhibit with the SEC. The SEC allows us to “incorporate by reference” information into this proxy statement. This means that we can disclose important information by referring to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this proxy statement. This proxy statement and the information that we later file with the SEC may update and supersede the information incorporated by reference. Similarly, the information that we later file with the SEC may update and supersede the information in this proxy statement. We also incorporate by reference into this proxy statement the following documents filed by us with the SEC under the Exchange Act and any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and before the date of the special meeting (provided that we are not incorporating by reference any information furnished to, but not filed with, the SEC):

 

   

our Annual Report on Form 10-K for the fiscal year ended December 31, 2018;

 

   

the portions of our Definitive Proxy Statement on Schedule 14A filed with SEC on March 19, 2019 that are incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018;

 

   

our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2019, June  30, 2019 and September 30, 2019;

 

   

our Current Reports on Form 8-K filed on February 14, 2019, May  8, 2019, May  10, 2019, May 15, 2019, August  8, 2019, November  7, 2019 and December 23, 2019.

Information furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K, including related exhibits, is not and will not be incorporated by reference into this proxy statement, unless expressly stated otherwise therein.

In addition, the Company incorporates by reference any future filings it makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and prior to the date of the special meeting (other than information furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K, unless expressly stated otherwise therein). Such documents are considered to be a part of this proxy statement, effective as of the date such documents are filed.

The information contained in this proxy statement speaks only as of the date indicated on the cover of this proxy statement unless the information specifically indicates that another date applies.

We have not authorized anyone to give you any information or to make any representation about the proposed merger or the Company that is different from or adds to the information contained in this proxy statement or in the documents we have publicly filed with the SEC. Therefore, if anyone does give you any different or additional information, you should not rely on it.

 

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ANNEX A

EXECUTION VERSION

 

 

 

AGREEMENT AND PLAN OF MERGER

Dated as of December 21, 2019,

Among

CINCINNATI BELL INC.,

CHARLIE ACQUIRECO INC.

and

CHARLIE MERGER SUB INC.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

         Page  
ARTICLE I  
The Merger  
SECTION 1.01.   The Merger      A-1  
SECTION 1.02.   Closing      A-1  
SECTION 1.03.   Effective Time      A-1  
SECTION 1.04.   Effects of the Merger      A-2  
SECTION 1.05.   Organizational Documents of the Surviving Corporation      A-2  
SECTION 1.06.   Board of Directors and Officers of the Surviving Corporation      A-2  
ARTICLE II  
Effect on the Stock of the  
Constituent Corporations; Exchange of Certificates  
SECTION 2.01.   Effect on Stock      A-2  
SECTION 2.02.   Exchange of Certificates; Book-Entry Shares      A-3  
SECTION 2.03.   Dissenters’ Rights      A-4  
SECTION 2.04.   Adjustments      A-5  
ARTICLE III  
Representations and Warranties of Parent and Merger Sub  
SECTION 3.01.   Organization, Standing and Power      A-6  
SECTION 3.02.   Authority; Execution and Delivery; Enforceability      A-6  
SECTION 3.03.   No Conflicts; Consents      A-6  
SECTION 3.04.   Information Supplied      A-7  
SECTION 3.05.   Litigation      A-7  
SECTION 3.06.   Brokers’ Fees and Expenses      A-7  
SECTION 3.07.   Financing      A-8  
SECTION 3.08.   Certain Arrangements      A-8  
SECTION 3.09.   Merger Sub      A-8  
SECTION 3.10.   Ownership of Company Stock      A-8  
SECTION 3.11.   No Other Representations or Warranties      A-8  
ARTICLE IV  
Representations and Warranties of the Company  
SECTION 4.01.   Organization, Standing and Power      A-9  
SECTION 4.02.   Company Subsidiaries      A-9  
SECTION 4.03.   Capital Structure      A-10  
SECTION 4.04.   Authority; Execution and Delivery; Enforceability      A-11  
SECTION 4.05.   No Conflicts; Consents      A-11  
SECTION 4.06.   SEC Documents; Undisclosed Liabilities      A-12  
SECTION 4.07.   Information Supplied      A-14  

 

A-i


Table of Contents

TABLE OF CONTENTS

(continued)

 

         Page  
SECTION 4.08.   Absence of Certain Changes or Events      A-14  
SECTION 4.09.   Taxes      A-14  
SECTION 4.10.   Benefits Matters; ERISA Compliance      A-15  
SECTION 4.11.   Litigation      A-17  
SECTION 4.12.   Compliance with Applicable Laws      A-17  
SECTION 4.13.   Environmental Matters      A-17  
SECTION 4.14.   Contracts      A-18  
SECTION 4.15.   Properties      A-19  
SECTION 4.16.   Intellectual Property      A-20  
SECTION 4.17.   Labor Matters      A-22  
SECTION 4.18.   Brokers’ Fees and Expenses      A-22  
SECTION 4.19.   Opinion of Financial Advisors      A-23  
SECTION 4.20.   Communications Regulatory Matters      A-23  
SECTION 4.21.   Insurance      A-24  
SECTION 4.22.   Certain Business Practices      A-24  
SECTION 4.23.   Affiliate Transactions      A-25  
SECTION 4.24.   No Other Representations or Warranties