<PAGE>
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
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
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
FRONTIER CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(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
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[_] 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:
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Notes:
<PAGE>
Frontier
Proxy Statement
Frontier Corporation
Frontier Center
180 South Clinton Avenue
Rochester, New York 14646-0700
Notice of Annual Meeting of
Common Shareowners
To be Held on April 24, 1996
Dear Shareowners:
The Annual Meeting of Common Shareowners of Frontier Corporation (the
"Company") will be held at the Ritz-Carlton Hotel, 15 Arlington Street, Boston,
Massachusetts 02117, at 10:30 a.m. on April 24, 1996. The purposes of the
meeting are:
. To elect thirteen Directors;
. To elect Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending
December 31, 1996;
. To approve two proposals regarding employee and
director compensation plans; and
. To transact such other business, if any, as may properly
come before the meeting or any adjournments thereof.
The Board of Directors amended Article II, Section 2, of the By-Laws to set
the number of Directors constituting the entire Board at thirteen, effective
January 22, 1996.
The Board of Directors has fixed the close of business on March 6, 1996, as
the record date for the determination of shareowners entitled to notice of and
to vote at the meeting.
Your vote is very important. Please sign and date the enclosed proxy card and
return it promptly in the enclosed return envelope, whether or not you expect
to attend the meeting. If you sign and return your proxy card without
specifying your choices, it will be understood that you wish to have your
shares voted in accordance with the Board of Directors' recommendations.
You may revoke your proxy and vote in person if you decide to attend the
meeting.
An admission card will be required to gain entry to the meeting. If you are
planning to attend the Annual Meeting, please check the box on the back of the
proxy card. We will then send you your admission card which will include a map
with directions to the meeting place.
By Action of the Board of Directors,
/s/ Josephine S. Trubek
- --------------------------
Josephine S. Trubek
Corporate Secretary
Rochester, New York
March 11, 1996
<PAGE>
Table of Contents
Proxy Statement
Proxy Solicitation 1
Voting at the Annual Meeting 1
Proposal 1 - Election of Directors 1
Information about the Board of Directors 1
Nominees for Director 2
Stock Ownership of Management, Directors and
Certain Beneficial Owners 4
Report of Committee on Directors 5
Report of Committee on Management 6
Performance Graph 8
Compensation of Company Management 9
Summary Compensation Table 9
Option/SAR Grants in Last Fiscal Year 10
Individual Grants in 1995 Table 11
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values Table 11
Long-Term Incentive Plans-Awards in Last Fiscal
Year Table 12
Pension Plan Table 12
Compensation Committee Interlocks and
Insider Participation in Compensation Decisions 13
Interest of Certain Persons in Matters to be
Acted Upon 14
Indemnification of Certain Persons 14
Proposal 2 - Election of Independent Auditors 15
Proposal 3 - Employees' Stock Option Plan 15
Proposal 4 - Directors' Stock Incentive Plan 16
New Plan Benefits 18
Other Matters 18
Future Proposals of Shareowners 18
<PAGE>
Proxy Statement
1996 Annual Meeting of Common Shareholders
of Frontier Corporation
- -------------------------------------------------------------------------------
Proxy Solicitation
We are sending you this Proxy Statement and the enclosed proxy card in
connection with the solicitation of proxies by the board of directors ("Board
of Directors") of Frontier Corporation (the "Company"), a New York corporation,
for use at the annual meeting of holders of the Company's $1.00 par value
common stock. This meeting (the "Annual Meeting") will be held on April 24,
1996, at 10:30 a.m., local time at the Ritz-Carlton Hotel, 15 Arlington Street,
Boston, Massachusetts 02117, or any later time, if adjourned, for the purposes
stated in the Notice of Annual Meeting of Common Shareowners provided to you.
The Company will bear the cost of proxy solicitation. In addition to
the solicitation of proxies by mail, some officers and employees of the Company,
without additional compensation, may solicit proxies personally or by telephone,
facsimile, telegraph or cable. The Company will also request brokerage houses,
nominees, custodians and fiduciaries to forward soliciting materials to the
beneficial owners of stock held of record and will reimburse such persons for
forwarding such materials. In addition, the Company has retained Georgeson &
Co., Inc., New York, New York, to aid in the solicitation of proxies at a fee
not to exceed $8,500, plus reimbursement for out-of-pocket expenses incurred by
that firm on behalf of the Company.
The principal executive offices of the Company are located at 180 South
Clinton Avenue, Rochester, New York 14646, and its telephone number is (716)
777-1000.
Voting at the Annual Meeting
The close of business on March 6, 1996, has been fixed as the Record Date
for the determination of the shareowners entitled to notice of, and to vote at,
the Annual Meeting. On that date there were 162,195,487 shares of the Company's
$1.00 par value common stock outstanding and entitled to vote at the meeting.
Each shareowner is entitled to cast one vote for each share of common stock held
as of the Record Date.
Each proxy which is properly executed and returned in the enclosed
return envelope will be voted at the Annual Meeting. Shares represented by your
proxy will be voted in accordance with the directions you specify on the proxy
card. If your proxy does not specify a choice, your shares will be voted for the
election of the Directors nominated in the proxy; in favor of the election of
Price Waterhouse LLP as independent auditors; and in favor of each of the
proposals regarding employee and Director compensation plans. You have the right
to revoke your proxy by executing a proxy bearing a later date, by attending the
meeting and voting in person, or by otherwise notifying the Company prior to the
meeting.
The proxy card contains spaces for you to indicate if you wish to
abstain on one or more of the proposals or to withhold authority to vote for one
or more nominees for Director. Directors are elected by a plurality of the votes
cast. Votes withheld in connection with the election of one or more of the
nominees for Director will not be counted as votes cast in connection with that
nominee's election. Auditors are elected by a majority of the votes cast.
Abstentions are not counted in determining the votes cast in connection with the
selection of auditors. Approval of the two proposals concerning employee and
Director compensation plans (Proposals 3 and 4) requires that a majority of the
outstanding shares entitled to vote on those proposals be voted in favor of
them. Abstentions on either of the Plan proposals have the same effect as a vote
against that proposal.
The New York Stock Exchange allows brokerage firms holding shares for
the benefit of their clients to vote in their discretion on behalf of their
clients with respect to "discretionary items" if the clients have not furnished
voting instructions within ten days of the shareowner meeting. The election of
Directors and auditors are discretionary items with respect to which brokerage
firms may vote. The proposals relating to the employee and Director compensation
plans are not discretionary items and brokers who receive no instructions from
their clients may not vote on these proposals. If your broker does not vote your
shares, those broker "non-votes" will not be considered as votes cast with
respect to the employee and Director compensation plan proposals but will have
the same effect as a "no" vote since the proposals require approval by a
majority of the outstanding shares entitled to vote.
- -------------------------------------------------------------------------------
Proposal 1 - Election of Directors
YOUR BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" ALL NOMINEES.
Information about the Board of Directors
Board of Directors
The Board of Directors of the Company is currently composed of thirteen
Directors. The Board of Directors nominates the thirteen persons named on pages
3 and 4 for election to the Board of Directors. All of the nominees are
currently Directors of the Company whose terms expire coincident with the
Annual Meeting. If elected, all nominees will serve until the Annual Meeting of
Shareowners to be held in 1997 or until such time as their respective
successors are elected.
The Board of Directors held ten meetings during 1995. All of the
Directors attended at least 75% of the total meetings of the Board and its
committees which they were eligible to attend.
This Proxy Statement and Form of Proxy are being first sent to Shareholders
on March 11, 1996.
1
<PAGE>
Committees of the Board of Directors
The Board of Directors conducts its business through meetings of the Board
and through the activities of its committees. The standing committees of the
Board are the Audit Committee, the Committee on Management, the Committee on
Directors and the Executive Committee.
Audit Committee
The Audit Committee of the Board is currently composed of Douglas H.
McCorkindale, Chair; Raul E. Cesan, Brenda E. Edgerton and Richard J. Uhl. This
committee reviews the scope of audit activities and the financial reports of
the Company, and reviews with management significant and material matters which
may result in either potential liability to the Company or significant exposure
to the Company. The Committee also makes reports and recommendations with
respect to audit activities, findings, and reports of the independent public
accountants and the internal audit staff of the Company. The Audit Committee
held three meetings in 1995.
Committee on Management
The present members of the Committee on Management are Daniel E. Gill,
Chair; Patricia C. Barron, Michael E. Faherty and Douglas H. McCorkindale. This
committee is responsible for determining the compensation, benefits and
perquisites of all senior executive officers of the Company, with the exception
of the Chief Executive Officer, and for recommending the compensation, benefits
and perquisites of the Chief Executive Officer to the full Board. This
committee also develops and administers executive compensation plans and
reviews succession planning for the Company and other significant human
resources issues. The Committee on Management held six meetings in 1995.
Committee on Directors
The Committee on Directors focuses the Board's attention on corporate
governance issues and serves as the nominating committee. The Committee
currently consists of Patricia C. Barron, Chair; Jairo A. Estrada, Robert J.
Holland, Jr., and Dr. Leo J. Thomas. The Committee is responsible for reviewing
all matters relating to the selection, qualification, evaluation, and
compensation of members of the Board of Directors and all nominees to the Board.
The Committee on Directors held four meetings in 1995.
The Committee on Directors will consider nominations by shareowners.
Such submissions should include sufficient biographical information so that the
committee can appropriately assess a nominee's qualifications. This information
would include, at a minimum, the nominee's name and address, business and other
experience, and a listing of any other Boards on which the nominee may be a
member. All submissions should be sent by a letter addressed to the Corporate
Secretary, Frontier Corporation, 180 South Clinton Avenue, Rochester, New York
14646-0700. Suggestions in connection with the 1997 Annual Meeting of Common
Shareowners must be received by November 1, 1996 in order to receive
consideration.
Executive Committee
The present members of the Executive Committee are Jairo A. Estrada, Chair;
Patricia C. Barron, Ronald L. Bittner, Daniel E. Gill, Alan C. Hasselwander,
Douglas H. McCorkindale and Marvin C. Moses. The Executive Committee possesses
all of the powers of the Board of Directors except those which, by law or the
Company's By-Laws, cannot be delegated to it. The Executive Committee met four
times in 1995.
Compensation of Directors
Directors are paid an annual retainer and meeting fees. The annual retainer
as set in 1995 is $15,000 and 500 shares of Frontier Corporation common stock.
However, if shareowners approve Proposal 4, Amendment to Directors' Stock
Incentive Plan, the annual retainer will consist of 1,200 shares of Frontier
Corporation common stock and no cash. As stated on page 6, this change in
compensation is intended to better align the interests of Directors with those
of shareowners. The meeting fee is $1,500 for each Board and/or committee
meeting attended. Under the 1995 compensation plan, each committee chair
received an annual retainer in the amount of $4,000. However, if shareowners
approve Proposal 4, Amendment to Directors' Stock Incentive Plan, the annual
retainer for each committee chair will instead consist of 300 shares of
Frontier Corporation common stock and no cash. New Directors also receive an
additional one-time grant of 1,000 shares of Frontier Corporation common stock
which they must hold during their tenure on the Board. Directors who are
employees of the Company or its subsidiaries receive no annual retainer or
meeting fees. Directors may elect to defer payment of their fees to future
years.
Pursuant to the Company's Directors' Stock Incentive Plan, Directors
annually receive an option to purchase 4,000 shares of the Company's common
stock. These options expire ten years after issuance, and the exercise price is
the value of the stock on the day the option was issued. Each outside Director
received a grant of options for 4,000 shares at an exercise price of $19.8750
per share on April 26, 1995, with the exception of Mr. Holland who received a
grant of options for 3,667 shares at an exercise price of $22.875 per share on
June 1, 1995, and Messrs. Faherty and Uhl who each received a grant of options
for 2,834 shares at an exercise price of $27.125 per share on August 16, 1995.
Messrs. Faherty and Uhl also held options for ALC Communications Corporation
common stock. In conjunction with the Company's acquisition of ALC on August
16, 1995, each ALC option became exercisable for two shares of Frontier
Corporation common stock.
Directors also receive cellular telephone equipment and service and
other nominal in-kind benefits.
- -------------------------------------------------------------------------------
Nominees for Director
The Board believes that all of the nominees will be available and willing to
serve as Directors. If any nominee is unable to serve, the shares represented
by all valid proxies will be voted for the election of such substitute as the
Board may recommend or the Board may fill the vacancy at a later date after
selecting an appropriate nominee.
2
<PAGE>
The principal occupation and business experience of each nominee
for election at the Annual Meeting of Common Shareowners to be held on
April 24, 1996 appears next to that person's photograph:
- -------------------------------------------------------------------------------
[Photo Appears Here]
Patricia C. Barron, 53, is President, Xerox Engineering Systems, Xerox
Corporation, a manufacturer of office systems and equipment, and has held this
position since February 1994. From March 1992 until February 1994, she was
President, Office Documents Products Division, Xerox Corporation. From 1979 to
March 1992, she was a Vice President of Xerox Corporation. She is a Director of
Quaker Chemical Corporation and of Reynolds Metals Company. She has been a
Director of the Company since 1990.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Ronald L. Bittner, 54, is Chairman, President and Chief Executive Officer of the
Company and has held this position since November 1995 and for the period of
April 1993 to August 1995. From August 1995 to November 1995, he was Chairman
and Chief Executive Officer of the Company. He served as the Company's President
and Chief Executive Officer from February 1992 to April 1993, and was an
Executive Vice President and President - Telecommunications Group from May 1988
to February 1992. He is also a Director of Dynatech Corp. He has been a Director
of the Company since 1989.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Raul E. Cesan, 48, is President, Schering-Plough Pharmaceuticals and
Executive Vice President, Schering-Plough Corporation, a worldwide manufacturer
and marketer of pharmaceutical and health care products and has held this
position since September 1994. From September 1992 through September 1994,
he was President, Schering Laboratories - U.S. Pharmaceutical Operations.
From September 1988 to September 1992, he was President, Schering-Plough
International. He has been a Director of the Company since 1995.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Brenda E. Edgerton, 46, is Vice President, Finance-U.S. Soup, Campbell Soup
Company, a manufacturer of prepared convenience foods and has held this position
since May 1994. From August 1989 through April 1994, she was Vice President and
Treasurer, Campbell Soup Company. She has been a Director of the Company since
1993.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Jairo A. Estrada, 48, is Past Chairman of the Board and Chief Executive Officer
of Garden Way Incorporated, a company which manufactures outdoor power
equipment. He held that position until December 1995. Mr. Estrada has been a
Director of the Company since 1989.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Michael E. Faherty, 61, is the principal of MICO, a general business consulting
and contract executive firm since February 1977. In connection with this
business, he has served, since 1994, as Chairman and Chief Executive Officer of
ECCS, Inc., a provider of open systems-based networked computing solutions which
incorporate ECCS's mass storage enhancement products. He also served from
January 1992 to January 1994, as President and Chief Executive Officer of Shared
Financial Systems, Inc., and was, from February 1989 to June 1992, President
and/or Chairman of Intec Corp. He is a Director of Bantec, Inc. and of ECCS,
Inc. Mr. Faherty has been a Director of the Company since 1995.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Daniel E. Gill, 59, is Past Chairman and Chief Executive Officer of Bausch &
Lomb Incorporated, a worldwide manufacturer and marketer of health care and
optical products. Mr. Gill retired from that position in December 1995. He is a
Director of Reebok International, Ltd. Mr. Gill has been a Director of the
Company since 1981.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Alan C. Hasselwander, 62, is Past Chairman of the Board of Rochester Telephone
Corporation (now Frontier Corporation). From February 1992 to April 1992, he was
Chairman of the Company. From July 1984 to February 1992, he was President and
Chief Executive Officer of the Company. He has been a Director of the Company
since 1984.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Robert J. Holland, Jr., 55, is Chief Executive Officer of Ben and Jerry's
Homemade, Inc., a manufacturer and marketer of premium ice cream, and has held
this position since February 1995. From 1991 to 1995, he was Chairman and Chief
Executive of Rokher-J, Inc., a business consulting firm, and from 1990 to 1991,
he was Chairman, Gilreath Manufacturing, Inc. He is also a Director of Mutual
Life Insurance Company of New York and Trumark Inc. Mr. Holland has been a
Director of the Company since 1995.
3
<PAGE>
- -------------------------------------------------------------------------------
[Photo Appears Here]
Douglas H. McCorkindale, 56, is Vice Chairman and Chief Financial and
Administrative Officer of Gannett Co., Inc., a nationwide diversified
communications company. He is a Director of Gannett Co., Inc., Continental
Airlines, and seven mutual funds in the Prudential Mutual Fund complex of funds.
He has been a Director of the Company since 1980.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Marvin C. Moses, 51, is Vice Chairman and Chief Financial Officer of the
Company and has held this position since November 1995. From August 1995 to
November 1995, he was Executive Vice President and Chief Financial Officer for
the Company. Mr. Moses was previously Executive Vice President and Chief
Financial Officer of ALC Communications Corporation from October 1988 to August
1995. Frontier Corporation acquired that provider of long distance
telecommunications services in 1995. Mr. Moses has been a Director of the
Company since 1995.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Dr. Leo J. Thomas, 59, is Executive Vice President of Eastman Kodak Company,
a manufacturer of imaging products, and has held this position since January
1995. From September 1994 to January 1995, he was Executive Vice President and
President, Imaging; and from September 1991 to September 1994, he was Group
Vice President and President, Imaging, Eastman Kodak Company. From November 1989
to September 1991, he was Group Vice President and General Manager, Health Group
of Eastman Kodak Company. He is a Director of Eastman Kodak Company and of John
Wiley & Sons, Inc. He has been a Director of the Company since 1984.
- -------------------------------------------------------------------------------
[Photo Appears Here]
Richard J. Uhl, 55, is President and a Director of Chicago Holdings, Inc., a
privately owned company engaged in the management of several lease portfolios
owned by it and its subsidiaries and in investments in operating companies. He
has held these positions since 1985. Since July 1995, Mr. Uhl has also served
as Chairman of the Board of Business Alliance Capital Corporation, an asset
based lender to small and medium sized businesses. Since December 1987, Mr. Uhl
also has been the President of Steiner Financial Corporation. He has been
Chairman of the Board of Dealers Alliance Credit Corp. since November 1993 and
a Director of First Merchant's Acceptance Corp. since May 1991. Both of these
companies are purchasers and servicers of automobile finance contracts. He has
been a Director of the Company since 1995.
- -------------------------------------------------------------------------------
Stock Ownership of Management, Directors
and Certain Beneficial Owners
In 1993, the Committee on Directors established targets for the minimum
amounts of the Company's common stock which Directors should own. These targets
for stock ownership consider the length of a Director's tenure on the Board. By
the end of 1995, each outside Director with at least five years' service on the
Board was to own at least 4,000 shares of the Company's common stock.
Executive officers of the Company are also encouraged to own shares of
the Company. The recommended stock ownership level is based on each officer's
position in the organization and is a multiple of salary. The stock ownership
targets of Messrs. Bittner, Moses and Massaro are the beneficial ownership of
Company common stock equal in value to four times his respective salary. Each
other Company executive has a target of beneficial ownership of Company common
stock, varying by salary grade, equal in value to one to three times his or her
respective salary. Each corporate officer is expected to achieve his or her
target by the later of January 1, 1999 or the fifth anniversary of his or her
appointment as an executive officer.
The following table sets forth the number of shares of the Company's
common stock beneficially owned by each Director and nominee, by each of the
named executive officers, and by Directors and officers of the Company as a
group as of February 22, 1996. No Director, officer or nominee owns more than 1%
of the Company's outstanding shares of common stock. The group's aggregate
holdings constitute less than 1% of the Company's issued and outstanding common
stock.
Management and Directors Stock Ownership Table
<TABLE>
<CAPTION>
Total
Common Stock Beneficial
Name Stock(1) Options(2) Ownership
- ---- -------- ---------- ----------
<S> <C> <C> <C>
Directors and Nominees:
Patricia C. Barron 4,884 4,064 8,948
Ronald L. Bittner (3) 149,920 149,264 299,184
Raul E. Cesan 2,437 0 2,437
Brenda E. Edgerton 4,453 3,114 7,567
Jairo A. Estrada 15,034 4,664 19,698
Michael E. Faherty 2,181 82,500 84,681
Daniel E. Gill 5,605 4,664 10,269
Alan C. Hasselwander (4) 33,395 1,964 35,359
Robert J. Holland, Jr. 2,590 0 2,590
Douglas H. McCorkindale 4,748 4,664 9,412
Marvin C. Moses (5) 18,047 612,800 630,847
Dr. Leo J. Thomas 23,444 4,664 28,108
Richard J. Uhl 1,754 42,500 44,254
Named Executive
Officers:
Ronald L. Bittner (3) 149,920 149,264 299,184
Marvin C. Moses(5) 18,047 612,800 630,847
Jeremiah T. Carr 19,633 39,398 59,031
Dale M. Gregory (6) 35,237 43,264 78,501
Louis L. Massaro 35,984 36,398 72,382
William H. Oberlin 0 69,200 69,200
John M. Zrno 0 100,000 100,000
Directors and Executive
Officers as a Group 359,346 1,203,122 1,562,468
</TABLE>
4
<PAGE>
(1) Includes all shares which each Director, nominee or officer directly, or
through any contract, arrangement, understanding, relationship or otherwise,
has or shares the power to vote or to direct the voting of such shares or to
dispose or to direct the disposition of such shares. Amounts in this column
include restricted stock. However, these amounts do not include shares which
each such person has the right to acquire pursuant to options or other rights.
(2) Includes all shares which such persons have the right to acquire within
the sixty days following February 22, 1996, pursuant to options or other
rights. These amounts do not include shares which such persons have the right
to acquire more than sixty days after that date.
(3) Includes 129 shares owned by Mr. Bittner's spouse and 313 shares owned
by other members of Mr. Bittner's family. Mr. Bittner disclaims beneficial
ownership of these shares.
(4) Includes 1,400 shares owned by Mr. Hasselwander's spouse. Mr. Hasselwander
disclaims beneficial ownership of these shares.
(5) Includes 4,000 shares owned by Mr. Moses' children. Mr. Moses disclaims
beneficial ownership of these shares.
(6) Includes 1,268 shares held by various trusts for the benefit of Mr.
Gregory's children. Mr. Gregory's spouse is a co-trustee of each of these
trusts. Mr. Gregory disclaims beneficial ownership of these shares.
Set forth below is the name, address and stock ownership of each person or
group of persons known by the Company to own beneficially more than 5% of the
outstanding shares of common stock.
Stock Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
Number of
Name and Address Shares of Percent
of Beneficial Owner Common Stock of Class
- ------------------- ------------ --------
<S> <C> <C>
FMR Corp.(1) 13,679,120 8.4%
82 Devonshire Street
Boston, Massachusetts 02109
Steven C. Simon(2) 5,143,217 3.2%
1300 Nicolett Mall
Minneapolis, Minnesota 55403
James J. Weinert(2) 3,424,633 2.1%
1300 Nicolett Mall
Minneapolis, Minnesota 55403
</TABLE>
(1) FMR Corp. ("FMR") filed with the Securities and Exchange Commission a
Schedule 13G, dated February 14, 1996, stating that it beneficially owned in
the aggregate 13,679,120 shares of the Company's common stock. As of February
22, 1996, this would represent approximately 8.4% of the Company's outstanding
common stock. Of that amount, 11,327,390 shares were beneficially owned by
FMR's wholly-owned subsidiary Fidelity Management & Research Company (acting as
investment advisor) and 2,351,730 shares were beneficially owned by FMR's
wholly-owned subsidiary Fidelity Management Trust Company (acting as investment
manager). All these shares are also deemed beneficially owned by Edward C.
Johnson 3d, who is FMR's Chairman and who is also a member of a controlling
group with respect to FMR Corp. In its Schedule 13G filing, FMR also disclosed
that with respect to the shares it beneficially owns, it has sole voting power
with respect to 1,479,830 shares, sole dispositive power with respect to
13,679,120 shares, and no shared voting or shared dispositive power with respect
to any shares.
(2) Steven C. Simon and James J. Weinert have expressly affirmed that they
together comprise a group in a Schedule 13D, dated March 17, 1995, filed with
the Securities and Exchange Commission. Each holds sole voting and investment
power with respect to his shares.
The Company's Directors, executive officers and shareowners holding in
excess of 10% of the common stock are required to file reports with the
Securities and Exchange Commission and the New York Stock Exchange, with copies
to the Company, concerning ownership of and transactions in the Company's common
stock. Based solely on those reports furnished to the Company and related
information, the Company believes that all such filing requirements for 1995
were complied with in a timely fashion.
- -------------------------------------------------------------------------------
Report of Committee on Directors
The Committee on Directors, which was created in 1993, focuses the Board's
attention on corporate governance issues and serves as the nominating
committee. Since its formation, the Committee initiated several actions
designed to increase the independence of the Board and to further align the
interests of Directors with the interests of shareowners. The Committee first
reported its activities in last year's proxy statement. During 1995, the
Committee continued its efforts to improve Frontier's corporate governance.
The Committee reviewed the complete set of Governance Guidelines,
originally created in 1994, and recommended certain changes. The Guidelines
establish the standards for Board operation. At the recommendation of the
Committee on Directors, the Board approved the standards.
The Governance Guidelines set the size of the Board to be between 9 and
14 members who are each elected for a one year term. Attendance is expected to
be 100 percent of meetings with a minimum of 75 percent. The minimum number of
Board meetings held each year is five and, for each Committee, is two.
The Governance Guidelines require that the Board be composed of
primarily outside directors, and all committees except the Executive Committee
are composed entirely of independent outside directors. Retirement age is 70. If
a Director's primary job changes, the Governance Guidelines require that the
Director submit a resignation which the Committee then recommends to the Board
whether or not to accept. Retirement is considered a job change in the context
of this provision.
The Committee monitored the stock ownership of the members of the
Board and reports that all current outside Board members have met their stock
ownership targets. In addition, the Committee re-evaluated the targets and set
new stock ownership targets commencing in 1996 at a multiple of four times the
annual compensation of a director.
5
<PAGE>
The Committee reviewed Board member compensation and determined that a
major shift was desirable to more closely align the Directors' interests with
those of the shareowners. Thus, the Committee set the 1996 compensation package
to require, subject to shareowner approval, that the full retainer for each
Board member and the full retainer for each Chair of a committee be paid
entirely in the form of shares of Frontier common stock.
The Committee utilized a formal system of evaluation of each Director in
its consideration of the slate of nominees submitted to shareowners for a vote
at the annual meeting of shareowners.
Your Committee on Directors will continue to review annually the
Governance standards and recommend improvements to the full Board of Directors.
The full Board of Directors considers the Governance Guidelines annually.
Respectfully submitted,
The Committee on Directors
Patricia C. Barron (Chair)
Jairo A. Estrada
Robert J. Holland, Jr.
Dr. Leo J. Thomas
January 22, 1996
- -------------------------------------------------------------------------------
Report of Committee on Management
Compensation Philosophy and Policy
We believe that a compensation program should offer performance-based
compensation to its employees and reward employees whose results enable the
Company to achieve its vision. The executive compensation program is designed
to measure and enhance executive performance.
The Company's executive compensation program has four components:
. Base Salary
. Annual Bonus
. Long-Term Incentive Plan
. Stock Incentive Plan
These components are designed to provide incentives and motivate key
executives whose efforts and job performance will enhance the strategic well-
being of the Company and maximize value to its shareowners.The program is also
structured to attract and retain the highest caliber executives.
The executive compensation program compensates the individual executive
officers based on the Company's consolidated performance and the individual's
contribution. The program is designed to be competitive with compensation
programs offered by comparable employers.
The Company retains William M. Mercer, Inc., to review its executive
compensation program on an annual basis. Information from this consulting firm,
as well as public information concerning salaries paid by companies in the
telecommunications and related industries, is used to determine what a
comparable firm would consider an appropriate performance-based compensation
package for its executives.
The analysis includes information from a self-constructed group of forty
publicly-traded companies in the telephone, long distance, cable television,
cellular and information technology industries. This group includes most of the
companies reported in the Standard and Poor's Telephone Index and the Standard
and Poor's Long Distance Index, together with additional companies. The
Company's policy is to benchmark compensation levels at the median of the
comparative companies and to reward results based on performance. On a
comparative basis, the base salary of the Company's CEO and its other
executives, on average, would be considered within the third quartile.
Base Salary
The salaries of the executive officers, including Mr. Bittner, were
determined based on the executive's performance and an analysis of base
salaries paid executive officers having similar responsibilities in other
companies. This analysis included the companies in the self-constructed group
of forty publicly-traded companies, together with additional companies from
other industries with similar revenues and/or asset values. The level of Mr.
Bittner's base salary was also based upon a subjective assessment of his
individual performance and responsibilities as well as overall corporate
performance as measured by actual earnings per share and cash flow versus
pre-established targets, strategic goals, and growth of the business. The other
executive officers have similar measurements, but specific factors are more
closely linked to individual responsibilities. No relative weights are
attributed to any specific measurement factors.
Annual Bonus
The Company's annual bonus plan is designed to provide performance-based
compensation awards to executives for achievement during the past year. For
executive officers, bonus awards are a function of individual performance and
consolidated corporate results. Business unit performance is also a component
of the bonus plan for those involved in line operations below the executive
officer level. All participants are subject to a discretionary adjustment,
either positive or negative, based on individual performance. The specified
qualitative and quantitative criteria employed by the Committee in determining
bonus awards vary individually and from year to year. These criteria, or
targets, are established as a means of measuring executive performance. The
corporate target for 1995 was an equally weighted earnings per share and cash
flow target established by this Committee of the Board of Directors as an
incentive to improve the financial performance of the firm and thus improve
long-term stock performance. Performance objectives and associated payouts were
established at the beginning of the year and were subsequently modified in
September to reflect the financial structure and objectives of the Company
following the completion of the Company's acquisition of ALC Communications
Corporation and other significant acquisition and merger activity. The
objectives are identified as threshold, standard and premier targets with
standard performance yielding payouts at the median level competitively. No
award will be paid unless threshold performance is achieved for both components.
6
<PAGE>
For 1995, both earnings per share and cash flow results were between
the standard and premier levels. All the Company's senior executives are
eligible to participate in the bonus plan with payout awards varying by salary
grade. With respect to Mr. Bittner's participation, his annual bonus was based
upon achievement of the corporate targets, a mechanical application of the
formula (which for Mr. Bittner was 105.0%, times his actual salary) and an
additional discretionary adjustment based on his individual performance.
Long-Term Incentive Plan
The Company's long-term incentive plan, the Performance Unit Plan ("PUP"),
was originally designed to motivate executives to improve shareowner value over
longer periods of time than one year. In the Committee's judgment, the
long-term incentive plan was not totally successful in linking employee
performance with increased shareowner value. The Committee determined that
stock-based compensation programs provide a better incentive to link an
executive's goals to those of a shareowner. Therefore, beginning in 1994, PUP
was discontinued and the Committee used stock-based plans to better align
employee interests with the long-term interests of shareowners. No new PUP
grants were issued in either 1994 or 1995, and the payouts for the 1993 -1995
cycle represent the conclusion of this Plan.
Executives received PUP payouts based on equally weighted measures of
the Company's stock appreciation over the past three years as compared to a
group of sixteen telecommunications firms and as compared to the Standard and
Poor's 500 Index. Cycle payouts are a product of the Company's stock price at
the end of the cycle, corporate performance against the selected measures, and
the number of units granted to an executive for the cycle. The final PUP awards
for Mr. Bittner and the other executive officers were based upon performance
achieved at 120% of the target levels.
Stock Incentive Plan
This Committee believes that stock-based plans are an important component of
executive compensation programs because they tie long-term compensation
directly to the interests of shareowners. The Company's Management Stock
Incentive Plan is designed to align executive compensation with the long-term
performance of the Company's stock. Stock options issued in 1995 do not expire
until 2005, and the exercise price is the value of the stock on the day the
option was granted. This Committee makes a subjective determination of the
specific stock option grant to be awarded to each executive officer. The factors
considered by the Committee in making this determination are:
(a) the executive officer's past performance on previously set objectives
and
(b) his or her expected future contribution to the long-term strategic goals
and objectives of the Company.
No relative weights are attributed to either of these factors. All executive
officers of the Company received options in 1995 based on their position in the
Company, their contribution to the achievement of the Company's long-term
objectives as assessed by Committee members based on their experience with the
executive officers, and upon the recommendation of the chief executive officer.
Upon this Committee's recommendation, the full Board awarded
Mr. Bittner options based upon these factors as well.
Restricted stock awards issued in 1995 expire on December 31, 1998, and
require that both passage of time and performance criteria be satisfied for
vesting of shares to occur. An executive must continue to be employed by the
Company and specified stock price levels must also be achieved by certain dates
for vesting to occur. No greater than one-third of an executive's award can be
paid in either 1996 or 1997. On the grant date the Company's stock price was
$27.1250 per share. The stock price performance vesting criteria for the first
one-third of the grant is the achievement of at least a $31.00 stock price for
twenty business days in a thirty business day period. Subsequent thirds will
vest upon the achievement of stock prices of $36.00 and $41.00 and the passage
of time. Messrs. Carr, Massaro and Gregory, and selected other key senior
managers received restricted stock awards based upon their expected future
contributions to the long-term strategic goals and objectives of the Company as
recommended by the chief executive officer and as assessed by Committee members.
Upon this Committee's recommendation, the full Board awarded Mr. Bittner
restricted stock based upon these factors as well.
Other Actions
The Company took action in 1995 to redesign a competitive, standardized
benefit package for all non-bargaining unit employees. To align executive
benefits, this Committee modified several of the executive benefit plans. The
Supplemental Management Pension Plan ("SMPP") is frozen as of December 31,
1996. Changes have been made affecting service and age factors impacting
retirement. The final benefit calculation will be enhanced by 20% to offset
partially the loss of future benefit accruals as a result of freezing the Plan.
Senior management as well as all executive officers are covered by SMPP.
The Supplemental Executive Retirement Plan ("SERP") is frozen as of
December 31, 1999. This date was selected to retain the Company's senior
executives during the period of transition following mergers and acquisitions
in 1995, and to avoid creating an incentive for senior executives to retire
prematurely. No change in retirement parameters nor enhancement of benefits is
provided, nor will new participants be included in the Plan beyond December 31,
1995. All executive officers are covered by SERP. See Pension Plans, page 12.
7
<PAGE>
The Committee believes that stock-based programs provide the best
long-term incentives, are excellent motivators and better align the efforts of
employees with the objectives of the shareowners. The Committee has established
stock ownership guidelines for the Company's executives. These guidelines are a
multiple of salary. Mr. Bittner's target, to be achieved by January 1, 1999, is
the beneficial ownership of Company common stock equal in value to four times
his annual salary.
The Committee approved the Employees' Stock Option Plan for
presentation to shareowners for approval (see pages 15 and 16). This broad-based
plan provides eligibility for stock option grants to non-executive employees of
the Company. Options will be issued at fair market value on the day of grant,
will vest upon the second anniversary of the grant date, and will expire on the
tenth anniversary of the grant date. The Committee believes that the
introduction of this program will better align the interests of all Company
employees with the interests of shareowners. This becomes much more important as
the Company continues its accelerated transition into a fully competitive
telecommunications marketplace.
Section 162(m) of the Internal Revenue Code limits the tax deduction
to $1 million for compensation paid to the five highest paid executive officers
unless certain requirements are met. The Management Stock Incentive Plan,
specifically as it relates to performance-based restricted stock, is designed to
comply with Section 162(m) requirements. The Committee favors a pay-for-
performance compensation program and intends to continue to review executive
compensation plans in consideration of the regulations.
No member of this Committee is a former or current officer or employee
of the Company or any of its subsidiaries.
Respectfully submitted,
Daniel E. Gill (Chair)
Patricia C. Barron
Michael E. Faherty
Douglas H. McCorkindale
January 22, 1996
- -------------------------------------------------------------------------------
Performance Graph
The following graph charts the Company's cumulative total shareowner return
performance against the Standard and Poor's Telephone Index, the Standard and
Poor's Long Distance Index and the Standard and Poor's 500 Index. The Long
Distance Index has been added this year because long distance is a more
significant component of the Company's business following its August 1995
acquisition of ALC Communications Corporation. The other indices have been
presented in past years. A variety of factors may be used in order to assess a
corporation's performance. This Performance Graph, which reflects the Company's
total return against the selected peer group, reflects one such method. The
performance of the Standard and Poor's Telephone Index and the Standard and
Poor's Long Distance Index are weighted by the stock market capitalization of
the companies within each of these peer groups.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG FRONTIER, S&P TELEPHONE INDEX, S&P 500 INDEX AND S&P LONG DISTANCE INDEX
<CAPTION>
Measurement period S&P TELEPHONE S&P 500 S&P LONG DISTANCE
(Fiscal year Covered) FRONTIER INDEX INDEX INDEX
- --------------------- -------- ------------- ------- -----------------
<S> <C> <C> <C> <C>
Measurement PT -
12/31/90 $100 $100 $100 $100
FYE 12/31/91 $116 $107 $130 $134
FYE 12/31/92 $135 $118 $140 $177
FYE 12/31/93 $177 $136 $155 $198
FYE 12/31/94 $172 $126 $157 $180
FYE 12/31/95 $254 $190 $215 $242
</TABLE>
8
<PAGE>
- -------------------------------------------------------------------------------
Compensation of Company Management
We have included the following tables and other information to help you
understand the compensation of the Company's executives. These tables reflect
the components of compensation paid the executive officers of Frontier
Corporation. Specifically, these include salary, bonus, stock options and a
long-term incentive plan. The Company does not provide its executives with
stock appreciation rights.
The Report of the Committee on Management of the Board of Directors
appears on pages 6 to 8 of this Proxy Statement. This Report discusses the
factors taken into consideration in setting Mr. Bittner's compensation and the
compensation of the other executive officers. A Performance Graph showing the
performance of the Company's stock as compared to the Standard and Poor's 500
Index, the Standard and Poor's Telephone Index, and the Standard and Poor's Long
Distance Index appears on page 8 of this Proxy Statement.
Summary Compensation Table
The following table provides a summary of compensation paid to the CEO and
the other four most highly compensated executive officers of the Company for
services rendered to the Company and its subsidiaries over the past three
fiscal years. The indicated titles are those currently held by each named
executive officer. The table also includes information concerning two
additional persons who were executive officers of the Company during 1995.
<TABLE>
<CAPTION>
Long Term
Compensation
-----------------------
Annual Compensation Awards Payouts
------------------------------------------ ----------- -------
Other Securities
Annual Underlying All Other
Name Compen- Options/ LTIP Compen-
and Principal Salary Bonus sation SARs Payouts sation
Position Year ($) ($) ($)(3) (#) ($)(4) ($)(5)
- ------------------------ ---- -------- -------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
R. L. Bittner 1995 $575,000 $660,000 $ 0 502,000 $222,850 $ 42,703
Chairman, President and 1994 $408,333 $349,471 $ 0 88,800 $204,164 $ 41,369
CEO Frontier Corporation 1993 $360,000 $407,500 $ 0 46,000 $230,121 $ 26,856
M. C. Moses(1) 1995 $272,917 $293,500 $ 0 100,000 $ 0 $ 1,065
Vice Chairman and 1994 $246,562 $250,000 $1,761 0 $ 0 $ 750
Chief Financial Officer 1993 $245,417 $210,000 $ 0 480,000 $ 0 $ 600
Frontier Corporation
J. T. Carr 1995 $258,033 $208,466 $ 0 86,400 $ 67,182 $ 8,152
Senior Vice President 1994 $200,275 $132,500 $8,330 22,000 $ 67,856 $ 10,508
Frontier Corporation 1993 $176,350 $ 87,750 $ 0 12,000 $ 80,702 $ 8,934
and Chairman Rochester
Telephone Corp.
D. M. Gregory 1995 $274,467 $193,315 $4,541 86,400 $ 71,545 $ 19,749
Senior Vice President 1994 $219,542 $131,600 $3,799 26,400 $ 65,556 $ 17,306
Frontier Corporation and 1993 $186,567 $131,625 $ 0 13,200 $ 69,753 $ 29,963
President-Carrier Services
L. L. Massaro 1995 $241,375 $219,199 $ 0 126,400 $ 68,127 $ 17,234
Executive Vice 1994 $189,442 $111,700 $ 0 22,000 $ 70,385 $ 16,600
President and Chief 1993 $174,800 $131,625 $ 0 9,000 $ 95,662 $ 11,721
Administrative Officer
Frontier Corporation
W. H. Oberlin(2) 1995 $258,333 $264,475 $ 0 100,000 $ 0 $1,161,065
former President 1994 $246,562 $250,000 $5,668 0 $ 0 $ 750
Frontier Corporation 1993 $245,417 $210,000 $ 0 480,000 $ 0 $ 600
J. M. Zrno(2) 1995 $270,833 $285,075 $6,269 0 $ 0 $1,274,064
former Vice Chairman 1994 $321,524 $325,000 $4,673 0 $ 0 $ 750
Frontier Corporation 1993 $319,041 $273,000 $2,650 600,000 $ 0 $ 600
</TABLE>
9
<PAGE>
(1) Mr. Moses was named Vice Chairman effective November 20, 1995. The
compensation indicated for 1995 and prior years includes compensation relating
to his position as an executive officer of ALC Communications Corporation,
which was acquired by the Company effective August 16, 1995. As a result of
that acquisition, each option for a share of ALC common stock became
exercisable for two shares of Frontier common stock. The number of securities
underlying options granted in 1993 has been adjusted in this Table to reflect
the effect of the acquisition. (See also footnote 3 to the Table of Aggregated
Option/SAR Exercises in Last Fiscal Year and Year-End Option/SAR Values at page
11.)
(2) Messrs. Oberlin and Zrno were named to the indicated positions with the
Company effective August 16, 1995, pursuant to the agreement for the
acquisition of ALC Communications Corporation by the Company. The compensation
indicated for 1995 and prior years includes compensation relating to their
positions as executive officers of ALC Communications Corporation. The number
of securities underlying options granted in 1993 has been adjusted in this
Table to reflect the effect of the acquisition. Mr. Zrno retired from Frontier
Corporation effective October 31, 1995. Mr. Oberlin resigned from Frontier
Corporation effective November 20, 1995, and consequently the 100,000 options
granted in 1995 and reflected in this Table will never vest. (See also footnote
3 to the Table of Aggregated Option/SAR Exercises in Last Fiscal Year and
Year-End Option/SAR Values at page 11.)
(3) The amounts reported in this column for 1995 include $4,541 paid to Mr.
Gregory and $6,269 paid to Mr. Zrno to offset income tax liabilities incurred
by each of them.
(4) As described in more detail in the Report of Committee on Management at
page 7 of this Proxy Statement, 1995 Performance Unit Plan awards are based
upon performance achieved at 120% of the target levels. This represents the
final payout under this plan.
(5) "All Other Compensation" includes imputed income from term life
insurance coverage and the Company's contributions to both the tax-qualified
401(k) and nonqualified defined contribution plans. For 1995, the dollar value
of term life insurance coverage premiums paid by the Company for the benefit of
the named executive officers was $1,476 for Mr. Bittner, $1,402 for Mr. Carr,
$1,476 for Mr. Gregory, $1,476 for Mr. Massaro, $65 for Mr. Moses, $65 for Mr.
Oberlin and $65 for Mr. Zrno. The Company's 1995 contributions on behalf of the
named executive officers to the tax-qualified 401(k) and nonqualified defined
contribution plans, respectively, were as follows: $5,368 and $35,859 for Mr.
Bittner; $6,750 and $0 for Mr. Carr; $6,126 and $12,147 for Mr. Gregory; $5,430
and $10,328 for Mr. Massaro; $1,000 and $0 for Mr. Moses; $1,000 and $0 for Mr.
Oberlin and $1,000 and $0 for Mr. Zrno. For Messrs. Oberlin and Zrno, "All
Other Compensation" includes amounts accrued in 1995 as a result of their
decision to terminate employment following a change in control of ALC
Communications Corporation. These amounts will be paid out over 24 month
periods. The sum of $1,160,000 was accrued for Mr. Oberlin and the sum of
$1,272,999 was accrued for Mr. Zrno.
The following companion tables to the Summary Compensation Table list
the stock options granted during the 1995 fiscal year to the named executive
officers, their stock held at the end of 1995, long-term incentive plan
restricted stock awards granted during 1995, and the estimated retirement
benefits which would be paid to them at age 65.
Option/SAR Grants in Last Fiscal Year
The following Individual Grants table includes two columns designated as
"Potential Realized Value." The calculations in those columns are based on
hypothetical growth assumptions, proposed by the Securities and Exchange
Commission, of 5% and 10% for stock price appreciation for the option term.
There is no way to anticipate what the actual growth rate of the Company's stock
price will be.
10
<PAGE>
Individual Grants in 1995
<TABLE>
<CAPTION>
Number of Potential Realized Value
Securities % of Total at Assumed Annual Rates
Underlying Options/SARs of Stock Price Appreciation
Options/SARs Granted to Exercise or for Option Term
Granted(1) Employees in Base Price Expiration ----------------------------
Name (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ---- ------------ ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
R. L. Bittner 102,000 5.09% $21.875 3/13/05 $1,403,221 $ 3,556,038
400,000 19.97% $27.125 8/16/05 $6,823,507 $17,292,106
M. C. Moses 100,000 4.99% $27.125 8/16/05 $1,705,877 $ 4,323,026
J. T. Carr 26,400 1.32% $21.875 3/13/05 $ 363,187 $ 920,386
60,000 3.00% $27.125 8/16/05 $1,023,526 $ 2,593,816
D. M. Gregory 26,400 1.32% $21.875 3/13/05 $ 363,187 $ 920,386
60,000 3.00% $27.125 8/16/05 $1,023,526 $ 2,593,816
L. L. Massaro 26,400 1.32% $21.875 3/13/05 $ 363,187 $ 920,386
100,000 4.99% $27.125 8/16/05 $1,705,877 $ 4,323,026
W. H. Oberlin 100,000 4.99% $27.125 8/16/05 $1,705,877 $ 4,323,026
J. M. Zrno 0 0.00% N/A N/A N/A N/A
</TABLE>
(1) The option grants have the following material terms: exercise price is
the market price (based on the closing price of the Company's common stock on
the New York Stock Exchange) on the date of the option grant; 1/3 of the
options granted may be exercised commencing one year following the grant date,
a second 1/3 may be exercised commencing two years following
the grant date, and the remaining 1/3 may be exercised commencing three
years following the grant date. The option grant dates were March 13, 1995 and
August 16, 1995. Options may not be transferred other than by will or the laws
of descent and distribution. An option may be exercised upon written notice to
the Company accompanied by payment in full for the shares being acquired. In the
event of a "change in control" as defined by the Management Stock Incentive
Plan, all options become immediately vested and exercisable. Mr. Oberlin has
left the Company and consequently the 100,000 options reflected in this Table
will never vest.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options/SARs
Shares Options/SARs at FY End at FY End(2)
Acquired Value --------------------------- ---------------------------
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- -------- ----------- ------------- ----------- -------------
Name (#) ($)(1) (#) (#) ($) ($)
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. L. Bittner 0 N/A 76,264 576,536 $ 816,344 $2,650,381
M. C. Moses(3) 0 N/A 1,500,000 100,000 $37,005,806 $ 287,500
J. T. Carr 0 N/A 20,732 105,068 $ 226,864 $ 555,611
D. M. Gregory 0 N/A 22,998 108,402 $ 263,384 $ 585,041
L. L. Massaro 0 N/A 18,732 144,068 $ 204,989 $ 659,673
W. H. Oberlin (3) 0 N/A 1,569,200 100,000 $38,960,706 $ 0
J. M. Zrno (3) 0 N/A 1,600,000 0 $38,452,976 N/A
</TABLE>
(1) Aggregate market value of the shares acquired or covered by the option
less the aggregate exercise price.
(2) Options are valued at the market value of Frontier Corporation common
stock at December 31, 1995, (closing price of $30.00) less the per share option
exercise price, multiplied by the number of exercisable/unexercisable options.
(3) ALC Communications Corporation merged with a subsidiary of Frontier
Corporation effective August 16, 1995. As a result of the merger, all options
in ALC Communications Corporation shares previously granted to Messrs. Moses,
Oberlin and Zrno became immediately vested and each option for an ALC share
became exercisable for two shares of Frontier Corporation common stock. This
exchange ratio is consistent with the exchange ratio of the underlying merger.
The exercisable stock options reported for Messrs. Moses, Oberlin and Zrno
include options for ALC shares which were previously granted by ALC
Communications Corporation. All options for ALC common stock were originally
granted with an exercise price equal to market price on the date of grant.
These options retain their original expiration dates. Mr. Oberlin has left the
Company and consequently the 100,000 options reflected in this Table in the
"Unexercisable" column will never vest and for that reason their value is
reflected as zero.
11
<PAGE>
Long-Term Incentive Plans - Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Number of Performances or
Shares, Units Other Period Until
or Other Maturation or
Name Rights (#) Payout
- ---- ------------- ------------------
<S> <C> <C>
R.L. Bittner 100,000 (1)
M.C. Moses 0
J.T. Carr 10,000 (1)
D.M. Gregory 10,000 (1)
L.L. Massaro 20,000 (1)
W.H. Oberlin 0
J.M. Zrno 0
</TABLE>
(1) Messrs. Bittner, Carr, Gregory and Massaro each were awarded shares of
restricted stock on August 16, 1995, under the Management Stock Incentive Plan
which is a long-term incentive plan. Vesting is subject to performance criteria
as well as the passage of time and continued employment. No greater than
one-third of the award can be paid in either 1996 or 1997. The first third will
vest upon achievement of at least a $31.00 stock price for twenty business days
in a thirty business day period. The remaining two-thirds will vest upon the
achievement of stock prices of $36.00 and $41.00 and the passage of time.
Unvested restricted share awards expire on December 31, 1998. Recipients of
restricted shares have full voting rights on the shares and are entitled to
receive accumulated dividends when the shares vest. In the event of a "change
in control" as defined by the Management Stock Incentive Plan, all restricted
shares become immediately vested and exercisable.
Pension Plans
The following table shows the estimated annual benefits payable upon
retirement at age 65 to individuals in specified remuneration and years of
service classifications. The amounts set forth in this table do not reflect
early retirement incentives which the Company had previously offered certain of
its management employees. Furthermore, the amounts set forth are neither
subject to any deduction for Social Security benefits or any other offsets nor
adjusted to reflect maximum allowable benefits under the Internal Revenue Code.
All of the Company's officers, including those listed in the Summary
Compensation Table, are participants in the Company's Management Pension Plan
as supplemented by a Supplemental Management Pension Plan ("SMPP"). The
annual aggregate pension benefit for an officer under these Plans is based
upon several factors and is largely determined by the number of years of
employment multiplied by a percentage of the officer's three consecutive years
of highest average annual compensation preceding retirement.
Both the Company's Management Pension Plan and
the SMPP have been amended and will be frozen effective December 31, 1996.
Benefit calculations under both pension plans were increased by 20% for all
plan participants who will have five or more years of service under the Plans
by December 31, 1996. Additionally, early retirement requirements were reduced
by three years of service and three years of age as final enhancements to both
plans.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service/
Remuneration (15) (20) (25) (30) (35)
- ----------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 350,000 95,368 127,157 158,946 190,735 222,524
400,000 109,228 145,637 182,046 218,455 254,864
450,000 123,088 164,117 205,146 246,175 287,204
500,000 136,948 182,597 228,246 273,895 319,544
550,000 150,808 201,077 251,346 301,615 351,884
600,000 164,668 219,557 274,446 329,335 384,224
650,000 178,528 238,037 297,546 357,055 416,564
700,000 192,388 256,517 320,646 384,775 448,904
750,000 206,248 274,997 343,746 412,495 481,244
800,000 220,108 293,477 366,846 440,215 513,584
850,000 233,968 311,957 389,946 467,935 545,924
900,000 247,828 330,437 413,046 495,655 578,264
950,000 261,688 348,917 436,146 523,375 610,604
1,000,000 275,548 367,397 459,246 551,095 642,944
1,050,000 289,408 385,877 482,346 578,815 675,284
1,100,000 303,268 444,357 505,446 606,535 707,624
</TABLE>
12
<PAGE>
Mr. Bittner, Mr. Moses, Mr. Carr, Mr. Gregory and Mr. Massaro each have
executive contracts which may pay a benefit in the event of a "Change in
Control" of the Company. These contracts are explained in detail on page 14 of
this Proxy Statement. Each of them also participates in the Company's Pension
Plan. Under SMPP, their service factor would include, subject to certain
limitations, the amount of service for which payment is made to them under their
executive contract.
The SMPP also provides that in the event of a Change in Control of the
Company, the Board may not terminate a participant's benefit and the Employees'
Benefit Committee may not change prior decisions regarding a participant's
service factor.
Effective January 1, 1994, the Company established a Supplemental
Executive Retirement Plan ("SERP") which covers all the officers named in the
preceding tables plus one additional executive officer and six other executives.
The Plan has an accrual and vesting schedule based on years of service and age.
A maximum benefit of 60% of final compensation will be paid to an executive
retiring at age 50 or older with 30 or more years of service. Payments made
under the Company's Management Pension Plan and the Supplemental Management
Pension Plan are included in determining the ultimate benefit payable under the
SERP. However, in order to qualify for the SERP benefit, a covered executive
must be at least 50 years of age. Executive officers who are not at least 50
years old when they retire would only receive the retirement benefits set forth
in the above Pension Plan Table and would receive no SERP benefit. Effective
December 31, 1999, the SERP will be frozen with no enhancements.
For the purpose of the Management Pension Plan, annual compensation
includes all taxable W-2 compensation plus deferred compensation. For the
purpose of SMPP and the SERP, annual compensation is the same as that given in
the Salary and Bonus columns of the Summary Compensation Table for the named
executive officers. The number of years of employment of such individuals for
the purposes of these Plans currently are as follows: Mr. Bittner-33; Mr. Carr-
26; Mr. Gregory-17; and Mr. Massaro-27. Messrs. Moses, Oberlin and Zrno have no
years of employment for purposes of these Plans. However, the Company has agreed
to bridge Mr. Moses's prior service with telecommunications companies provided
he remains employed by Frontier Corporation. Effective September 1, 1997, the
Company will credit Mr. Moses nine years and three months toward pension
eligibility, and two years thereafter, the Company will credit him his remaining
nine years and three months experience. The Company has also agreed to bridge
Mr. Gregory's prior service with other telecommunications companies provided he
remains employed by Frontier Corporation until January 1, 1997. Effective that
date, the Company will credit Mr. Gregory his additional six years and six
months experience in the telecommunications industry.
Mr. Zrno and Mr. Oberlin will receive no payments from the SERP as they
have left the Company and because they have no years of employment for the
purpose of any of the Company's plans. Neither Mr. Massaro nor Mr. Gregory has
yet reached the age of 50 years. Assuming they retired as of the current date,
Mr. Massaro would receive a full pension and Mr. Gregory would receive a
deferred pension based upon the amount reflected in the Pension Plan Table, and
neither would receive any additional benefit under the SERP. Mr. Bittner has
reached the age of 50 years and has accrued at least 30 years of service
credit. If he retired as of the current date, he would receive a full pension
based on the amount reflected in the Pension Plan Table and no SERP benefit
because the amount he would receive under the current pension formula would
exceed any SERP benefit. Since Mr. Carr has reached the age of 50 years and has
26 years of service credit, he is entitled to a full pension based on the
amount reflected in the Pension Plan Table. Assuming annual compensation at his
January 31, 1996 level, if Mr. Carr were to retire, he would additionally
receive an annual SERP benefit of $23,945. Although Mr. Moses has reached the
age of 50 years, he does not currently have enough years of service with the
Company to qualify for any pension or SERP benefit.
- -------------------------------------------------------------------------------
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The members of the Committee on Management at the end of the last completed
fiscal year were Ms. Barron, Mr. Faherty, Mr. McCorkindale and Mr. Gill
(Chair). None of these persons were, during 1995 or previously, an officer or
employee of the Company or any of its subsidiaries.
The full Board of Directors accepted the recommendation of the
Committee on Management concerning Mr. Bittner's compensation. Mr. Hasselwander
is a former officer of the Company and, during 1995, he participated in those
deliberations of the Company's Board of Directors in which the Board accepted
the Committee on Management's recommendations concerning executive officer
compensation. Mr. Hasselwander is not a member of the Committee on Management.
No executive officer of the Company has, during 1995 or previously, served as a
director or member of the compensation committee of any other entity that has an
executive officer who serves or has served either as a member of the Committee
on Management or as a member of the Board of Directors of Frontier Corporation.
13
<PAGE>
Employment Contracts
On August 16, 1995, the Company entered into three year employment agreements,
with provisions for annual renewals, with Mr. Bittner, Mr. Carr, Mr. Gregory,
and Mr. Massaro. Each agreement provides for specific compensation, duties and
terms and conditions of employment. Each agreement also provides that, in the
event of a change in control (as defined in the agreement) which is followed
within three (3) years by termination of employment under certain circumstances,
the employee will be entitled to all accrued compensation, a pro rata bonus, a
cash severance payment (as determined under the agreement), the cash value of
certain retirement amounts (as determined under the agreement) and continuation
for three years of certain health and life insurance benefits. Additionally, in
the event any of these amounts are determined to trigger an Excise Tax (as
defined in the agreement), the employee may also be entitled to a Gross-Up
Payment (also as defined in the agreement).
Frontier Corporation acquired ALC Communications Corporation ("ALC") on
August 16, 1995. Under the terms of the acquisition agreement, Messrs. Faherty,
Uhl and Moses became Directors of the Company. In late 1988, ALC entered into
employment agreements with Messrs. Zrno and Oberlin. These agreements were
subsequently amended several times. As of the effective date of the acquisition,
each employment agreement was amended again to provide for a specific base
salary, term of employment and position with Frontier Corporation, and qualified
the employee to participate in Frontier Corporation's executive retirement and
pension plans. Mr. Zrno's employment agreement had a base salary of $300,000
which was increased to $325,000 and an expiration date of January 7, 1997, while
Mr. Oberlin's agreement had an expiration date of January 1, 2000, and an annual
base salary of $350,000. Both agreements also contained certain non-compete
provisions. Mr. Oberlin's agreement also granted him 100,000 options in Frontier
Corporation common stock and the right to earn 200,000 additional options, if
certain performance goals are met and he remained employed by Frontier.
The acquisition of ALC by Frontier qualified as a "Change-in-Control
Event" under the employment agreements of Messrs. Zrno and Oberlin. Accordingly,
each officer was entitled to terminate voluntarily his employment at any time
within 12 months after the acquisition date and receive the same severance
package as if his employment were terminated without cause. Specifically, this
benefit would be the salary and benefits which he would have been entitled to
receive for a period of two years had his employment not terminated, plus an
amount of compensation equivalent to the sum of his incentive compensation
awards for the immediately preceding two fiscal years. The employment agreements
also provided that any ALC stock options previously granted to that officer
would immediately vest upon his termination of employment and remain exercisable
for shares of Frontier Corporation common stock for at least the 12 months
following the termination of his employment. Mr. Zrno elected to terminate his
employment effective October 31, 1995, and Mr. Oberlin chose to terminate his
employment effective November 20, 1995. These events triggered the payments due
them under the Change-in-Control provisions. Frontier Corporation has accrued
for these payments which are reflected in the "All Other Compensation" column of
the Summary Compensation Table located at page 9 of this proxy statement.
Effective November 20, 1995, the Company entered into a restated
employment agreement with Mr. Moses. That agreement, which continues through
December 31, 1999, provides for specific compensation, duties and position with
Frontier Corporation and qualifies Mr. Moses to participate in the Company's
executive retirement and pension plans. That agreement contains customary terms
regarding the reimbursement of employee expenses and the indemnification of
officer acts, as well as typical covenants regarding certain confidential
matters. It also contains certain non-compete provisions and reaffirmed a prior
grant to Mr. Moses of 100,000 options in Frontier Corporation common stock and
the right to earn 200,000 options, if certain performance goals are met and he
remains employed by Frontier. The Company may terminate Mr. Moses' employment
with or without cause, and Mr. Moses may also terminate his employment with or
without cause. Depending upon the circumstances and date of Mr. Moses'
employment termination, the Company may be required to pay Mr. Moses certain
benefits.
- -------------------------------------------------------------------------------
Interest of Certain Persons In Matters to
be Acted Upon
As disclosed at Proposal 3, Employees' Stock Option Plan, at pages 15 and
16, the executive officers of the Company would not be entitled to participate
in that Plan. They would continue to participate in the Management Stock
Incentive Plan which was previously approved by shareowners. As disclosed at
Proposal 4, Directors' Stock Incentive Plan, at pages 16 and 17, the nominees
for Director would be entitled to participate in that Plan. The New Plan
Benefits Table at page 18 of this Proxy Statement reflects the benefits each
group would receive under the Plans which are the subject of these Proposals.
- -------------------------------------------------------------------------------
Indemnification of Certain Persons
As authorized by New York State Law, the Company and its subsidiaries have
purchased insurance from the Chubb Group, the National Union Fire Insurance
Company of Pittsburgh, PA, and Gulf Insurance Company, insuring such companies
against amounts they may pay as a result of indemnifying their officers and
Directors for certain liabilities such officers and Directors might incur. These
14
<PAGE>
insurance policies also insure all officers and Directors of the Company and its
affiliates for additional liabilities against which such officers and Directors
may not be indemnified by the Company and its affiliates. The insurance was
renewed on May 21, 1995 for a period of one year. During 1995, the Company paid
$594,907 for this insurance and the renewal policy costs will be negotiated in
March, 1996.
- -------------------------------------------------------------------------------
Proposal 2-Election of Independent Auditors
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
The Company's independent auditors are Price Waterhouse LLP. At the Annual
Meeting, the shareowners will consider and vote upon a proposal to elect
independent auditors for the Company's fiscal year ending December 31, 1996.
The Audit Committee of the Board of Directors has recommended that Price
Waterhouse LLP be re-elected as independent auditors for that year. No member
of the Audit Committee is an officer or employee of the Company. The Board of
Directors unanimously recommends that you vote FOR this proposal. Proxies
solicited by the Board of Directors will be voted FOR the foregoing proposal
unless otherwise indicated. Approval of this proposal will require the
affirmative vote of a majority of the votes cast at the Annual Meeting by the
holders of the common stock outstanding.
Representatives of Price Waterhouse LLP will be present at the Annual
Meeting to make a statement, if they wish, and to respond to appropriate
questions from shareowners.
- -------------------------------------------------------------------------------
Proposals Regarding Employee and Director
Compensation Plans
The Company is requesting your approval of a new employee compensation plan
and an amendment and modification to an existing Director compensation plan.
These are designed to incent employees and Directors to act in the best
interests of shareowners by increasing their ownership of Company common stock.
These proposals are included on pages 15 through 17 of this Proxy Statement as
Proposals 3 and 4. Specifically, in the case of Proposal 3, shareowner approval
is requested to establish a new plan that will increase the group of employees
eligible to receive stock compensation. A total of 8,000,000 shares over a 10
year period would be available for grant under this new plan. In the case of
Proposal 4, shareowner approval is requested to increase the number of shares
of Frontier common stock granted, in lieu of cash, to Directors of the Company
and its subsidiaries annually for service on the Board. A brief summary of the
intent of each proposal is presented after the title of the proposal. As
required by the regulations of the Securities and Exchange Commission, also
included is a summary of the material provisions of each Plan.
You can receive a copy of these Plans by calling the Shareowner Line,
1-800-836-0342. Alternatively, you may direct a written request for copies of
the Plans to the Corporate Secretary at the Company's office at Frontier Center,
180 South Clinton Avenue, Rochester, New York 14646. We must receive your oral
or written request by April 18, 1995, in order for you to receive the copy in
advance of the meeting. Copies of each of these Plans will also be available at
the meeting.
- -------------------------------------------------------------------------------
Proposal 3-Employees' Stock Option Plan
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
Summary of Proposed Action
As discussed in the Report of the Committee on Management at page 6 of this
Proxy Statement, the Committee has adopted the Employees' Stock Option Plan
(the "Plan"), subject to shareowners' approval. The purpose of the proposed
action is to provide a broad-based stock option plan available to employees
other than senior executives. This action will require the affirmative vote of a
majority of the outstanding shares eligible to vote on this proposal.
Your Board of Directors believes that all employees should be
encouraged to own shares of the Company's stock in order to align employees'
interests better with shareowners. As the telecommunications industry becomes
more competitive, the speed of change in the industry requires employees to
become more entrepreneurial and customer focused. The nature of the Company's
business has grown and changed dramatically over the past several years.
Currently, nearly 70% of the Company's revenue is generated from the provision
of long distance service, an already very competitive market. It is necessary
for the Company to maintain a competitive compensation program in order to
attract and retain high performance employees critical to the future success of
the Company. Stock options, even in limited numbers per employee, will provide
an important link between the employee's performance, compensation and increased
value for shareowners. Your Board of Directors asks that you approve this broad-
based employee stock option plan that will allow the Company to incent and
reward non-senior executive employees with stock options.
Summary of Plan Provisions
The Company's Employees' Stock Option Plan will be a new, broad-based plan.
All employees of the Company and its subsidiaries, other than senior
executives, generally will be eligible to participate. Participation of
bargaining unit employees would be subject to the collective bargaining
process. Options may be granted under the Plan during a 10 year period
following shareowner approval of the Plan.
15
<PAGE>
Plan Administration; Eligibility. A Stock Option Committee (the
"Committee"), which currently would be composed of members of the Company's
senior management team, has discretion to select, from among the persons
eligible for awards, the employees to whom awards will be granted and to
determine the specific terms of each award, subject to the provisions of the
Plan.
Stock Options. The Plan permits the granting of Non-Qualified Stock
Options ("NQSOs"). The exercise price under each option is the fair market value
of the common stock on the day the option is granted. Options by their terms are
not transferable by the participant other than by will or the laws of descent
and distribution, by gift to family members or by the terms of a domestic
relations order. Options become exercisable on the second anniversary of the
date of the grant. Options expire automatically if not exercised within ten (10)
years following the date of grant.
Shares Available. The aggregate number of shares of the Company's common
stock available for award under this Plan during the 10 year life of the Plan
will not exceed eight million (8,000,000) shares.
If an award expires, terminates or is canceled without being exercised,
under certain circumstances, new awards may thereafter be granted incorporating
such shares. No award will be granted more than 10 years after the Plan
is approved by shareowners.
Change in Control. In the event of a change in control of the Company,
all of a participant's stock options shall become immediately exercisable,
unless directed otherwise by resolution of the Board adopted prior to and
specifically relating to the occurrence of such change in control. Each
participant also has the right, exercised by written notice to the Company
within sixty (60) days after the change in control, to receive, in exchange for
the surrender of an option or any portion thereof to the extent the option is
then exercisable, an amount of cash equal to the difference between the fair
market value (as determined by the Board) on the date of surrender of the common
stock covered by the option or portion thereof which is so surrendered and the
option price of such common stock under the option.
Tax Consequences
The Company has been advised by counsel that under present law the following
are the Federal income tax consequences generally arising with respect to stock
options granted under the Plan. The grant of an option will create no Federal
income tax consequences for an optionee or the Company. Upon exercising an
NQSO, the optionee must recognize ordinary income equal to the difference
between the exercise price and the fair market value of the stock on the date
of exercise. The Company will be entitled to a deduction for the same amount.
The treatment of an optionee's disposition of shares acquired through the
exercise of an option depends on how long the shares have been held.
- -------------------------------------------------------------------------------
Proposal 4-Directors' Stock Incentive Plan
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
Summary of Proposed Action
Increased common share ownership in the Company by non-employee Directors of the
Company and its subsidiaries will more closely align their interests to those of
our general shareowner population. Based on management's recommendation, your
Board of Directors has recommended a modification and restatement of the
Directors' Stock Incentive Plan to increase the annual stock grants to non-
employee Directors of the Company and its subsidiaries so that their retainers
will be paid entirely in Company common stock. Currently eleven persons are non-
employee Directors of Frontier Corporation and five persons are non-employee
Directors of Frontier Corporation subsidiaries. This action requires the
affirmative vote of a majority of the outstanding shares eligible to vote on
this proposal.
Summary of Current Plan Provisions
The Directors' Stock Option Plan was adopted by the Board of Directors on
November 20, 1989, approved by shareowners on April 25, 1990, and amended by
shareowners on April 27, 1994. Modified and renamed the Directors' Stock
Incentive Plan, the Plan currently authorizes 1,000,000 shares to be available
for grants. This authorization is sufficient to support the proposed new
action. The Plan currently provides for the automatic annual grant to
non-employee Directors of Frontier Corporation of non-qualified stock options
to purchase 4,000 shares of the Company's common stock, and the automatic
annual grant to non-employee Directors of Frontier Corporation subsidiaries of
non-qualified stock options to purchase 3,000 shares of the Company's common
stock. Additionally, the Plan also currently provides for an annual grant of
500 shares to non-employee Frontier Corporation Directors. Grants are made each
year on the date of the Annual Meeting electing Directors to the Board. Any new
non-employee Director also receives a one time grant of 1,000 shares which may
not be transferred while the Director remains on the Board. Non-employee Board
members who begin service on the Board on a date other than the date of the
Annual Meeting are granted an option to purchase a pro rata portion of 4,000
shares and are awarded a pro rata portion of 500 shares. All eleven current
non-employee Frontier Corporation Directors and five Rochester Telephone Corp.
Directors currently participate in this Plan.
16
<PAGE>
Each option granted under the Plan is evidenced by an option agreement
between the individual Director and the Company. At the date each year that
Directors are elected to the Board, each Director so elected (whether newly
elected or continuing as a carryover Director) will receive an option to
purchase a fixed number of shares of the Company's common stock. The exercise
price under each option equals the fair market value of the common stock at the
time the option is granted. Options are not transferable by the participant
other than by will or the laws of descent and distribution. New options granted
under the Plan will become exercisable with respect to one-third of the option
shares on the first anniversary of the date of grant and with respect to an
additional one-third of such shares on the second and third anniversaries of the
grant.
Notwithstanding any of the provisions of the Plan, in the event of a
change in control of the Company, all of a participant's options are immediately
vested and exercisable, unless directed otherwise by resolution of the Board
adopted prior to and specifically relating to the change in control. In the
event of a change in control, each holder of an exercisable option shall also
have the right at any time thereafter during the term of such option to exercise
the option in full, notwithstanding any limitation or restriction in any option
agreement or in the Plan. Each participant shall also have the right, exercised
by written notice to the Company within sixty (60) days after the change in
control, to receive, in exchange for the surrender of the option or any portion
thereof to the extent the option is then exercisable, an amount of cash. This
amount of cash will be equal to the difference between the fair market value (as
determined by the Board) on the date of surrender of the common stock covered by
the option or portion thereof which is so surrendered and the option price of
such common stock under the option.
Plan Modifications
Eligibility. Currently the eligible participants are persons who are
non-employee Directors of Frontier Corporation and its subsidiaries. The
restated Plan will not change the composition of the eligible group.
Stock Grants. The Board of Directors of Frontier Corporation believes it
would further the purpose of aligning the interests of the Directors of the
Company and its shareowners if the annual retainers paid to the non-employee
Directors were paid in the form of shares of Frontier common stock rather than
in cash. Upon the recommendation of the Committee on Directors, the Board of
Directors voted, subject to the approval of shareowners, to change the form of
payment of the annual retainers for non-employee Directors from a combination of
cash and stock to all stock. To achieve this, the Directors' Stock Incentive
Plan must be changed in the following manner:
1. Annual Frontier Board Retainer will be 1,200 shares of Frontier common stock;
after 1996 the retainer will be the greater of 1,200 shares or the number of
shares of common stock having a fair market value equal to the annual cash Board
Retainer.
2. Annual Frontier Committee Chair Retainer will be 300 additional shares of
Frontier common stock; after 1996 the retainer will be the greater of 300 shares
or the number of shares of common stock having a fair market value equal to the
annual cash Committee Chair Retainer.
3. Subsidiary annual retainers will be paid in Frontier common stock having
an aggregate fair market value on the date of grant equal to the amount of the
Retainer.
Other provisions of the Plan, such as the grant of stock options and new
Director shares, would remain unchanged.
Tax Consequences
The Company has been advised by counsel that under present law the following
are the Federal income tax consequences generally arising with respect to
awards granted under the Plan.
The grant of an NQSO will create no Federal tax consequences for the
optionee or the Company. Upon exercising, the optionee must recognize ordinary
income equal to the difference between the exercise price and the fair market
value of the stock on the date of exercise. The Company will be entitled to a
deduction for the same amount. The treatment of an optionee's disposition of
the shares acquired through exercise of an NQSO depends on how long the shares
have been held. Generally, there will be no tax consequences to the Company in
connection with the disposition of the shares acquired by an optionee through
exercise of an NQSO.
A recipient of a stock grant will be subject to tax at ordinary income
rates on the fair market value of the stock at the time of the grant, provided
that a Director who has elected to defer receipt of directors fees shall
recognize income in accordance with the deferral election. The Company will be
entitled to take a tax deduction equal to the amount includable in the
Director's income.
New Plan Benefits
As required by regulations of the Securities and Exchange Commission, the
following table shows the benefits under each of the Plans described in
Proposals 3 and 4. The table indicates the Plan benefits which may be received
by or allocated for the named executive officers, the executive officers as a
group, Directors who are not executive officers, and Company employees who are
not executive officers. The benefits are expressed in number of units. The
Directors and nominees will benefit from approval of the Plan in which they
participate.
17
<PAGE>
New Plan Benefits
<TABLE>
<CAPTION>
Employees' Directors'
Stock Option Stock Incentive
Plan(1) Plan(2)
Name and Position (#) (#)
- ----------------- ---------------- ---------------
<S> <C> <C>
R. L. Bittner N/A N/A
Chairman, President and CEO
Frontier Corporation
M. C. Moses N/A N/A
Vice Chairman and Chief Financial
Officer Frontier Corporation
J. T. Carr N/A N/A
Senior Vice President Frontier
Corporation and Chairman
Rochester Telephone Corp.
D. M. Gregory N/A N/A
Senior Vice President
Frontier Corporation and
President - Carrier Services
L. L. Massaro N/A N/A
Executive Vice President and
Chief Administrative Officer
Frontier Corporation
W. H. Oberlin N/A N/A
former President
Frontier Corporation
J. M. Zrno N/A N/A
former Vice Chairman
Frontier Corporation
Executive Group N/A N/A
Non-Executive N/A 83,700
Director Group
Non-Executive Discretionary(3) N/A
Officer Employee
Group
</TABLE>
(1) Executive Officers and Directors are not eligible to participate in the
Employees' Stock Option Plan.
(2) All amounts are 1996 projections. This Plan is available only to
Directors of the Company and its subsidiaries who are not employees of the
Company or any of its subsidiaries or affiliates.
(3) The number of stock options which would be granted to the eligible
employees is undeterminable at this time as any such grants are at the
discretion of the Stock Option Committee.
- -------------------------------------------------------------------------------
Other Matters
As of the date of this Proxy Statement, the Board of Directors does not
intend to present any matter for action at the Annual Meeting other than those
set forth in the Notice of Annual Meeting. If any other matters properly come
before the meeting, the holders of the proxies will act in accordance with
their best judgment. In the event a nominee is unable to serve, the proxies
will vote upon a substituted nominee.
- -------------------------------------------------------------------------------
Future Proposals of Shareowners
In order to be eligible for inclusion in the proxy materials for the
Company's 1997 Annual Meeting of Shareowners, any shareowner proposal to take
action at such meeting must be received at the Company's principal executive
offices by November 13, 1996. Any such proposal should be addressed to 180
South Clinton Avenue, Rochester, New York 14646, Attention: Josephine S.
Trubek, Corporate Secretary.
In addition, the Company's By-Laws establish an advance notice procedure
with regard to certain matters, including shareowner proposals not included in
the Company's proxy statement, to be brought before an annual meeting of
shareowners. In general, in order to bring a matter before the meeting, notice
must be received by the Corporate Secretary of the Company not less than 60
days nor more than 90 days prior to the anniversary of the immediately preceding
annual meeting and must contain specified information concerning the matters to
be brought before such meeting and concerning the shareowner proposing such
matters. If the date of the annual meeting is more than 30 days earlier or more
than 60 days later than the anniversary date, notice must be received not
earlier than the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which the public announcement of the date of
such meeting is first made. However, if a shareowner complies with the
requirements to have a proposal included in the proxy materials, he or she is
deemed to have complied with this advance notice procedure. If a shareowner who
has notified the Company of his or her intention to present a proposal at an
annual meeting does not appear or send a qualified representative to present
that proposal at the meeting, the Company need not present the proposal for a
vote at the meeting.
March 11, 1996
18
<PAGE>
Frontier
Without Limits, Within Reach.
Frontier Corporation
Frontier Center
180 South Clinton Avenue
Rochester, NY 14646-0700
<PAGE>
Frontier [LOGO] Proxy For Common Shares
CORPORATION
I authorize each of Ronald L. Bittner and/or Josephine S. Trubek, or
substitutes selected by them, to vote all shares of Frontier Corporation
which I am entitled to vote at the Annual Meeting of Shareowners on April
24, 1996, or at any adjournment thereof, as specified below:
The Board of Directors recommends a vote FOR Proposals 1 through 4:
1. NOMINEES FOR DIRECTORS: Patricia C. Barron, Ronald L. Bittner, Raul
E. Cesan, Brenda E. Edgerton, Jairo A. Estrada, Michael E. Faherty,
Daniel E. Gill, Alan C. Hasselwander, Robert J. Holland, Jr.,
Douglas H. McCorkindale, Marvin C. Moses, Dr. Leo J. Thomas, and
Richard J. Uhl.
[ ] VOTE FOR all nominees listed above, except for the following
(if any):
------------------------------------------
[ ] VOTE WITHHELD from ALL nominees
FOR AGAINST ABSTAIN
2. Election of Price Waterhouse LLP as Auditors [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Approval of the Employees' Stock [ ] [ ] [ ]
Option Plan
FOR AGAINST ABSTAIN
4. Approval of the Directors' [ ] [ ] [ ]
Stock Incentive Plan Amendment
5. To vote in favor of any substituted director if a nominee is unable
to serve and to act in their discretion upon such other matters which
may properly come before the meeting, or which are incident to the conduct
of the meeting, or which the Board of Directors does not know, at the time
of this solicitation, will be presented at the meeting.
CONTINUED, and to be signed and dated, on REVERSE SIDE
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION TO
THE CONTRARY IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
ALL NOMINEES AND AUDITORS AND IN FAVOR OF THE BENEFIT PLAN PROPOSALS, NUMBERS
3 AND 4.
[ ] Yes, I plan to attend the 1996 Annual Meeting.
Dated , 1996
---------------- -------------------------------------------
-------------------------------------------
(Please sign exactly as name appears below)
