<PAGE>
SCHEDULE 14A INFORMATION
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
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] 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)
FRONTIER CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] $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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- -------------
* Set forth the amount on which the filing is calculated and state how it
was determined.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF FRONTIER APPEARS HERE]
NOTICE OF ANNUAL MEETING OF
COMMON SHAREOWNERS
TO BE HELD ON MAY 2, 1997
Frontier Corporation
Frontier Center
180 South Clinton Avenue
Rochester, New York 14646-0700
Proxy
Statement
Dear Shareowners:
The Annual Meeting of Common Shareowners of Frontier Corporation (the Company")
will be held at the Westin Hotel, Tabor Center Denver, 1672 Lawrence Street,
Denver, Colorado 80202 at 10:30 a.m., local time, on May 2, 1997. The purposes
of the meeting are:
. To elect twelve Directors;
. To elect Price Waterhouse LLP as the Company's public accountants for the
fiscal year ending December 31, 1997;
. To act upon a shareowner proposal concerning executive change in control
arrangements; 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 twelve, effective April 30,
1996.
The Board of Directors has fixed the close of business on March 14, 1997, 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. A map which indicates the
meeting place appears on the back cover of the proxy statement.
By Action of the Board of Directors,
/s/ Josephine S. Trubek
Josephine S. Trubek
Corporate Secretary
Rochester, New York
March 24, 1997
<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
Section 16(a) Beneficial Ownership
Reporting Compliance 5
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 1996 Table 10
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 11
Pension Plan Table 12
Compensation Committee Interlocks and
Insider Participation in Compensation Decisions 13
Indemnification of Certain Persons 13
Proposal 2 Election of Public Accountants 14
Proposal 3 Shareowner Proposal Regarding
Executive Change in Control Arrangements 14
Other Matters 15
Future Proposals of Shareowners 15
<PAGE>
Proxy Statement
1997 Annual Meeting of Common Shareowners
of Frontier Corporation
Proxy Solicitation
The board of directors ("Board of Directors") of Frontier Corporation (the
"Company"), a New York corporation, is soliciting proxies for use at the annual
meeting of holders of the Company's $1.00 par value common stock. We are sending
you this Proxy Statement and the enclosed proxy card in connection with the
Board's solicitation so that you may vote your shares. The meeting (the "Annual
Meeting") will be held on May 2, 1997, at 10:30 a.m., local time at the Westin
Hotel, Tabor Center Denver, 1672 Lawrence Street, Denver, Colorado 80202, 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 pay 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 contact you personally or by telephone,
facsimile, telegraph or cable, to solicit your proxy. 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 $7,500, 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 14, 1997, is the Record Date for determination of
the shareowners entitled to notice of, and to vote at, the Annual Meeting. On
that date there were 164,130,495 shares of the Company's $1.00 par value common
stock outstanding and entitled to vote at the meeting. Each shareowner may 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 public accountants; and against the shareowner proposal.
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. Public accountants are elected by a majority of the votes cast.
Approval of the shareowner proposal requires a majority of the votes cast as
well. Abstentions are not counted in determining the votes cast in connection
with the selection of public accountants or approval of the shareowner 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 public accountants are discretionary items with respect to which
brokerage firms may vote. The shareowner proposal is not a discretionary item
and brokers who receive no instructions from their clients may not vote on this
proposal. If your broker does not vote your shares, those broker "non-votes"
will not be considered as votes cast with respect to the shareowner proposal.
- --------------------------------------------------------------------------------
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 currently consists of twelve persons. The
Board of Directors nominates the twelve persons named on pages 3 and 4 for
election to the Board of Directors. All of these people are currently Directors
of the Company, and their terms of office all expire on the date of the Annual
Meeting. If elected, all of them will serve until the Annual Meeting of
Shareowners to be held in 1998 or until such time as their respective successors
are elected.
The Board of Directors held six meetings during 1996. 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 Shareowners on
March 24, 1997.
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 Jairo A. Estrada,
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 four
meetings in 1996.
Committee on Management
The present members of the Committee on Management are Daniel E. Gill, Chair;
Michael E. Faherty and Dr. Leo J. Thomas. 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 after an evaluation of his performance. 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 five meetings in 1996.
Committee on Directors
The Committee on Directors serves as the nominating committee and also is
responsible for corporate governance issues. The Committee currently consists of
Patricia C. Barron, Chair; Robert Holland, Jr., Douglas H. McCorkindale and Dr.
Leo J. Thomas. The Committee reviews 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
1996.
The Committee on Directors will consider nominations by shareowners. Such
suggestions 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 relevant to serving as a member of Frontier's Board of Directors, 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 1998 Annual Meeting of Common Shareowners
must be received by October 31, 1997 in order to receive consideration.
Executive Committee
The present members of the Executive Committee are Douglas H. McCorkindale,
Chair; Patricia C. Barron, Ronald L. Bittner, Jairo A. Estrada, Daniel E. Gill
and Alan C. Hasselwander. 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 1996.
Compensation of Directors
Directors are paid an annual retainer and meeting fees. The annual retainer
consists of 1,200 shares of Frontier Corporation common stock. The meeting fee
is $1,500 for each Board and/or committee meeting attended. The annual retainer
for each committee chair consists of 300 shares of Frontier Corporation common
stock. 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 closing
price 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 $30.25 per
share on April 24, 1996.
Directors also receive cellular telephone equipment and service and other
nominal in-kind items.
- --------------------------------------------------------------------------------
Nominees for Director
The Board believes that all of the persons it has nominated 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 person.
The principal occupation and business experience of each nominee for election
at the Annual Meeting of Common Shareowners to be held on May 2, 1997 appears
next to that person's photograph.
2
<PAGE>
[PHOTO OF PATRICIA C. BARRON APPEARS HERE]
Patricia C. Barron, 54, 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 OF RONALD L. BITTNER APPEARS HERE]
Ronald L. Bittner, 55, is Chairman and Chief Executive Officer of the Company
and has held this position since April 1993. He also 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 a Director of Dynatech Corp. and of LG&E Energy Corp. He
has been a Director of the Company since 1989.
[PHOTO OF RAUL E. CESAN APPEARS HERE]
Raul E. Cesan, 49, 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 OF BRENDA E. EDGERTON APPEARS HERE]
Brenda E. Edgerton, 47, is Vice President - Business Development, Campbell Soup
Company, a manufacturer of prepared convenience foods and has held this position
since May 1996. From May 1994 to May 1996, she held the position Vice President,
Finance - U.S. Soup, and 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 OF JAIRO A. ESTRADA APPEARS HERE]
Jairo A. Estrada, 49, is a private investor. Until December 1995 he was Chairman
of the Board and Chief Executive Officer of Garden Way Incorporated, a company
which manufactures outdoor power equipment. Mr. Estrada has been a Director of
the Company since 1989.
[PHOTO OF MICHAEL E. FAHERTY 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 of ECCS, Inc., a provider of
open systems-based networked computing solutions which incorporate ECCS' mass
storage enhancement products. From 1994 until June 1996, he also served as ECCS'
Chief Executive Officer. From January 1992 to January 1994, he also was
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.
Subsequent to February 1977 and prior to 1989, he had served as either Chief
Executive or Chief Operating Officer for varying periods of time of Information
Magnetics, Cable & Wireless North America, Digital Sound Corporation, and Banc
Tec, Inc. He is a Director of Banc Tec, Inc., and of ECCS, Inc. Mr. Faherty has
been a Director of the Company since 1995.
[PHOTO OF DANIEL E. GILL APPEARS HERE]
Daniel E. Gill, 60, 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. Mr. Gill
has been a Director of the Company since 1981.
[PHOTO OF ALAN C. HASSELWANDER APPEARS HERE]
Alan C. Hasselwander, 63, 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 OF ROBERT HOLLAND APPEARS HERE]
Robert Holland, Jr., 56, is the former Chief Executive Officer of Ben and
Jerry's Homemade, Inc., a manufacturer and marketer of premium ice cream. He
held that position from February 1995 until October 1996. 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 of Gilreath Manufacturing, Inc. He is
also a Director of Mutual Life Insurance Company of New York, Trumark Inc., and
A.C. Nielsen Co. Mr. Holland has been a Director of the Company since 1995.
3
<PAGE>
[PHOTO OF DOUGLAS H. MCCORKINDALE APPEARS HERE]
Douglas H. McCorkindale, 57, 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 a director or trustee of a number of investment companies in the
family of Prudential Mutual Funds. He has been a Director of the Company since
1980.
[PHOTO OF DR. LEO J. THOMAS APPEARS HERE]
Dr. Leo J. Thomas, 60, retired in May 1996, from Eastman Kodak Company, a
manufacturer of imaging products. From September 1994 to May 1996, he held the
position Executive Vice President. From September 1991 to September 1994, he was
Group Vice President, Eastman Kodak Company. He is a Director of John Wiley &
Sons, Inc. He has been a Director of the Company since 1984.
[PHOTO OF RICHARD J. UHL APPEARS HERE]
Richard J. Uhl, 56, 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 DACC Liquidation Corp. (formerly known as 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 first 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. The
current target for each outside Director with at least five years of service on
the Board is the beneficial ownership of at least 6,800 shares of the Company's
common stock. All Directors with five years service on the Board have met this
target.
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. Mr. Bittner and each
Executive Vice President has a stock ownership target which is 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 1, 1997. No Director, officer or nominee beneficially 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.
<PAGE>
<TABLE>
<CAPTION>
Management and Directors Stock Ownership Table
as of February 1, 1997
- --------------------------------------------------------------------------------
Total
Common Stock Beneficial
Name Stock(1) Options(2) Ownership
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Directors and Nominees:
Patricia C. Barron 7,175 7,399 14,574
Ronald L. Bittner(3) 153,165 346,199 499,364
Raul E. Cesan 4,211 1,333 5,544
Brenda E. Edgerton 6,365 6,449 12,814
Jairo A. Estrada 17,409 7,999 25,408
Michael E. Faherty 4,079 88,444 92,523
Daniel E. Gill 7,987 7,999 15,986
Alan C. Hasselwander(4) 35,256 5,265 40,521
Robert Holland, Jr. 4,431 1,222 5,653
Douglas H. McCorkindale 6,974 7,999 14,973
Dr. Leo J. Thomas 25,821 7,999 33,820
Richard J. Uhl 2,954 48,444 51,398
Named Executive
Officers:
Ronald L. Bittner(3) 153,165 346,199 499,364
Robert L. Barrett 52,183 66,666 118,849
Kevin J. Bennis 54,815 66,666 121,481
Jeremiah T. Carr 20,636 75,532 96,168
Dale M. Gregory(5) 36,487 80,866 117,353
Louis L. Massaro 38,468 85,865 124,333
Directors and Executive
Officers as a Group
(17 persons) 478,416 912,346 1,390,762
- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
(Footnotes to Management and Directors Stock
Ownership Table)
(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 1, 1997, 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 319 shares owned by 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 1,295 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.
<TABLE>
<CAPTION>
Stock Ownership of Certain Beneficial Owners
as of February 1, 1997
- -------------------------------------------------------------------------------
Number of
Name and Address Shares of Percent of
of Beneficial Owner Common Stock Class
- -------------------------------------------------------------------------------
<S> <C> <C>
Delaware Management
Holdings, Inc. (1) 12,544,909 7.66%
2005 Market Street
Philadelphia, Pennsylvania 19103
Steven C. Simon (2) 5,105,244 3.1%
1300 Nicolett Mall
Minneapolis, Minnesota 55403
James J. Weinert (2) 3,384,112 2.0%
1300 Nicolett Mall
Minneapolis, Minnesota 55403
</TABLE>
- -------------------------------------------------------------------------------
(1) Delaware Management Holdings, Inc., filed with the Securities and Exchange
Commission a Schedule 13G, dated December 31, 1996, stating that it beneficially
owned in the aggregate 12,544,909 shares of the Company's common stock in its
capacity as the parent holding company of Delaware Management Company, Inc. In
its Schedule 13G filing, Delaware Management Holdings, Inc., also disclosed that
with respect to the shares it beneficially owns, it has sole voting power with
respect to 858,880 shares, shared voting power with respect to no shares, sole
dispositive power with respect to 12,106,809 shares, and shared voting and
shared dispositive power with respect to 438,100 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.
- --------------------------------------------------------------------------------
Section 16(a) Beneficial Ownership
Reporting Compliance
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 1996 were complied with
in a timely fashion.
- --------------------------------------------------------------------------------
Report of Committee on Directors
Frontier believes that good corporate governance supports good financial
performance and serves the best interests of the shareowners. As part of its
efforts to encourage high standards of corporate governance, Frontier formed the
Committee on Directors in 1993 to focus the Board's attention on corporate
governance issues and to serve 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. Many of these actions were reported in the 1995 and 1996 proxy
statements. During 1996, the Committee continued its efforts to improve
Frontier's corporate governance.
The Committee reviewed the complete set of existing Governance Guidelines and
recommended certain changes. The guidelines establish the framework and
standards for Board operation. The guidelines are described generally here.
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 with a minimum of 75 percent of meetings. The minimum number of
Board meetings held each year is 5 and, for each Committee, is 2.
5
<PAGE>
The Governance Guidelines require that the Board be composed of primarily
outside Directors and all Committees, except the Executive Committee, are
composed 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 to the Committee on Directors which then recommends whether or not
to accept it. Retirement is considered a job change in the context of this
provision.
The Committee monitors the stock ownership of the members of the Board and
reports that all current outside Board members have met their respective stock
ownership target. The stock ownership target is set as a multiple of four times
the average annual compensation of a Director.
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 that the full retainer for each Board member and each Chair of a
Committee be paid in the form of shares of Frontier common stock. The
shareowners approved this plan at the April 24, 1996 Annual Meeting of
shareowners. This plan remains in effect for 1997.
In 1995, the Committee utilized a formal system of evaluation of each Director
in its process of nomination of the slate of nominees submitted to shareowners
for a vote at the Annual Meeting of Shareowners. This year the Committee
introduced a full peer evaluation process which provided feedback to the
individual Directors and to the Board as a whole with respect to strengths of
the Board and areas for improvement.
Your Committee on Directors will continue to review annually the governance
standards and recommend improvements to the full Board of Directors.
Respectfully submitted,
The Committee on Directors
Patricia C. Barron (Chair)
Robert Holland, Jr.
Douglas H. McCorkindale
Dr. Leo J. Thomas
January 27, 1997
- --------------------------------------------------------------------------------
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 three components:
. Base Salary
. Annual Incentive Plan (Bonus)
. 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 peer group of thirty
publicly-traded companies in the telephone, long distance, cable television, and
cellular and information technology industries. This group includes most of the
companies reported in the Standard and Poor's Telephone Index and all of the
companies reported in the Standard and Poor's Long Distance Index, together with
additional companies. The Company's policy is to benchmark senior executive
compensation levels within the third quartile 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 of this group of peer companies.
6
<PAGE>
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 peer group of thirty
publicly-traded companies, together with additional companies from other
industries with similar revenues and/or asset values. The base salaries of the
executive officer positions, including that of the Chief Executive Officer, were
set in 1995 and are commensurate with the positions' responsibilities. The
salaries of persons who became executive officers subsequent to 1995 generally
reflect this salary structure as well. This Committee continues to review
executive salary levels in order to ensure they remain competitive.
In addition to benchmarking comparative companies' salaries, Mr. Bittner's
salary level was 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 Incentive Plan (Bonus)
The Company's annual incentive plan is a bonus plan designed to provide
performance-based compensation awards to executives for achievement during the
past year. For executive officers, annual incentive awards are a function of
individual performance and consolidated corporate results. Business unit
performance is also a component of the annual incentive 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 annual incentive 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 1996 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. The objectives are identified as threshold, standard and premier
targets with standard performance yielding payouts at the median level
competitively. Actual 1996 corporate performance was below the threshold level
and, accordingly, there was no bonus payout, either for Mr. Bittner or for the
other executives.
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 1996 do not expire until 2006, and
the exercise price is the closing price 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;
(b) his or her expected future contribution to the long-term strategic goals and
objectives of the Company; and
(c) industry practices.
No relative weights are attributed to any of these factors. All executive
officers of the Company received options in 1996 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.
Two Executive Vice Presidents joined Frontier in March 1996 and received stock
option grants and restricted stock awards at that time 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. Restricted stock awards issued to them in 1996 expire on
December 31, 1999, and require that both passage of time and performance
criteria be satisfied for vesting of shares to occur. Each 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 1997 or 1998. On the grant
date the Company's stock price was $30.8750 per share. The stock price
performance vesting criteria for the first one-third of the grant is the
achievement of at least a $36.00 stock price for twenty business days in a
thirty business day period. Subsequent thirds will vest upon the achievement,
for the same minimum duration, of stock prices of $41.00 and $46.00 and the
passage of time.
7
<PAGE>
Other Actions
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 had previously established
stock ownership guidelines for the Company's executives. These guidelines are
described elsewhere in the Company's Proxy Statement.
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 regulation.
No member of this Committee is a former or current officer or employee of the
Company or any of its subsidiaries.
Respectfully submitted,
The Committee on Management
Daniel E. Gill (Chair)
Michael E. Faherty
Dr. Leo J. Thomas
January 27, 1997
- --------------------------------------------------------------------------------
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. 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.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
0 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Frontier Corporation $100 $117 $151 $150 $211 $167
S&P Telephone Index $100 $104 $114 $105 $158 $159
S&P 500 Index $100 $108 $119 $121 $166 $202
S&P Long Distance Index $100 $128 $143 $127 $172 $172
</TABLE>
8
<PAGE>
Compensation of Company Management
We have included the following tables and other information to help you
understand the compensation of the Company's executives. These tables reflect
the components of compensation paid the executive officers of Frontier
Corporation. Specifically, these include salary, bonus, stock options and a
long-term incentive plan. The Company does not provide its executives with stock
appreciation rights.
The Report of the Committee on Management of the Board of Directors appears on
pages 6 through 8 of this Proxy Statement. This Report discusses the factors
taken into consideration in setting Mr. Bittner's compensation and the
compensation of the other executive officers. A Performance Graph showing the
performance of the Company's stock as compared to the Standard and Poor's 500
Index, the Standard and Poor's Telephone Index, and the Standard and Poor's Long
Distance Index appears on page 8 of this Proxy Statement.
Summary Compensation Table
The following table provides a summary of compensation paid to the CEO and the
other five most highly compensated executive officers of the Company for
services rendered to the Company and its subsidiaries over the past three fiscal
years. The indicated titles are those currently held by each named executive
officer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Long Term
Compensation
- -----------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- -----------------------------------------------------------------------------------------------------
Other Securities
Annual Underlying All Other
Name Compen- Options/ LTIP Compen-
and Principal Salary Bonus sation SARs Payouts sation
Position Year ($) ($) ($)/(2)/ (#) ($)/(3)/ ($)/(4)/
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. L. Bittner 1996 $700,000 $0 $0 175,000 N/A $11,276
Chairman and CEO 1995 $575,000 $660,000 $0 502,000 $222,850 $42,703
Frontier Corporation 1994 $408,333 $349,471 $0 88,800 $204,164 $41,369
R. L. Barrett /(1)/ 1996 $231,250 $0 $84,670 200,000 N/A $246,528
Executive Vice President 1995 N/A N/A N/A N/A N/A N/A
Frontier Corporation and 1994 N/A N/A N/A N/A N/A N/A
President--Network
Systems and Services
K. J. Bennis (1) 1996 $250,520 $0 $30,737 200,000 N/A $ 4,948
Executive Vice President 1995 N/A N/A N/A N/A N/A N/A
Frontier Corporation and 1994 N/A N/A N/A N/A N/A N/A
President--Frontier
Communications
J. T. Carr 1996 $270,000 $0 $0 100,000 N/A $ 5,226
Executive Vice President 1995 $258,033 $208,466 $0 86,400 $ 67,182 $ 8,152
Frontier Corporation and 1994 $200,275 $132,500 $ 8,330 22,000 $ 67,856 $ 10,508
Chairman Rochester
Telephone Corp.
D. M. Gregory 1996 $283,000 $0 $0 100,000 N/A $ 6,858
Senior Vice President 1995 $274,467 $193,315 $ 4,541 86,400 $ 71,545 $ 19,749
Frontier Corporation and 1994 $219,542 $131,600 $ 3,799 26,400 $ 65,556 $ 17,306
Vice President--
Business Development
L. L. Massaro 1996 $285,000 $0 $0 100,000 N/A $ 6,997
Executive Vice President 1995 $241,375 $219,199 $0 126,400 $ 68,127 $ 17,234
and Chief Financial and 1994 $189,442 $111,700 $0 22,000 $ 70,385 $ 16,600
Administrative Officer
Frontier Corporation
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
(Footnotes to Summary Compensation Table)
(1) Mr. Barrett and Mr. Bennis were each named an Executive Vice President
effective March 26, 1996. Prior to that date, neither had received any
remuneration for services to Frontier Corporation or any of its subsidiaries.
See also Long-Term Incentive Plans - Awards in Last Fiscal Year Table at page
11.
(2) The amounts reported in this column for 1996 include $84,670 paid to Mr.
Barrett to offset income tax liabilities incurred by him and $15,886 of personal
travel services paid on behalf of Mr. Bennis pursuant to his employment
agreement with the Company.
(3) The Performance Unit Plan was discontinued in 1994. The 1995 Performance
Unit Plan awards were the final payouts under that plan. In 1995, certain of the
named executives received awards of restricted stock for which vesting is
subject to performance criteria as well as the passage of time and continued
employment. Specifically, Mr. Bittner was awarded 100,000 restricted shares, Mr.
Massaro was awarded 20,000 restricted shares, and Messrs. Carr and Gregory were
each awarded 10,000 restricted shares. None of these restricted shares have yet
vested. In 1996, Mr. Barrett and Mr. Bennis also were each awarded 50,000
restricted shares under this plan. None of these restricted shares have yet
vested.
(4) "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 1996, 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, $1,107 for Mr. Barrett, $729 for
Mr. Bennis, $1,476 for Mr. Carr, $1,476 for Mr. Gregory and $1,476 for Mr.
Massaro. The Company's 1996 contributions on behalf of the named executive
officers to the tax-qualified 401(k) and nonqualified defined contribution
plans, respectively, were as follows: $3,750 and $6,050 for Mr. Bittner; $3,750
and $375 for Mr. Barrett; $3,750 and $469 for Mr. Bennis; $3,750 and $0 for Mr.
Carr; $3,750 and $1,632 for Mr. Gregory and $3,750 and $1,771 for Mr. Massaro.
For Mr. Barrett, "All Other Compensation" also includes a special signing bonus
of $80,000 and the reimbursement of relocation expenses in the amount of
$161,296.
The following companion tables to the Summary Compensation Table list the stock
options granted during the 1996 fiscal year to the named executive officers,
their stock option exercises in 1996 and the aggregate options they held at the
end of 1996, long-term incentive plan restricted stock awards granted during
1996, and the estimated retirement benefits which would be paid to them at age
65.
Option/SAR Grants in Last Fiscal Year
The following table of Individual Grants includes two columns designated as
"Potential Realized Value." The calculations in those columns are based on
hypothetical growth assumptions, proposed by the Securities and Exchange
Commission, of 5% and 10% for stock price appreciation for the option term.
There is no way to anticipate what the actual growth rate of the Company's stock
price will be.
Individual Grants in 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Potential Realized Value
Securities % of Total at Assumed Annual Rates
Underlying Options/SARs of Stock Price Appreciation
Options/SARs Granted to Exercise or for Option Term
Granted Employees in Base Price Expiration -----------------------------
Name (#)/(1)/ Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. L. Bittner 175,000 5.83% $31.625 5/01/06 $3,480,539 $8,820,368
R. L. Barrett 200,000 6.66% $30.875 3/26/06 $3,883,424 $9,841,360
K. J. Bennis 200,000 6.66% $30.875 3/26/06 $3,883,424 $9,841,360
J. T. Carr 100,000 3.33% $31.625 5/01/06 $1,988,879 $5,040,211
D. M. Gregory 100,000 3.33% $31.625 5/01/06 $1,988,879 $5,040,211
L. L. Massaro 100,000 3.33% $31.625 5/01/06 $1,988,879 $5,040,211
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The option grants have the following material terms: exercise price is the
market price (based on the closing price of the Company's common stock on the
New York Stock Exchange) on the date of the option grant; 1/3 of the options
granted may be exercised commencing one year following the grant date, a second
1/3 may be exercised commencing two years following the grant date, and the
remaining 1/3 may be exercised commencing three years following the grant date.
The option grant date for Messrs. Barrett and Bennis was March 26, 1996, and the
option grant date for Messrs. Bittner, Carr, Gregory and Massaro was May 1,
1996. Options may not be transferred other than by will or the laws of descent
and distribution. An option may be exercised upon written notice to the Company
accompanied by payment in full for the shares being acquired. In the event of a
"change in control" as defined by the Management Stock Incentive Plan, all
options become immediately vested and exercisable.
10
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE>
<CAPTION>
- ----------------------------- ------------ ----------------------------- -----------------------------
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options/SARs
Shares Options/SARs at FY End at FY End/(2)/
Acquired Value --------------------------- ----------- ----------------
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------- ------------ -------------- -------------- ------------- ----------------
Name (#) ($)/(1)/ (#) (#) ($) ($)
- ----------------------------- ------------ -------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
R. L. Bittner 0 N/A 288,531 539,269 $368,415 $85,023
R. L. Barrett 0 N/A 0 200,000 $0 $0
K. J. Bennis 0 N/A 0 200,000 $0 $0
J. T. Carr 0 N/A 60,864 164,936 $103,340 $21,635
D. M. Gregory 0 N/A 64,998 166,402 $111,065 $23,360
L. L. Massaro 0 N/A 71,197 191,603 $ 92,652 $21,635
- ----------------------------- ------------ -------------- -------------- ------------- ----------------
</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, 1996, (closing price of $22.625) less the per share option
exercise price, multiplied by the number of exercisable/unexercisable options.
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 0
R. L. Barrett 50,000 (1)
K. J. Bennis 50,000 (1)
J. T. Carr 0
D. M. Gregory 0
L. L. Massaro 0
------------------------------- --------------------
</TABLE>
(1) Messrs. Barrett and Bennis each were awarded shares of restricted stock on
March 26, 1996, 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 1997 or 1998. The first third will vest upon achievement
of at least a $36.00 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 $41.00 and $46.00 for twenty business days in a thirty business day
period. Unvested restricted share awards expire on December 31, 1999. 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.
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. 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.
Certain of the Company's officers are participants in the Company's Management
Pension Plan as supplemented by a Supplemental Management Pension Plan ("SMPP").
Of those listed in the Summary Compensation Table, Messrs. Bittner, Carr,
Gregory and Massaro participate in these Plans. 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
were frozen effective December 31, 1996. Benefit calculations under both pension
plans were increased by 20% for all plan participants who had 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.
11
<PAGE>
Pension Plan Table
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Years of Service/
Remuneration (15) (20) (25) (30) (35)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$250,000 67,648 90,197 112,746 135,295 157,844
300,000 81,508 108,677 135,846 163,015 190,184
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
1,100,000 303,268 404,357 505,446 606,535 707,624
- ------------------------------------------------------------------------------------------------
</TABLE>
Messrs. Bittner, Barrett, Bennis, Carr, Gregory and 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 13 of
this Proxy Statement. With the exception of Messrs. Barrett and Bennis, each of
them also participates in the Company's Pension Plan. Under SMPP, the service
factor would include, subject to certain limitations, the amount of service for
which payment is made to each of them under their respective 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 Messrs. Bittner, Carr, Gregory and Massaro
plus four other current 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-34; Mr. Carr-27; Mr.
Gregory-24; and Mr. Massaro-28. Messrs. Barrett and Bennis are not covered by
these Plans, have no years of employment for purposes of these Plans, and will
receive no benefits under these Plans.
Mr. Gregory has not yet reached the age of 50 years. Assuming he retired as of
the current date, Mr. Gregory would receive a deferred pension based upon the
amount reflected in the Pension Plan Table, and would receive no additional
benefit under the SERP. Since Messrs. Bittner,
12
<PAGE>
Carr and Massaro have each attained the age of 50 years and have respectively
34, 27 and 28 years of service credit, each is entitled to a full pension based
on the amount reflected in the Pension Plan Table. If Mr. Bittner retired as of
the current date, he would receive no SERP benefit because the amount he would
receive under the current formula would exceed any SERP benefit. Assuming
compensation at their respective January 31, 1997 level, if Mr. Carr were to
retire, he would additionally receive an annual SERP benefit of $24,180; and if
Mr. Massaro were to retire, he would receive an annual SERP benefit of $23,724.
Employment Contracts
Effective August 16, 1995, the Company entered into three year employment
agreements, with provisions for annual renewals, with Messrs. Bittner, Carr,
Gregory, and Massaro. Effective March 26, 1996, the Company also entered into
three year employment agreements, with provisions for annual renewals, with
Messrs. Barrett and Bennis. Each of these agreements 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 (if applicable and
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).
Robert Barrett and Kevin Bennis each became an employee of Frontier
Corporation effective March 26, 1996, and received normal and customary
inducements to enter into an employment arrangement with the Company. These
included temporary housing, relocation support, stock option grants and
restricted stock awards. Frequently, such inducements may also include special
signing bonuses or forgivable loans. Mr. Barrett received a one-time signing
bonus in the amount of $80,000. Effective April 1, 1996, Frontier Corporation
loaned Mr. Bennis the sum of $250,000 for a term of three years, with interest
at the applicable federal rate in effect for the month of April 1996. One-third
of the principal and all of the accrued interest is to be forgiven on each of
the first three anniversaries of the loan. Forgiveness is conditioned upon Mr.
Bennis' continued employment with the Company. Should Mr. Bennis leave Frontier
Corporation for any reason before the end of the three year period, the balance
remaining and interest thereon at the prime rate plus 1% will become immediately
due and payable. In March 1997, the Company made a personal loan to Mr. Bittner
in the sum of $300,000 for a term of five years, with interest at the applicable
federal rate. Mr. Bittner is obligated to repay one-fifth of the principal and
all of the accrued interest annually on the anniversary of the loan.
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 Mr. Faherty, Mr. Gill (Chair) and Dr. Thomas. None of these
persons were, during 1996 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 1996, 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 1996 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.
Indemnification of Certain Persons
As authorized by New York State Law, the Company and its subsidiaries have
purchased insurance from the Chubb Group, Gulf Insurance Company, and Reliance
National, insuring the Company and its subsidiaries against amounts they may pay
as a result of indemnifying their officers and Directors for certain liabilities
such officers and Directors might incur. These 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, 1996 for a
period of one year. During 1996, the Company paid $510,407 for this insurance.
13
<PAGE>
Proposal 2-Election of Public Accountants
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
The Company's public accountants are Price Waterhouse LLP. At the Annual
Meeting, the shareowners will consider and vote upon a proposal to elect public
accountants for the Company's fiscal year ending December 31, 1997. The Audit
Committee of the Board of Directors has recommended that Price Waterhouse LLP be
re-elected as public accountants 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.
Proposal 3-Shareowner Proposal Regarding Executive Change in Control
Arrangements
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
Proxies solicited by the Board of Directors will be voted AGAINST the following
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.
Local 1170, Communications Workers of America, 1451 Lake Avenue, Rochester, New
York 14615, advises that it holds 9,299 shares of the Company's common stock,
and that it intends to present the following proposal for consideration and
action at the Annual Meeting. Local 1170 primarily represents certain network
installation and repair employees of one of the Company's subsidiaries.
Resolution Proposed by Shareowner
RESOLVED, that Frontier Corporation Board of Directors should adopt a policy
against making any future compensation awards to the officers and directors of
this Corporation, which are contingent on a change of control of the
corporation, unless such compensation awards are submitted to a vote of the
shareholders and approved by a majority of the votes cast.
Statement of Support by Proponent Local 1170, Communications Workers of America
Golden Parachutes are lucrative compensation awards, which are provided to
senior executives. They are made contingent on a change of control, usually
through a merger or acquisition of the corporation, and are often awarded
without the approval of shareholders.
In our view, a conflict of interest is created when executives are awarded
special compensation that is to be paid only in the event of a future merger or
acquisition. Such awards provide management with a personal financial incentive
to perform their duties in a way that might be detrimental to shareholder
interests.
Management's first priority should be to maximize shareholder value. However,
actions that might temporarily diminish or restrain the growth of shareholder
value may make the company look more attractive as the potential target of a
merger or acquisition. In the alternative, management may be tempted to support
a merger or acquisition proposal without seeking a better deal for shareholders.
Under these circumstances, it does not seem prudent to give senior managers
lucrative compensation awards, but only in the event that their jobs are
terminated as a result of a merger or acquisition. A shareholder vote would
allow the owners of the Frontier Corporation to decide for themselves whether
golden parachutes are in their best interests.
Statement in Opposition by Board of Directors
Your Board of Directors believes that aligning the executive team's interests
with your interests is one of the most effective ways to enhance shareowner
value. The Company's benefit plans and shareownership targets, described
elsewhere in this Proxy Statement, promote this unity of interest by encouraging
members of your Board and the senior management to own Company common stock and
by incenting management to perform in the shareowners' interest.
We believe that change in control arrangements do not create a conflict of
interest as suggested by the Proponent. Rather, change in control arrangements
encourage management to assess takeover bids or tender offers objectively and
with less concern with how they may be personally affected. Often, senior
management lose their positions following a change in control. The real
possibility of losing one's regular source of income may conflict with an
executive's objective evaluation of potential business combinations and
arrangements which could result in a change in control. Your Board believes
change in control arrangements are in your best interest because they encourage
both continuity and cooperation of management during a period of uncertainty and
provide management a minimal level of financial security in the event of a
potential job loss, thereby eliminating a potential conflict of interest and
allowing them to focus solely on the best interests of shareowners.
14
<PAGE>
Only one Director is an employee of the Company, and only non-employee
Directors may approve change in control executive contracts. We believe that the
normal scope of our responsibilities includes approving executive compensation
arrangements and obtaining and retaining effective management. Additionally, we
firmly believe that requiring shareowner approval of these arrangements is not
in your best interests. The requirement suggested by the Proponent disadvantages
you because it would result in substantial delays in adopting new arrangements
and would severely limit your Board's flexibility. In fulfilling our
responsibility to you, we believe your interests are best served if your Board
has the power to react quickly to changing economic and business conditions.
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.
An admission ticket will be required to enter the Annual Meeting. Please use
the form attached to your proxy card to request your ticket. Ticket requests
after April 18, 1997 should be made by calling the Shareowner Line, 1-800-836-
0342. If you hold your shares through your broker or otherwise are not a record
holder, you may be asked to show evidence of your share position in order to
enter the Annual Meeting.
Future Proposals of Shareowners
In order to be eligible for inclusion in the proxy materials for the Company's
1998 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 24, 1997. 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. In order to provide an admission card, we do ask that if a
proposal is to be presented by a qualified representative, the shareowner advise
us of the identity of the person who will be presenting the proposal.
March 24, 1997
15
<PAGE>
[LOGO OF FRONTIER CORPORATION APPEARS HERE]
Frontier Corporation
Frontier Center
180 South Clinton Avenue
Rochester, New York 14646-0700
[MAP OF DOWNTOWN DENVER, COLORADO APPEARS HERE]
[MAP OF THE WESTIN HOTEL APPEARS HERE]
The Westin Hotel*
1672 Lawrence Street
303-572-9100
<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 PUBLIC ACCOUNTANTS AND AGAINST THE
SHAREOWNER PROPOSAL, NUMBER 3.
[_] Yes, I plan to attend the 1997 Annual Meeting.
Dated_______________, 1997
(Please sign exactly as name appears below)
_______________________________________
(Cut along dotted line)
- ---------------------------------------------------------------
Ticket Request
Use this Form to request your admission ticket if you plan to attend the
Annual Meeting of Shareowners at 10:30 a.m., local time, on Friday, May 2,
1997, at the Westin Hotel, Tabor Center in Denver, Colorado. Complete the form
by typing or printing your name and address. If your request is received by
April 18, 1997, an admission ticket will be mailed to you. All other admission
tickets will be provided beginning at 9:30 a.m. at the registration desk for the
meeting. (Doors to the meeting will not open before 9:30 a.m.) The envelope
provided for the return of your proxy card should also be used to return this
form. Alternatively, tickets may be requested by calling the Shareowner Line,
1-800-836-0342. If you hold your shares through your broker or otherwise are
not a record holder, we may require you to show evidence of your share position
before you will be allowed into the Annual Meeting.
NOTE: If your shares are not registered in your own name, please advise the
shareowner of record (i.e., your bank, broker, trustee, etc.) that you wish to
attend the meeting. The registered owner must provide you with evidence of your
stock ownership so that you may gain admittance to the meeting.
I plan to attend the meeting.
(Please print or type)
Name______________________________________________________________
Street____________________________________________________________
City______________________________________________________________
State_____________________________Zip Code________________________
<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 May 2,
1997, or at any adjournment thereof, as specified below:
The Board of Directors recommends a vote FOR Proposals 1 and 2 and
AGAINST Proposal 3:
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 Holland, Jr.,
Douglas H. McCorkindale, 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 [_] [_] [_]
Public Accountants
FOR AGAINST ABSTAIN
3. Approval of the Shareowner Proposal [_] [_] [_]
Regarding Executive Change in Control
Arrangements
4. 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
