FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
From the transition period from _____ to ______
Commission file number 1-4166
FRONTIER CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-0613330
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
180 South Clinton Avenue, Rochester, NY 14646-0700
(Address of principal executive offices) (Zip Code)
(716) 777-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes X No____
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest
practicable date.
$1.00 Par Value Common Stock 164,096,407 shares as
of April 30, 1997
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FRONTIER CORPORATION
Form 10-Q
Index
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Business Segment Information for
the three months ended March 31,
1997 and March 31, 1996 3
Consolidated Statements of Income
for the three months ended March 31,
1997 and March 31, 1996 4
Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 5
Consolidated Statements of Cash Flows
for the three months ended March 31,
1997 and March 31, 1996 6
Notes to Consolidated Financial
Statements 7-10
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 11-21
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 21-23
Item 6. Exhibits and Reports on Form 8-K 23
Signature 24
Index to Exhibit 25
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FRONTIER CORPORATION
Business Segment Information
(Unaudited)
3 Months Ended March 31,
In thousands of dollars 1997 1996
- ----------------------------------------------------------------
Long Distance Communications Services
Revenues $ 401,135 $ 486,102
Operating (Loss) Income:
Operating Income Before Other Charge $ 12,470 $ 63,255
Other Charge (96,600) -
Total Operating (Loss) Income $ (84,130) $ 63,255
Depreciation and Amortization $ 22,368 $ 19,518
Capital Expenditures $ 55,930 $ 37,230
Identifiable Assets $1,159,700 $ 990,181
- ----------------------------------------------------------------
Local Communications Services
Revenues $ 163,330 $ 158,442
Operating Income $ 59,714 $ 50,851
Depreciation and Amortization $ 27,285 $ 25,149
Capital Expenditures $ 15,356 $ 19,462
Identifiable Assets $ 903,355 $ 937,520
- ----------------------------------------------------------------
Corporate Operations and Other
Revenues $ 8,946 $ 10,605
Operating Loss $ (1,884) $ (2,254)
Depreciation and Amortization $ 862 $ 1,021
Capital Expenditures $ 6,733 $ 5,308
Identifiable Assets $ 205,937 $ 227,014
- ----------------------------------------------------------------
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Consolidated
Revenues $ 573,411 $ 655,149
Operating (Loss) Income:
Operating Income Before Other Charge $ 70,300 $ 111,852
Other Charge (96,600) -
- ----------------------------------------------------------------
Total Operating (Loss) Income $ (26,300) $ 111,852
Depreciation and Amortization $ 50,515 $ 45,688
Capital Expenditures $ 78,019 $ 62,000
Identifiable Assets $2,268,992 $ 2,154,715
=================================================================
See accompanying Notes to Consolidated Financial Statements.
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FRONTIER CORPORATION
Consolidated Statements of Income
(Unaudited)
3 Months Ended March 31,
In thousands, except per share data 1997 1996
- -------------------------------------------------------------------
Revenues $573,411 $655,149
- -------------------------------------------------------------------
Costs and Expenses
Operating expenses 439,903 485,828
Depreciation and amortization 50,515 45,688
Taxes other than income taxes 12,693 11,781
Other charge 96,600 -
- -------------------------------------------------------------------
Total Costs and Expenses 599,711 543,297
- -------------------------------------------------------------------
Operating (Loss) Income (26,300) 111,852
Interest expense 10,510 11,638
Other income and expense:
Gain on sale of assets 18,765 4,976
Equity earnings from
unconsolidated wireless interests 1,489 1,455
Interest income 691 523
Other income (expense) 87 (727)
- -------------------------------------------------------------------
(Loss) Income Before Taxes and
Cumulative Effect of
Change in Accounting Principle (15,778) 106,441
Income tax (benefit) expense (2,217) 41,300
- -------------------------------------------------------------------
(Loss) Income Before Cumulative
Effect of Change in Accounting
Principle (13,561) 65,141
Cumulative effect of change in
accounting principle - (8,018)
- -------------------------------------------------------------------
Net (Loss) Income (13,561) 57,123
Dividends on preferred stock 253 293
- -------------------------------------------------------------------
(Loss) Income Applicable to Common
Stock $ (13,814) $ 56,830
- -------------------------------------------------------------------
Dividends declared on common stock $ 35,653 $ 34,480
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(Loss) Earnings Per Common Share
(Loss) Income before cumulative
effect of change in
accounting principle (.08) $ .40
Cumulative effect of change in
accounting principle - (.05)
- -------------------------------------------------------------------
(Loss) Earnings Per Common Share (.08) $ .35
- -------------------------------------------------------------------
Average Common Shares Outstanding 163,474 163,527
(in thousands)
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- -------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
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FRONTIER CORPORATION
Consolidated Balance Sheets
In thousands of dollars, March 31, December 31,
except share data (Unaudited) 1997 1996
- ----------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 37,312 $ 30,948
Accounts receivable, (less allowance
for uncollectibles
of $30,992 and $30,911, respectively) 373,137 364,256
Materials and supplies 14,720 13,198
Deferred income taxes 29,201 30,349
Prepayments and other 37,930 30,483
- ----------------------------------------------------------------------
Total Current Assets 492,300 469,234
- ----------------------------------------------------------------------
Property, plant and equipment, net 943,618 971,259
Goodwill and customer base 529,479 535,979
Deferred income taxes 35,721 -
Deferred and other assets 267,874 245,048
Total Assets $2,268,992 $2,221,520
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LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Accounts payable $ 305,424 $ 322,325
Dividends payable 35,934 35,966
Debt due within one year 5,918 6,253
Taxes accrued 66,011 34,963
Other liabilities 68,008 18,596
- ----------------------------------------------------------------------
Total Current Liabilities 481,295 418,103
Long-term debt 709,966 675,043
Deferred income taxes - 2,542
Deferred employee benefits obligation 65,618 65,479
- ----------------------------------------------------------------------
Total Liabilities 1,256,879 1,161,167
- ----------------------------------------------------------------------
Shareowners' Equity
Preferred stock 22,611 22,611
Common stock, par value $1.00,
authorized 300,000,000
shares; 164,080,974 shares and
163,731,733 shares
issued in 1997 and 1996 164,081 163,732
Capital in excess of par value 508,416 500,196
Retained earnings 335,715 385,350
1,030,823 1,071,889
- ----------------------------------------------------------------------
Less -
Treasury stock, 10,849 shares in 1997
and 6,375 shares in 1996, at cost 231 147
Unearned compensation - restricted 18,479 11,389
stock plan
- ----------------------------------------------------------------------
Total Shareowners' Equity 1,012,113 1,060,353
- ----------------------------------------------------------------------
Total Liabilities and $2,268,992 $2,221,520
Shareowners' Equity
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
See accompanying Notes to Consolidated Financial
Statements.
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FRONTIER CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
3 Months Ended March 31,
In thousands of dollars 1997 1996
- ------------------------------------------------------------------------
Operating Activities
Net (loss) income $(13,561) $ 57,123
- ------------------------------------------------------------------------
Adjustments to reconcile net (loss)
income to net cash
provided by operating activities:
Cumulative effect of change in
accounting principle - 12,396
Other charge 96,600 -
Depreciation and amortization 50,515 45,688
Gain on sale of assets (18,765) (4,976)
Equity earnings from unconsolidated
wireless interests (1,489) (1,455)
Other, net 304 950
Changes in operating assets and
liabilities, exclusive
of impacts of purchase acquisitions:
Increase in accounts receivable (9,725) (30,451)
Increase in materials and supplies (1,331) (2,356)
Increase in prepayments and other assets (7,799) (2,282)
Increase in deferred and other assets (6,265) (5,349)
(Decrease) increase in accounts payable (17,870) 20,541
Increase in taxes accrued and other
liabilities 13,030 5,475
Increase in deferred employee benefits
obligation 587 2,692
(Increase) decrease in deferred
income taxes (37,115) 1,195
- ------------------------------------------------------------------------
Total adjustments 60,727 42,068
- ------------------------------------------------------------------------
Net cash provided by operating activities 47,166 99,191
- ------------------------------------------------------------------------
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Investing Activities
Expenditures for property, plant and equipment (44,510) (61,708)
Deposit for capital projects (31,761) -
Investment in cellular partnerships - (19,102)
Proceeds from asset sales 32,889 10,441
Other investing activities 902 (4,868)
- ------------------------------------------------------------------------
Net cash used in investing activities (42,480) (75,237)
- ------------------------------------------------------------------------
Financing Activities
Proceeds from issuance of long-term debt 48,486 -
Repayments of debt (8,656) (16,280)
Dividends paid (35,935) (33,883)
Treasury stock, net (2,468) -
Issuance of common stock 301 18,820
- ------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 1,728 (31,343)
- ------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents 6,364 (7,389)
Cash and Cash Equivalents at Beginning of Period 30,948 31,449
- ------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $37,312 $24,060
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
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FRONTIER CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
Note 1: Consolidation
The consolidated financial information includes the
accounts of Frontier Corporation and its majority-owned
subsidiaries (the "Company" or "Frontier") after
elimination of all significant intercompany transactions.
Investments in entities in which the Company does not have
a controlling interest are accounted for using the equity
method.
Preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 : Other Charge
In March 1997, the Company recorded a $96.6 million pre-
tax charge primarily related to the write-off of network
facilities no longer required due to the migration of the
Company's major carrier customer's one-plus traffic volume
to other networks and to the Company's overall network
integration efforts. The Company is in the process of
decommissioning these redundant network facilities. This
project is expected to be completed by the second quarter
of 1998.
Note 3: Purchase Acquisitions
In February 1997, the Company completed its purchase of
RG Data, Inc. (RG Data), a computer and data networking
equipment and services company. A total of 110,526 shares
of Frontier common stock were reissued from treasury in
exchange for all of the shares of RG Data. The treasury
shares were acquired through open market purchases.
In March 1996, the Company acquired a 55 percent
interest in the New York RSA No. 3 Cellular Partnership
(RSA No. 3). RSA No. 3 is a provider of cellular mobile
telephone service in the New York State Rural Service Area
No. 3. RSA No. 3 encompasses much of the Southern Tier
Area of Western New York State. The Company's interest in
RSA No. 3 is managed by Frontier Cellular, a 50/50 owned
joint venture with Bell Atlantic/NYNEX Mobile, and the
operating results are reported using the equity method of
accounting. The Company paid a total of $25.3 million in
cash for its interest in RSA No. 3; $19.1 million in the
first quarter and $6.2 million in the second quarter of
1996.
Note 4 : Long-Lived Assets to Be Disposed Of
Effective January 1, 1996, the Company adopted Financial
Accounting Standards No. 121 ("FAS 121"), "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". FAS 121 requires that certain
long-lived assets and identifiable intangibles be written
down to fair value whenever an impairment analysis
indicates that the carrying value cannot be recovered on
an undiscounted cash flow basis. The statement also
requires that certain long-lived assets and identifiable
intangibles to be disposed of be reported at fair value
less selling costs. The Company's adoption of this
standard resulted in a non-cash charge of $8.0 million
(net of a tax benefit of $4.4 million) and is reported in
the Consolidated Statements of Income as a cumulative
effect of a change in accounting principle. The charge
represents the cumulative adjustment required by FAS 121
to remeasure the carrying amount of certain assets held
for disposal as of January 1, 1996.
These assets held for disposal consist principally of
telephone switching equipment in the Company's Local
Communications Services segment as a result of
management's commitment, in late 1995, to a central office
switch consolidation project primarily at the Rochester
Telephone and Frontier Communications of New York
subsidiaries.
Note 5: Gain on Sale of Assets
On January 31, 1997, the Company completed the sale of
its 69.5 % equity interest in the South Alabama Cellular
Communications Partnership. The sale resulted in an after-
tax gain of $11.2 million, or $.07 per share. In March
1996, Frontier sold its minority investment in a Canadian
long distance company for an after-tax gain of $3.0
million, or $.02 per share.
The Company decided to redeploy these resources into
more strategic assets as the assets sold were not critical to
the achievement of the Company's overall business
strategy.
Note 6: Earnings (Loss) Per Share
Average common shares outstanding excludes common stock
equivalents resulting from stock options and warrants
outstanding at March 31, 1997 and includes common stock
equivalents at March 31, 1996. In accordance with
Generally Accepted Accounting Principles ("GAAP"), the
computation of loss per share was calculated without the
effect of common stock equivalents
Note 7: New Accounting Standards
The Company will adopt the provisions of Financial
Accounting Standards ("FAS") No. 128, "Earnings Per
Share" effective for financial statements issued for
periods ending after December 15, 1997; earlier
application is not permitted. FAS 128 requires dual
presentation of basic and diluted EPS on the face of the
income statement and requires a reconciliation of the
numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS
calculation. Basic EPS excludes the effect of common
stock equivalents and is computed by dividing income
available to common shareowners by the weighted average
common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could result if
securities or other instruments to issue common stock were
exercised or converted into common stock.
Proforma (loss) earnings per share computed in accordance
with FAS 128 is presented below.
For the three months ended
March 31, 1997 March 31, 1996
- ------------------------------------------------------
Basic (loss) earnings
per share $(0.8) $0.36
Diluted (loss) earnings
per share $(0.8) $0.35
Note 8: Cash Flows
For purposes of the Statement of Cash Flows, the Company
considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Cash flows from financing activities includes $18.8
million of cash proceeds from stock options and warrants
exercised during the first quarter of 1996. The resultant
tax benefit realized from the exercise of stock options
during the first quarter of 1996 of $38.5 million is
reflected as an adjustment to capital in excess of par
value and taxes accrued.
Actual interest paid was $12.8 million and $11.4
million for the three month period ended March 31, 1997,
and March 31, 1996, respectively. Interest costs
associated with the construction of capitalized assets,
including the nationwide fiber optic network project, are
capitalized. Total amounts capitalized for the first three
months of 1997 and 1996 were $2.5 million and $.6 million,
respectively. In addition, actual income taxes paid were
$2.2 million for the three months ended March 31, 1997,
and $3.5 million for the three months ended March 31,
1996.
Note 9: Commitments and Contingencies
During 1997, it is anticipated that the Company will
expend approximately $550 million to $575 million for
additions to property, plant and equipment, including the
nationwide fiber optic network expansion project.
Construction began on the nationwide fiber optic network
in late 1996. Frontier will be investing a total of
approximately $425 million into this project. The
projected cost of this investment is approximately 15%
less than the $500 million previously disclosed due to the
addition of another large participant to the construction
project. The partnership agreement with Qwest provides
for a reduction in the Company's portion of the overall
cost of construction of the fiber optic network with the
addition of another large participant. Capital
expenditures related to the network expansion will be
approximately $225 million to $250 million for 1997.
Since construction began in 1996, the Company has made
total deposit payments of $93.8 million; $31.8 million of
this total was paid during the first quarter of 1997.
This amount is included in the "Deferred and other"
caption in the Consolidated Balance Sheets. In connection
with this capital program, the Company has made certain
commitments for the purchase of materials and equipment.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three Months Ended March 31, 1997 and 1996
The matters discussed throughout this Form 10-Q, except
for historical financial results contained herein, may be
forward looking in nature or "forward looking statements."
Actual results may differ materially from the forecasts or
projections presented. Forward looking statements are
identified by such words as "expects," "anticipates,"
"believes," "intends," "plans" and variations of such
words and similar expressions. The Company believes that
its primary risk factors include, but are not limited to:
changes in the overall economy, the nature and pace of
technological change, the number and size of competitors
in the Company's markets, changes in law and regulatory
policy, and the mix of products and services offered in
the Company's markets. Any forward looking statements in
the March 31, 1997 Form 10-Q should be evaluated in light
of these important risk factors.
DESCRIPTION OF BUSINESS
Frontier Corporation (the "Company" or "Frontier") is a
diversified telecommunications company, serving more than
2 million customers throughout the United States and in
several foreign countries. Frontier Corporation's
principal lines of business are long distance
communications services and local communications services.
The Company's other lines of business include wireless
operations, telecommunications equipment sales, video and
audio conferencing.
RESULTS OF OPERATIONS
Consolidated
Revenues for the first quarter of 1997 were $573.4
million, a decrease of $81.7 million or 12.5% over the
comparable period in 1996. Operating income, excluding
nonrecurring charges, was $70.3 million for the three
months ended March 31, 1997 as compared to $114.7 million
in 1996. Operating results in the first quarter of 1997
were adversely impacted by a decline in traffic levels
without a corresponding decline in operating expenses in
the long distance segment. The long distance segment also
experienced an increase in bad debt expense during the
first quarter of 1997 as compared to the same period in
the prior year. This increase is primarily related to two
large carrier customers. The decline in revenue is
principally attributed to the previously announced
migration of the Company's largest carrier customer's one-
plus traffic from the Frontier network. The Company also
experienced slower than anticipated growth in its other
sales channels, including the "casual calling" or dial
around product, expansion of ultimate distribution
channels and the general business segment. Consolidated
operating margins, excluding nonrecurring charges
described below, declined from 17.1% for the first three
months of 1996 to 12.3% for the same period in 1997. This
decline is driven by the lower revenues as previously
detailed and increased expenses in the long distance
segment. The lower traffic volumes in the long distance
segment resulted in the Company's cost of access
percentage increasing from approximately 62% in the prior
year quarter to approximately 65% in the current quarter,
due to a higher proportion of fixed costs as a percent of
revenue. The Company anticipates that these fixed costs
can be reduced significantly through its efforts to
"regroom" its network to make it more efficient and as the
Company's fiber optic network build is phased into
service. In addition, the Company's Selling, General and
Administrative costs ("SG&A") at its long distance segment
increased by 8% from the prior year, as the Company
entered into many new sales partnerships and ventures to
diversify and grow its revenue sources for the future.
The Company expects the current costs associated with
these alliances to result in sales growth opportunities in
subsequent periods. The Company's local communications
segment's results remain strong as the operating margins
increased from 33.9% in the prior year quarter to 36.6% in
the current quarter.
Operating results for 1997 and 1996 were affected by
certain one-time events. In the first quarter of 1997, the
Company recorded a pre-tax charge of $96.6 million
primarily related to certain network costs no longer
required for long distance traffic volumes. As a result
of the decline in long distance traffic, an evaluation of
the existing network was performed and facilities no
longer used for the Company's traffic were identified. The
excess facilities resulted principally from the previously
reported migration of the Company's major customer's one-
plus traffic.
During the quarter ended March 31, 1997, the Company
also completed the sale of its 69.5% equity interest in
the South Alabama Cellular Communications Partnership. The
sale resulted in a pre-tax gain of $18.7 million.
During the first quarter of 1996, operating costs
increased $2.8 million (pre-tax) at the Company's largest
telephone subsidiary due to higher security, labor and
other related expenses in connection with a union contract
negotiation. See page 15 for information on the
resolution of the contract negotiations with the union
that occurred on May 6, 1997.
The Company sold its minority investment in a Canadian
long distance company for a pre-tax gain of $5.0 million
during the quarter ended March 31, 1996.
Results for the first quarter of 1996 include an $8.0
million post-tax charge relating to the adoption of
Statement of Financial Accounting Standards No. 121 (FAS
121), "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of". The assets
held for disposal consist principally of telephone
switching equipment in the Local Communications segment as
a result of the central office switch consolidation
project.
Business Segments
The Company reports its operating results in three
segments: Long Distance Communications Services, Local
Communications Services and Corporate Operations and
Other. A review of the 1997 and 1996 first quarter
results of each business segment follows.
Long Distance Communications Services
Long distance revenues totaled $401.1 million in the
first quarter of 1997, as compared to $486.1 million in
the same quarter in 1996, a decrease of $85.0 million or
17.5%. The decrease in long distance revenues, which is
reported net of bad debt expense, is principally
attributable to the migration of the Company's largest
customer's one-plus traffic from the Frontier network and
the impact of $5.0 million of incremental bad debt expense
primarily associated with two carrier customers during the
quarter. Normalized for the effect of this major carrier
customer's one-plus traffic, revenue and minutes of use
increased by 3% compared to the prior year quarter.
The decline in this segment's operating results is
directly attributable to the previously announced
migration of the Company's largest customer's one-plus
traffic which resulted in the fixed costs of the Company's
leased transmission facilities being absorbed by
significantly less billed minutes. Revenue from this
customer represented less than 10% of the first quarter
1997 long distance revenue as compared to 23% in the prior
year. Also contributing to the lower operating margin is
increased sales and marketing expenses associated with
programs designed to generate additional revenue in future
periods. The Company anticipates replacing the one-plus
traffic with growth in existing customer segments and
bases and through new revenue initiatives, including
enhanced services, the expansion of ultimate distribution
channels and the general business segment.
Operating income for long distance, excluding
nonrecurring charges, decreased 80.3% to $12.5 million for
the three months ended March 31, 1997. Operating margin
as a percent of revenue decreased from 13.0% in the first
quarter of 1996 to 3.1% for the current quarter. The
reduction in operating margin in the first quarter is
driven by lower revenue, without a corresponding decrease
in network costs, and the incremental SG&A costs
associated with sales and marketing programs for new
revenue initiatives. Cost of access represented
approximately 65% of total long distance revenue for the
first three months of 1997 as compared to approximately
62% for the same period in 1996. The increase in the cost
of access percentage to revenue is driven by the fact that
the Company's fixed costs are currently being covered by a
reduced revenue base. Network integration and the
construction of the Company's fiber optic network is
expected to reduce costs and provide new revenue
opportunities for Frontier. Construction of the fiber
optic network is on schedule through the first quarter of
1997. The network is expected to be completed by late
1998; however, the Company anticipates that it will be
carrying some traffic on a portion of this network as
early as July 1997. The incremental SG&A costs incurred
in the first quarter of 1997 are expected to result in new
business that will positively impact revenue and operating
results in the second half of the year.
The Company is providing facilities-based Alternative
Local Exchange Carrier ("A-LEC") services in the New York
City area and operating as an A-LEC reseller in New York
City and in 32 markets in ten additional states.
Nationwide, Frontier is serving 73,000 automatic number
identifications ("ANIs") in its non-telephone markets.
The Company plans to expand its operations as either a
facilities based local carrier or as a reseller of local
telecommunications services during 1997 and 1998.
Local Communications Services
Local Communications Services includes the Company's
local telephone operations, consisting of 34 telephone
operating subsidiaries in 13 states. Also included in
this segment are the local service revenues and associated
expenses generated from the efforts of Frontier
Communications of Rochester, a competitive
telecommunications company formed on January 1, 1995 that
provides an array of services on a retail basis in the
Rochester marketplace. Consequently, the Local
Communications Services segment includes both wholesale
and retail local service provided in the Rochester, New
York market. As a result of the Company's efforts to
consolidate operating and administrative functions within
this segment in order to become more efficient and improve
operating results, the Company no longer separately
reports its local operations in the Rochester, New York
market from the Regional Telephone Companies.
Revenues for Local Communications Services were $163.3
million in the three month period ended March 31, 1997, an
increase of $4.9 million or 3.1% over the comparable
period in 1996. The continued growth in this segment is
driven by a 2.6% increase in access lines and a 5.1%
increase in minutes of use over the previous year.
Revenue growth during the first quarter of 1997 is
attributed to growth in enhanced services, including
increased demand for Internet services. Revenue growth is
partially offset by rate reductions required by the Open
Market Plan in the Rochester, New York market.
Costs and expenses in the first quarter of 1997 for
Local Communications Services were $103.6 million,
representing a decrease of $1.1 million or 1.0% over the
first quarter of 1996, excluding certain one-time charges.
During the first quarter of 1996, the Rochester telephone
operation experienced increased costs that arose out of
continuing union contract negotiations. These expenses,
which were incurred in connection with contract
negotiations with the Communications Workers of America
("CWA"), Local 1170, were necessary to ensure customer
service continuity in the event of a work stoppage or
slowdown. The contract negotiations were at an impasse
and the Rochester company implemented the terms of its
final offer as of April 9, 1996. The Union filed unfair
labor practice complaints with the National Labor
Relations Board (the "NLRB"). In June 1996, Frontier
received a favorable determination after review within the
agency which rejected all unfair labor practice claims
that could have impacted the declaration of impasse. The
Union appealed these decisions within the NLRB and on
December 2, 1996, the agency remanded the matter back to
its regional office to hold a hearing on the one issue of
declaration of impasse, while upholding the other actions
and dismissing those other unfair labor practice charges.
The remanded matter will go back to hearing and is
scheduled to begin on May 19, 1997. The Company cannot
predict the final outcome of this matter. On May 6, 1997,
the members of CWA, Local 1170, ratified a tentative
agreement which was reached with Rochester Telephone on
April 29, 1997 which contained provisions that differed
from the Company's final offer implemented at the time of
impasse. This new agreement will provide several
operational improvements and will result in alignment of
benefits with the rest of the Corporation. The
differences between the Company's final offer and the
agreement that was ratified are not material.
Operating income normalized for nonrecurring items for
the first quarter of 1997 was $59.7 million, an increase
of $6.0 million, or 11.2% over the first quarter of 1996.
Normalized operating margins for the three month period
improved from 33.9% in 1996 to 36.6% in 1997, reflecting
the continuing improvements in operating efficiencies.
During late 1995, management committed to a major switch
consolidation plan at its Rochester Telephone and Frontier
Communications of New York subsidiaries. The three-year
plan to consolidate host switches by over 60% is projected
to improve network efficiency and reduce the cost of
maintenance and software upgrades. As of March 1997, the
project is progressing as scheduled and two host switches
have been consolidated. The Company anticipates that this
project will be substantially complete by July 1998.
Corporate Operations and Other
Corporate Operations is comprised of the expenses
traditionally associated with a holding company,
including executive and board of directors expenses,
corporate finance and treasury, investor relations,
corporate planning, legal services and business
development. The Other category is comprised of the
Company's majority ownership interest in wireless
operations and Frontier Network Systems ("FNS"). FNS
includes the operations of RG Data, Inc., a purchase
acquisition consummated in February 1997. FNS markets and
installs telecommunications systems and equipment.
Wireless operations for the first quarter of 1997 included
Minnesota RSA No. 10 and the Company's 69.5% interest in
Alabama RSAs No. 4 and No. 6 through February 1997. The
sale of the Company's interest in Alabama RSAs No. 4 and
No. 6 was finalized on January 31, 1997.
Other Income Statement Items
Interest Expense
Interest expense was $10.5 million in the first quarter
of 1997, a $1.1 million decline as compared to the same
period in 1996. The overall decrease in interest expense
is attributable to an increase in capitalized interest of
$1.9 million over the prior year, partially offset by an
increase in gross interest expense in the first quarter of
1997 due to higher average debt levels.
Gain on Sale of Assets
On January 31, 1997, the Company completed the sale of
its 69.5 % equity interest in the South Alabama Cellular
Communications Partnership. The sale resulted in an after-
tax gain of $11.2 million. During March 1996, the Company
recorded an after-tax gain of $3.0 million related to the
sale of its minority interest in the stock of a Canadian
long distance company.
The Company decided to redeploy these resources into
more strategic assets as they were not critical to
the Company's current business strategy.
Equity Earnings from Unconsolidated Wireless Interests
The Company's minority interests in wireless operations
and its 50% interest in the Frontier Cellular joint
venture with Bell Atlantic/NYNEX Mobile are accounted for
using the equity method. This method of accounting
results in the Company's proportionate share of earnings
being reflected in a single line item below operating
income. Equity earnings from the Company's interests in
wireless partnerships in the first quarter of 1997 were
$1.5 million, consistent with 1996.
Income Taxes
The effective income tax rate for the first quarter of
1997, normalized for nonrecurring items, is 38.8 %,
consistent with the first quarter of 1996.
FINANCIAL CONDITION
Review of Cash Flow Activity
Earnings before interest, taxes, depreciation and
amortization ("EBITDA") is a common measurement of a
company's ability to generate cash flow from operations.
EBITDA should be used as a supplement to, not in place of,
cash from operating activities. The Company's EBITDA was
$120.8 million and $157.5 million, excluding nonrecurring
charges, for the periods ending March 31, 1997 and 1996,
respectively. The decrease in EBITDA and cash provided
from operations as presented in the Consolidated
Statements of Cash Flows, is primarily attributable to the
lower operating results in the long distance
communications segment previously discussed.
Cash used for investing activities decreased $32.8
million or 43.5% primarily due to the proceeds received
from the sale of the Company's equity interest in the
South Alabama Cellular Communications Partnership which
closed in the first quarter of 1997 ($32.9 million). This
decrease is offset by increases in capital expenditures
during the first quarter 1997 of $14.6 million or 23.6%
and the purchase of an interest in a cellular partnership
in March 1996 ($19.1 million). The increase in capital
expenditures is principally due to the fiber optic network
build and continued product and network enhancements.
Cash flows from financing activities amounted to an
inflow of $1.7 million in the first quarter of 1997 as
compared to an outflow of $31.3 million in the first
quarter of 1996. This net inflow of cash is driven by
increased commercial paper borrowings during the first
three months of 1997 largely due to the Company's capital
program. The proceeds from the commercial paper borrowings
is offset by scheduled debt repayments of $8.7 million in
1997 and $16.3 million in 1996 and the payment of the
preferred and common dividends.
Debt
The Company's total debt amounted to $715.9 million at
March 31, 1997, an increase of $34.6 million from December
31, 1996. This increase is primarily the result of a
$43.3 million net increase in commercial paper borrowings
offset by a reduction in debt carried by the South Alabama
Cellular Communications Partnership ($7.1 million), which
was sold in the first quarter of 1997. The overall
increase in borrowings is primarily attributable to
capital expenditures related to the fiber optic network
project.
The Company filed a $500 million universal shelf
registration with the SEC in November 1995. This
registration allows for the issuance of a combination of
debt, common preferred stock or warrant securities.
During the second quarter of 1997, the Company intends to
offer approximately $300 million in medium-term public
debt. Proceeds of the offering will be used to finance
the Company's capital program.
On May 14, 1997, Duff and Phelps revised its rating on the Company's
long-term debt from "A" to "A-", reflecting concern about the recent
performance of the Company's long distance operations, increased
spending levels and rising uncertainty in the long distance business.
Standard and Poor's affirmed its "A" rating of the Company on
May 12, 1997, although it revised its rating "outlook" from stable to
negative. Rating outlooks serve as an assessment of long-term trends
or risks, normally for periods covering one to three years,
that have less certain credit implications, and are
not necessarily a precursor to future rating
changes. The Company anticipates Moody's and Fitch to affirm
their respective "A3" and "A" ratings in the near term. The Company
does not anticipate that the revised rating or rating "outlook" will
have a material impact on the future cost of borrowing.
Debt Ratio and Interest Coverage
The Company's debt ratio (total debt as a percent of
total capitalization) was 41.4% at March 31, 1997, as
compared with 39.1% at December 31, 1996. Pre-tax
interest coverage, excluding nonrecurring charges, was 5.6
times for the three months ended March 31, 1997, as
compared with 9.5 times for the same period in 1996.
Capital Spending
Through March 1997, gross capital expenditures amounted
to approximately $78.0 million as compared to $62.0
million in the prior year. Capital expenditures for the
fiber optic network build were approximately $32 million
in the first quarter of 1997. The Company plans to spend a
total of approximately $550 million to $575 million on its
capital program during 1997, including approximately $225
million to $250 million for the fiber optic network
project. The cost of this investment is approximately 15%
less than the $500 million previously disclosed due to the
addition of another large participant in the project. The
partnership agreement with Qwest provides for a reduction
in the Company's portion of the overall cost of
construction of the fiber optic network with the addition
of another large participant. The Company anticipates
financing its capital program with a combination of
internally generated cash from operations and external
financing.
Dividends
On March 21, 1997, the Board of Directors declared the
first quarter 1997 dividend of 21.75 cents per share on
the Company's common stock, payable May 1, 1997 to
shareowners of record on April 15, 1997.
OTHER ITEMS
Open Market Plan
The Rochester, New York local communications' subsidiary
began its third year of operations under the Open Market
Plan in January 1997. The Open Market Plan promotes
telecommunications competition in the Rochester, New York
marketplace by providing for (1) interconnection of
competing local networks including reciprocal compensation
for terminating traffic, (2) equal access to network
databases, (3) access to local telephone numbers, (4)
service provider telephone number portability, and (5)
certain wholesale discounts to resellers of local
services. The inherent risk associated with opening the
Rochester market to competition is that some customers are
able to purchase services from competitors, which may
reduce the number of retail customers and potentially
cause a decrease in the revenues and profitability for
Rochester Telephone. However, results since
implementation of the Open Market Plan indicate that a
stimulation of demand in the use of the network and new
product revenue may offset the losses from customer
migration. Increased competition may also lead to
additional price decreases for services, adversely
impacting Rochester Telephone's margins. An additional
positive feature of the Open Market Plan provides that
Rochester Telephone can retain additional earnings
achieved through operating efficiencies. Previously these
earnings would have been shared with customers.
During the seven year period of the Open Market Plan,
rate reductions of $21 million will be implemented for
Rochester area consumers, $14.0 million of which occurred
through 1996 and an additional $1.5 million which is
occurring on a pro rata basis in 1997. Rates charged for
basic residential and business telephone service may not
be increased during the seven year period of the Plan.
The Company is allowed to raise prices on certain enhanced
products such as caller ID and call forwarding. Price
increases on enhanced products partially offset the rate
reductions required under the Plan during 1997.
AT&T Communications of New York filed a complaint with
the New York State Public Service Commission ("NYSPSC")
for reconsideration of the Open Market Plan on October 3,
1995. The complaint sought a change in the wholesale
discount, a change in the minutes of use surcharge and
also changes in a number of operational and support
activities. Some of these issues are also being
considered in other states in other unrelated local
competition proceedings. On July 18, 1996, the NYSPSC
issued an order establishing a temporary wholesale
discount of 13.5% for services and eliminating the minutes
of use surcharge. On November 27, 1996, the NYSPSC set
permanent wholesale discounts retroactive to July 24,
1996, of 17.0% for resellers that use the Company's
operator services and 19.6% for resellers that provide
their own operator services. The Company believes that,
currently, all resellers in this market use the Company's
operator services.
Under the Telecommunications Act of 1996 and a statewide
proceeding, the NYSPSC is also considering the prices that
local exchange companies in New York may charge for
"unbundled" service elements such as links (the wire from
the switch to the customers premises), ports (the portion
of the switch that terminates the link) and switch usage
features. The Company is actively participating in this
proceeding and expects the NYSPSC to issue a decision on
service elements in 1997.
Management believes there are significant market and
business opportunities associated with the Company's Open
Market Plan. However, there are also uncertainties
associated with the Plan. In the Company's opinion, the
most significant risks relate to increased competition in
the Rochester, New York market, the risk inherent in the
Rate Stabilization Plan and the potential diversification
risk.
The Open Market Plan prohibits the payment of dividends
by Rochester Telephone Corp. to Frontier if certain
conditions are not met. In 1996, Rochester Telephone
Corp. failed to achieve the service quality levels
required by the Open Market Plan. In April, 1997, the
Company received notice from the NYSPSC that the flow of
cash dividends from Rochester Telephone Corp. to Frontier
was to be restricted as a result of its finding that
service quality levels were not met. Management does not
anticipate that this restriction will effect the Company's
ability to make scheduled debt and interest payments or
have a material impact on the Company's operations.
On May 7, 1997, the Federal Communications Commission
("FCC") adopted changes to its system of interstate access
charges to make them more economically efficient and more
compatible with a fully competitive marketplace. The
primary rate structure change will remove from existing
usage sensitive access charges those costs that are not
incurred on a usage sensitive basis, and require that they
be recovered, if at all, through a mix of fixed charges.
On the same day, the FCC adopted rules that expand the
scope and availability of universal service support in
line with mandates in the Telecommunications Act of 1996.
These rules will also assure recovery of the related
universal service costs from all providers of interstate
services, not just long distance carriers. Finally, the
FCC modified its regulations governing price cap local
exchange carriers. It set a single higher productivity
offset ( a percentage rate by which pricing indices are
reduced each year). The FCC also removed the requirement
that certain earnings above the price cap be shared with
customers. The three FCC actions will be implemented over
time, but some of the changes will be made as early as
July 1, 1997, when new access tariffs become effective.
(The change in the productivity offset must be
incorporated on that date as if it had been in effect
earlier.) The Company believes that these changes are
consistent with the development of competitive
telecommunications markets, and that the overall impact of
these orders will, on balance, be positive for Frontier.
There can be no assurance that the changing regulatory
environment will not have a negative impact on the
Company.
Part II - Other Information
Item 1 - Legal Proceedings
On June 11, 1992, a group of corporate plaintiffs
consisting of Cooper Industries, Inc.; Keystone
Consolidated Industries, Inc.; The Monarch Machine Tool
Company; Niagara Mohawk Corporation and Overhead Door
Corporation commenced an action in the United States
District Court for the Northern District of New York
seeking contribution from fifteen corporate defendants,
including Rotelcom Inc., a wholly-owned subsidiary of the
registrant held through intervening subsidiaries (now
named Frontier Network Systems, Inc. or FNS). The
plaintiffs seek environmental "response costs" in the
approximate amount of $1.5 million incurred by the
plaintiffs pursuant to a consent decree entered into by
plaintiffs with the United States Environmental Protection
Agency (the "EPA"). Two additional defendants were named
in 1994. In addition to FNS, the current defendants are:
Agway, Inc.; BMC Industries, Inc.; Borg-Warner
Corporation; Elf Atochem North America, Inc.; Mack Trucks,
Inc.; Motor Transportation Services, Inc.; Pall Trinity
Micro Corporation; The Raymond Corporation;
Redding-Hunter, Inc.; Smith Corona Corporation; Sola Basic
Industries, Inc.; Wilson Sporting Goods Company; Phillip
A. Rosen; Harvey M. Rosen; City of Cortland and New York
State Electric & Gas Corporation.
The consent decree concerned the clean-up of an
environmental Superfund site located in Cortland, New
York. It is alleged that the corporate defendants
disposed of hazardous substances at the site and are
therefore liable under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"). The
Company is anticipating that a final Record of Decision
("ROD") will be issued by the EPA and will prescribe the
remediation requirements for the site. The aggregate
amount of remediation costs to be incurred by the
plaintiffs will be based on the requirements of the ROD.
The total cost of remediation at the site is uncertain,
although estimates have ranged from $25 million to $100
million. There has been no allocation of liability as
among or between the plaintiffs or defendants. The extent
to which plaintiffs can recover any of these costs from
the defendants, including FNS, will be determined at
trial. The litigation has been delayed by the bankruptcy
filing of one of the defendants. FNS has been vigorously
defending this lawsuit. The Company believes that it will
ultimately be successful, but it is unable to predict the
outcome with any certainty at this time.
Since February 1994, hundreds of plaintiffs, all of whom
are former ASI shareholders, have filed and amended
several and various complaints in Hennepin County
(Minnesota) District Court. Included among the defendants
are ASI, its former principal shareowners, Steven Simon
and James Weinert, and Frontier. These suits allege
generally that Simon and Weinert, with and through ASI,
embarked upon a scheme to gain control of ASI and acquire
all of its stock through common law fraud, breach of
fiduciary duty and certain violations of the Minnesota
Business Corporation Act. This Act requires shareowners
in a closely held corporation to act fairly toward one
another and refrain from misappropriation. Another action
by a few former ASI shareholders who dissented from the
cashout merger that finally took ASI private is pending in
federal court in Minnesota. The federal lawsuit asserts
RICO claims in addition to state common law and statutory
violations. The claims against Frontier maintain that
Frontier controls the disposition of the restricted
Frontier stock which was issued to Simon and Weinert in
connection with the acquisition of ASI and that such stock
should be held in trust for the benefit of the plaintiffs.
Recently, the owners of over half of the stock who have
made claims have entered into a settlement in principle
with Simon and Weinert. That settlement is now being
submitted to the individual plaintiffs for their review
and acceptance. If the settlements are accepted, the
lawsuits of these plaintiffs shall be dismissed.
Although it is too early to determine the outcome of the
suits that have not settled, Frontier, ASI and the other
defendants each are contesting the claims. In connection
with the acquisition of ASI by Frontier, Simon and Weinert
agreed to indemnify the Company for these claims.
On April 10, 1997, Jeff Thompson filed a purported class
action on behalf of himself and all other similarly-
situated persons in Circuit Court for Marengo County
Alabama. Named as defendants are Frontier Corporation,
Frontier Subsidiary Telco, Inc. and Frontier
Communications of the South, Inc. The complaint also
reserves the right to add additional defendants and
identifies all of Frontier's telephone subsidiaries.
Concomitant with filing the complaint, plaintiff also
filed an ex parte motion for conditional class
certification which the Court granted. It conditionally
certified a class consisting of "All persons or entities
in the United States who have been charged by Defendants
or their subsidiaries or affiliates a fee for `inside wire
maintenance' without having given their affirmative
acceptance to a repair service contract; specifically
excluded from this class, however, are all employees,
agents, officers, directors and affiliates of any of the
Defendants and all persons or entities who have pending
and/or previously filed individual (non-class) lawsuits
against any of the Defendants for the same claims set
forth in the Complaint.
In the Complaint, plaintiff alleges that the Company
improperly marketed and sold deregulated inside wire
maintenance services to its subscribers pursuant to a
"negative option" or "default sale" approach from January
1, 1987 to the present. Plaintiff alleges that the
Defendants have never had enforceable contracts with their
customers for inside wire maintenance services, and have
defrauded their customers. Plaintiff requests a refund of
all moneys paid for inside wire maintenance services.
This case is similar to a number of cases filed against
other carriers with local telephone properties.
The Company believes that the inside wire programs in
place in its telephone properties have been implemented in
accordance with the law and any applicable regulatory
requirements. The Company is in the early stages of
investigating this complaint and therefore, has not yet
made an evaluation of the materiality of the litigation.
The Company is vigorously defending against this suit, but
cannot predict the outcome.
The Open Market Plan discussion in the Management's
Discussion and Analysis of Financial Condition and Results
of Operations in Part I, Item 2 of this document is
incorporated herein by reference.
Item 6 - Exhibits and Reports on Form 8-K
(a) See Exhibit Index
(b) Reports on Form 8-K filed during the quarter:
SEC Filing Date Item No. Financial Statements
March 27, 1997 5 No
The Company filed the following reports on Form 8-K
subsequent to the quarter ended March 31, 1997:
SEC Filing Date Item No. Financial Statements
April 10, 1997 5 No
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
FRONTIER CORPORATION
------------------------
(Registrant)
Dated: May 14, 1997 /s/Richard A. Smith
By:---------------------------
Richard A. Smith
Vice President and Controller
(principal accounting officer)
<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
3 Bylaws Incorporated by
reference to Exhibit 3.3
to Form 10-K for the year ended
December 31, 1996.
10.15 Amendment No. 1, dated
December 14, 1995,
to 1995 Restated
Management
Pension Plan Filed herewith
10.16 Amendment No. 2 dated
February 6, 1996,
to 1995 Restated
Management Pension Plan Filed herewith
10.17 Frontier Corporation
Pension Plan for Non-
Bargaining Employees
dated December 31, 1996 Filed herewith
10.18 Promissory Note for
Mr. Bittner Filed herewith
10.19 Medical Expense
Reimbursement
for Mr. Bittner Filed herewith
11 Statement re: Computation
of Earnings
per Share of Common
Stock on a
Fully Diluted Basis
(Unaudited) Filed herewith
27 Financial Data Schedule Filed herewith
<PAGE> 1
EXHIBIT 10.15
FRONTIER CORPORATION
MANAGEMENT PENSION PLAN
Amendment No. 1 to 1995 Restatement
Pursuant to Article XI, the Plan is amended, effective
December 31, 1995, as follows:
1. The following new Article XVI is added after Article
XV:
ARTICLE XVI
Freeze of Plan Benefits
Except for effective dates otherwise noted below, the Plan is
frozen, effective as of December 31, 1996, pursuant to the
following terms and conditions:
Eligibility: No person not already a Participant on December 31,
1995, shall be eligible to commence participation in the Plan,
provided that persons may become Participants through the merger
of other frozen plans of Affiliated Companies into this Plan.
Benefits Freeze: All Accrued Benefits under the Plan shall be
frozen as of December 31, 1996, and no further Plan benefits
shall accrue after this date.
Post-Freeze Service: No service with the Employer or any
Affiliated Company after December 31, 1996 shall be taken into
account under this Plan for the purpose of calculating the amount
of a person's Accrued Benefit but shall be taken into account for
purposes of determining eligibility for benefits.
Vesting: All Accrued Benefits on and after August 16, 1995 shall
become or shall remain 100 percent vested.
Compensation Definition: Effective with respect to all
participants on the active payroll (or on the inactive payroll
but receiving benefits under the Employer's Long Term Disability
Benefit Plan) on or after August 16, 1995, the definition of
"Compensation" in Section 2.11 shall be revised by replacing the
first paragraph in this provision with the following:
<PAGE> 2
"Compensation" means the total W-2 income paid by the Employer to
an Employee during a Plan Year plus amounts contributed to the
Employer's Tel Flex Plan and its Employees' Retirement Savings
Plan during a Plan Year on behalf of an Employee pursuant to a
salary reduction agreement. Compensation does not include
contributions made to this Plan or to any other plan of deferred
compensation (other than ERSP) nor does it include an Employee's
compensation in excess of $150,000 (adjusted for cost of living
increases under the Code) per year.
Average Compensation Definition: Effective with respect to all
Participants on the active payroll (or on the inactive payroll
but receiving benefits under the Employer's Long Term Disability
Benefit Plan) on or after August 16, 1995, the benefit formula in
Section 4.1 shall be applied to compute average compensation on a
three year basis by replacing the word "five" with the word
"three" each place the former word appears in Section 4.1.
20% Benefit Increase: Each Plan Participant who is on the active
payroll (or on the inactive payroll but receiving benefits under
the Employer's Long Term Disability Benefit Plan) on or after
August 16, 1995, who has five or more Years of Service under this
Plan upon the earlier of (1) termination of employment or (2)
December 31, 1996, shall have his or her Accrued Benefit at the
earlier of (1) termination of employment or (2) December 31, 1996
increased by 20 percent. For this purpose, an eligible
Participant's Accrued Benefit shall include the 3 year average
and compensation changes described above.
Eligibility for Retirement Benefits: For purposes of determining
whether a Participant has met the age and service requirements
for unreduced and reduced early retirement benefits, the age
requirements and the service requirements shall be reduced by
three for each Participant on the active payroll (or on the
inactive payroll but receiving benefits under the Employer's Long
Term Disability Benefit Plan) on or after August 16, 1995. For
example, if an unreduced benefit is normally available for
Participants who have reached age 55 and have 20 Years of
Service, under this enhancement, the requirement shall be reduced
to age 52 with 17 years of service.
<PAGE> 3
Death Benefits: The ancillary death benefit under Section 7.4 is
eliminated December 31, 1996 except for the death of pensioners
who retire on or prior to December 31, 1996.
Preservation of Accrued Benefits: None of the above changes
shall diminish or eliminate a Participant's Accrued Benefit in
effect immediately prior to December 31, 1995. For this purpose,
the Plan's death benefit is not part of a Participant's Accrued
Benefit.
Other: Except as modified above, the Plan shall remain in
effect, shall be administered according to its terms and shall
pay benefits as they become due.
2. Effective December 31, 1995, Article V is amended by
adding at the end thereof the following new Section 5.20:
Benefit Supplement for Retirees
- -------------------------------
SECTION 5.20 Except for a person receiving supplement a deferred
vested benefit or a contingent for Retirees annuitant of such
person, a Participant who retired prior to January 1, 1994 shall
have his or her monthly benefit increased by $50 per month and a
contingent annuitant of a Participant who retired prior to
January 1, 1994 shall have his or her monthly benefit increased
by $25 per month. This increase in the monthly benefit shall be
effective with the first benefit payment due after December 31,
1995 and shall continue for as long as the recipient is entitled
to receive Plan benefits.
3. Effective as of December 31, 1995, the Frontier
Communications of Minnesota, Inc. Retirement Pension Plan (the
"Minnesota Plan") shall be merged into this Plan (the pre-merger
portion of this Plan is herein referred to as the "Rochester
Plan") pursuant to the following terms and conditions (the merged
Plan is hereinafter referred to as "the merged Plan")
o the merged assets and liabilities of the Minnesota Plan
and the Rochester Plan (together with assets of related plans
that now constitute a single plan under Code section 414(l) with
respect to the Minnesota and Rochester Plans) shall, as of
<PAGE> 4
December 31, 1995, constitute a single "plan" as this term is
defined in Code section 414(l). All assets of the merged Plan
shall be available at all times to pay benefits on an ongoing
basis to participants covered by the merged Plan;
o the Rochester Plan and the Minnesota Plan shall
continue to be maintained pursuant to separate plan documents,
i.e., a participant's eligibility, vesting, benefits and other
matters will all be determined by reference to the separate plan
documents governing such participant;
o the merged Plan shall be administered by the Employees'
Benefit Committee of the Rochester Plan provided that
administrative responsibilities relating to participants in the
Minnesota Plan may be delegated to the plan administrator of the
Minnesota Plan;
o each participant in the merged Plan shall (if the
merged Plan then terminated) receive a benefit immediately after
the merger which is equal to or greater than the benefit he or
she would have been entitled to receive immediately before the
merger (if the constituent plan then terminated).
IN WITNESS WHEREOF, the Employer has caused its duly
authorized officer to execute this amendment on its behalf this
14th day of December 1995.
FRONTIER CORPORATION
By: /s/ Barbara J. LaVerdi
----------------------------------
Barbara J. LaVerdi
Its: Assistant Secretary
- 2 -
<PAGE> 1
EXHIBIT 10.16
FRONTIER CORPORATION
MANAGEMENT PENSION PLAN
Amendment No. 2 to 1995 Restatement
Pursuant to Article XI, Section 3.1 of the Plan is amended,
effective January 1, 1996, by deleting the last sentence of
Section 3.1 and substituting in its place the following:
A Participant in this Plan whose employment is transferred
on or after January 1, 1996, from the Employer or another
Participating Company that has adopted this Plan to any
Affiliated Company that has not adopted this Plan or any
other defined benefit pension plan shall remain a
Participant in this Plan. The Participant's service and
compensation with the non-participating Affiliated Company
shall be credited under this Plan for all purposes as if it
were earned during employment with a Participating Company.
IN WITNESS WHEREOF, the Employer has caused its duly
authorized officer to execute this amendment on its behalf this
6th day of February 1996.
FRONTIER CORPORATION
By: /s/ Barbara J. LaVerdi
----------------------------
Barbara J. LaVerdi
Its: Assistant Secretary
- 1 -
ROC09:120684
<PAGE> 1
EXHIBIT 10.17
FRONTIER CORPORATION
PENSION PLAN FOR NON-BARGAINING EMPLOYEES
FRONTIER CORPORATION, a New York corporation (the
"Employer"), hereby freezes, renames, amends and restates in its
entirety the FRONTIER CORPORATION PENSION PLAN FOR NON-BARGAINING
EMPLOYEES (formerly the Frontier Corporation Management Pension
Plan) (the "Plan") for the exclusive benefit of Employees of the
Employer and of Affiliated Companies who are Participants. By
separate agreement with Boston Safe Deposit and Trust Company, as
Trustee, the Employer has established a Trust to hold the assets
of the Plan.
<PAGE> 2
Table of Contents
Page
ARTICLE I - Introduction 1
ARTICLE II - Definitions 2
ARTICLE III - Accrued Benefit 9
ARTICLE IV - Retirement Income Benefits 10
ARTICLE V - Form of Benefit Payments 17
ARTICLE VI - Death Benefits 22
ARTICLE VII - Employer Contributions 23
ARTICLE VIII - Trust Fund 24
ARTICLE IX - Employees' Benefit Committee and
Other Fiduciaries 25
ARTICLE X - Amendments 30
ARTICLE XI - Successor Employer and Merger
or Consolidation of Plans 31
ARTICLE XII - Plan Termination 33
ARTICLE XIII - Top-Heavy Provisions 36
ARTICLE XIV - Miscellaneous 39
APPENDIX A - Frontier Corporation
APPENDIX B - Frontier Communications of Minnesota, Inc.
APPENDIX C - Frontier Communications of New York, Inc.
APPENDIX D - Frontier Communications of Pennsylvania, Inc.
APPENDIX E - Frontier Communications of Georgia, Inc.
APPENDIX F - Frontier Communications of Wisconsin, Inc.
APPENDIX G - Frontier Communications - Lakeshore, Inc.
APPENDIX H - Frontier Communications of Mondovi, Inc.
APPENDIX I - Frontier Communications of Viroqua, Inc.
APPENDIX J - Frontier Corporation Subsidiary Telcos
APPENDIX K - Frontier Communications of Indiana, Inc. -
Telco Subs Consolidated Pension Plan
APPENDIX L - Participating Affiliates and Merged Plans
APPENDIX M - Frozen Accrued Benefits
<PAGE> 3
ARTICLE I
Introduction
The name of this Plan is the Frontier Corporation Pension
Plan for Non-Bargaining Employees. Its purpose is to provide
retirement benefits to the eligible non-bargaining Employees of
Frontier Corporation and its Affiliated Companies.
This Plan was originally established effective as of July
30, 1921 and has been titled most recently the Frontier
Corporation Management Pension Plan. The Plan was last restated
in its entirety as of January 1, 1994 to comply with the Tax
Reform Act of 1986 and to incorporate several amendments made
since the previous restatement.
Effective December 31, 1996, the Plan is frozen. In
addition, effective as of the same date, several other defined
benefit plans of Affiliated Companies have also been frozen and
merged into this Plan. The Plan is being continued to pay the
frozen Accrued Benefits as Participants become eligible to
receive them under the Plan's terms. Lastly, effective December
31, 1996, the name of the Plan is changed to the Frontier
Corporation Pension Plan for Non-Bargaining Employees. This
restatement is generally effective December 31, 1996, except that
in the case of any provision which itself contains a separate
effective date, the separate date shall apply.
ARTICLE II
Definitions
SECTION 2.1 "Accrued Benefit" means the annual benefit
accrued as of December 31, 1996 for each Participant as set forth
in Appendix M or, in the case of a Participant who was a
Participant in this Plan before the 1995 and 1996 plan mergers,
his benefit as calculated under the formula set forth in Appendix
A.
SECTION 2.2 "Actuarial Equivalent" means the equivalent
current value of a Participant's Accrued Benefit determined
pursuant to the rates set forth in the Appendices.
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SECTION 2.3 "Actuary" means an enrolled actuary selected by
the Committee.
SECTION 2.4 "Affiliated Company" means (1) a member of an
affiliated service group within the meaning of Code section
414(m) of which the Employer is a member; (2) a member of a
controlled group of corporations of which the Employer is a
member; (3) an unincorporated business which is part of a group
of trades or businesses (whether or not incorporated) under
common control with the Employer as determined pursuant to
section 414(c) of the Code; or (4) any other entity with which
the Employer must be aggregated pursuant to section 414(o) of the
Code. For purposes of this Section, a controlled group of
corporations means a group defined under section 1563(a) of the
Code determined without regard to Code sections 1563(a)(4) and
1563(e)(3)(C).
SECTION 2.5 "Annuity Starting Date" means the first day of
the month with respect to which a retirement income payment is
payable under the Plan.
SECTION 2.6 "Beneficiary" means, in the case of a married
Participant, the Participant's surviving spouse. If the
Participant is not married or if the surviving spouse of a
married Participant waives the spouse's right to any death
benefit, Beneficiary means any person (including a trustee)
specified by the terms of this Plan to receive any death benefit
which shall be payable under this Plan.
SECTION 2.7 "Board" means the Board of Directors of
Frontier Corporation or any committee of the Board of Directors
authorized to act on behalf of the Board. Any such Board
committee shall be composed of at least three members of the
Board of Directors. As used in this Plan the term "Board-
appointed committee" means any other committee appointed by the
Board which need not be comprised of at least three Board members
but may include or consist entirely of management personnel who
are not members of the Board.
SECTION 2.8 "Break in Service" means that an Employee fails
to complete more than 500 Hours of Service during a Plan Year,
whichever is applicable.
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SECTION 2.9 "Code" means the Internal Revenue Code of 1986,
as amended from time to time.
SECTION 2.10 "Committee" means the Employees' Benefit
Committee appointed by the Board pursuant to Article IX to
administer the Plan.
SECTION 2.11 "Compensation" means the total W-2 income paid
by the Employer to an Employee during a Plan Year plus amounts
contributed to the Employer's Tel Flex Plan and its Employees'
Retirement Savings Plan during a Plan Year on behalf of an
Employee pursuant to a salary reduction agreement. Compensation
does not include severance pay, amounts earned after December 31,
1996, contributions made to this Plan or to any other plan of
deferred compensation (other than ERSP) nor does it include an
Employee's compensation in excess of $150,000 (adjusted for cost
of living increases under the Code) per year.
SECTION 2.12 "Contingent Annuitant" means the person
designated by a Participant to receive lifetime monthly
retirement income payments after his death in accordance with
Article V.
SECTION 2.13 "Deferred Retirement Date" means the first day
of the month coincident with or next following the month in which
a Participant actually retires after his Normal Retirement Date.
SECTION 2.14 "Disability" means a disability as defined in
the Appendices.
SECTION 2.15 "Early Retirement Date" means the first day of
the month coincident with or next following the month in which a
Participant retires prior to Normal Retirement Age pursuant to
the Appendices.
SECTION 2.16 "Election Period" means the period of time
during which a Participant can elect, with the consent of his
spouse, to waive the Qualified Joint and Survivor Annuity or the
Qualified Pre-Retirement Survivor Annuity or can elect to revoke
such a waiver. In the case of a Qualified Joint and Survivor
Annuity, the Election Period is the 90 day period preceding the
<PAGE> 6
Annuity Starting Date. In the case of a Qualified Pre-Retirement
Survivor Annuity the Election Period begins on the first day of
the Plan Year in which a Participant attains age 35 and ends on
the date of the Participant's death.
SECTION 2.17 "Employee" means any individual who is
employed by Frontier Corporation or by its Affiliated Companies
which have adopted this Plan.
SECTION 2.18 "Employer" means Frontier Corporation, its
predecessor or successor, or any Affiliated Company set forth in
Appendix L. The term "Employer" means either one or more of the
adopting companies acting individually or collectively as the
context requires.
SECTION 2.19 "Employment Date" means the date on which an
Employee first performs an Hour of Service for the Employer or an
Affiliated Company.
SECTION 2.20 "ERISA" means the Employee Retirement Income
Security Act of 1974 as amended from time to time and regulations
issued thereunder.
SECTION 2.21 "Former Participant" means a Participant whose
employment with the Employer has terminated, and who has a vested
benefit under the Plan which has not been paid in full.
SECTION 2.22 "Hour of Service" means each hour for which an
Employee is paid, or entitled to payment, during an applicable
computation period in accordance with the following:
(a) Performance of Services. An Hour of Service shall
be credited for each hour that an Employee is paid or entitled to
payment for the performance of services for the Employer.
(b) Leaves of Absence, etc. An Hour of Service shall
be credited for each hour during which no duties are performed
but for which an Employee is paid or entitled to payment by the
Employer (whether or not the employment relationship has
terminated) for any other purpose, including without limitation
payment due to vacation, holiday, illness, disability, layoff,
jury duty or Leave of Absence. Credit shall also be given for
<PAGE> 7
any maternity or paternity leave (i.e., pregnancy of the
Employee, birth or adoption of the Employee's child, or caring
for the Employee's child immediately following birth or adoption)
taken by an Employee. No more than 501 Hours of Service shall be
credited under this provision, however, to an Employee on account
of any single continuous period during which no services are
performed for the Employer. In addition, no Hours of Service
shall be credited with respect to payments made under a plan
maintained by the Employer solely for complying with applicable
workers' compensation, or disability insurance laws or to
payments which reimburse an Employee for medical or
medically-related expenses.
(c) Back pay. To the extent not credited for either
of the preceding purposes, an Employee shall be credited with an
Hour of Service for each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the
Employer. If back pay is made with respect to one of the
purposes set forth in provision (b) above, the number of
creditable Hours of Service shall be subject to the limitations
set forth in that provision.
(d) Computation and Crediting of Hours. The Committee
shall determine the number of creditable Hours of Service in any
computation period on the basis of any records kept by the
Employer that accurately reflect Hours of Service. If any
payments (including back pay awards) relate to any period for
which no duties are performed, the number of creditable Hours of
Service shall equal the number of regularly scheduled working
hours upon which the payment is based. If the payment is not
calculated on the basis of units of time for which the hours may
be determined, the number of creditable Hours of Service shall be
equal to the amount of the payment divided by the Employee's most
recent hourly rate of compensation before the period during which
no duties are performed. In no event, however, shall an Employee
be credited with a greater number of Hours of Service than the
number of regularly scheduled hours for the performance of
services during the applicable period.
Hours of Service shall be credited to the
computation period in which the services were performed, the
period to which payments are made when no services are performed,
<PAGE> 8
or the period to which back pay awards relate, whichever is
applicable. Hours of Service pursuant to maternity/paternity
leave shall be credited to the Employee in the Plan Year in which
the absence from work begins only if the additional hours
afforded would prevent the Participant from incurring a one year
Break in Service; otherwise these hours shall be credited to the
Participant in the Plan Year immediately following the date the
Participant begins his absence from work. The crediting of Hours
of Service for reasons other than the performance of services and
the crediting of Hours of Service to computation periods shall be
made in accordance with 29 C.F.R. sections 2530.200b-2(b) and (c)
which are hereby incorporated by this reference.
(e) Alternative Method of Crediting Hours. In lieu of
counting an Employee's actual number of Hours of Service during
any computation period, the Committee shall credit each Employee
who earns at least one Hour of Service during any week of
employment with 45 Hours of Service for each such week.
(f) Military Service. An Hour of Service shall be
credited for each hour of the normally scheduled work hours for
each day during any period the Employee is on leave of absence
from the Employer or any Affiliated Company for military service
with the Armed Forces of the United States, but not to exceed the
period required under the law pertaining to veterans' re-
employment rights; provided that if he fails to report for work
at the end of such leave during which he has employment rights,
he shall not receive credit for hours on such leave.
Notwithstanding any provision of this plan to the contrary,
contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with
414(u) of the Internal Revenue Code.
SECTION 2.23 "Investment Manager" means any individual or
corporation selected by the Board or by any Board-appointed
committee having the authority to select such person who (i) is
registered as an investment adviser under the Investment Advisers
Act of 1940; or (ii) is a bank, as defined in that Act; or (iii)
is an insurance company qualified to manage, acquire or dispose
of plan assets under the laws of more than one state and each
individual or corporation acknowledges in writing that he or the
<PAGE> 9
corporation, as the case may be, is a fiduciary with respect to
the Plan.
SECTION 2.24 "Leave of Absence" means any leave formally
granted in conformity with the rules of the Employer, as adopted
from time to time, and leave on account of continued Disability
following the expiration of a period of disability benefits. A
Leave of Absence for a period not exceeding one month, except a
leave following the expiration of disability benefits, will be
granted automatically in accordance with the rules of the
Employer without approval of the Committee. The period of
absence shall be credited in computing the Employee's Hours of
Service and the Employee shall be eligible for all benefits
during his absence. A Leave of Absence for any period in excess
of one month shall not be effective unless approved in writing by
the Committee and in any case in which approval is given, the
Committee shall indicate the effect of such leave on the
Employee's entitlement to benefits. An Employee's absence
following the expiration of a period of disability benefits shall
be considered as a separation from service unless the Employee is
granted a Leave of Absence by the Committee. The Committee may
deem such absence to be an approved Leave of Absence, however, if
satisfactory evidence is furnished that a Disability was
continuous during the entire period of absence.
SECTION 2.25 "Normal Retirement Age" means normal
retirement age as defined in the Appendices.
SECTION 2.26 "Normal Retirement Date" means the first day
of the month coincident with or next following a Participant's
Normal Retirement Age.
SECTION 2.27 "Participant" means an Employee who has an
Accrued Benefit listed on Appendix M or any Participant who was
in the Frontier Corporation Management Pension Plan prior to the
1995 and 1996 mergers..
SECTION 2.28 "Plan" means the Frontier Corporation Pension
Plan for Non-Bargaining Employees as set forth herein, as amended
from time to time.
<PAGE> 10
SECTION 2.29 "Qualified Joint and Survivor Annuity" means a
qualified joint and survivor annuity as defined in the
Appendices.
SECTION 2.30 "Qualified Pre-Retirement Survivor Annuity"
means a qualified pre-retirement survivor annuity as defined in
the Appendices.
SECTION 2.31 "Trust" or "Trust Fund" means, effective
January 1, 1997, the Frontier Pension Fund maintained in
accordance with the terms of the trust agreement, as from time to
time amended, which constitutes a part of this Plan. The Trust
Fund constitutes a common trust fund for the Employer's Pension
Plan for Non-Bargaining Employees, Craft Pension Plan-I and Craft
Pension Plan-II, and any other plans that may subsequently be
merged into the Trust Fund, all of which funds are available to
pay benefits under any of the constituent plans.
SECTION 2.32 "Trustee" means Boston Safe Deposit and Trust
Company or any other trustee appointed by the Board to administer
the Trust.
SECTION 2.33 "Year" or "Plan Year" means the
twelve-consecutive-month period ending each December 31. The
Plan Year shall be the accrual computation period, the vesting
computation period and the limitation year as these terms are
used in regulations issued pursuant to ERISA.
SECTION 2.34 "Year of Participation" means a year of
participation as defined in the Appendices.
Notwithstanding any other provision of this Plan, no service
with the Employer or any Affiliated Company after December 31,
1996 shall be taken into account under this Plan for the purpose
of calculating the amount of a Participant's Accrued Benefit but
shall be taken into account for purposes of determining
eligibility for benefits.
SECTION 2.35 "Year of Service" means a year of service as
defined in the Appendices.
<PAGE> 11
For purposes of determining a Participant's Accrued Benefit,
of applying the Plan's benefit formulae and of determining the
length of service needed for receiving an unreduced benefit, the
term Year of Service shall include only those periods of time
during which the Employer or an Affiliated Company maintained
this Plan or any other plan which has been merged into this Plan.
Notwithstanding any other provision of this Plan, no service
with the Employer or any Affiliated Company after December 31,
1996 shall be taken into account under this Plan for the purpose
of calculating the amount of a Participant's Accrued Benefit but
shall be taken into account for purposes of determining
eligibility for benefits.
SECTION 2.36 The masculine gender whenever used shall
include the feminine and the singular shall include the plural,
unless the context clearly indicates the contrary.
ARTICLE III
Accrued Benefit
Accrued Benefit
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SECTION 3.1 A Participant's benefit under this Plan shall
be his frozen Accrued Benefit as set forth in Appendix M, except
that in the case of a Participant who was a Participant in this
Plan before the 1995 and 1996 plan mergers, the Participant's
Accrued Benefit shall be determined under the formula set forth
in Appendix A.
Transfer Policy
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SECTION 3.2 In the case of a Participant who has a frozen
Accrued Benefit in this Plan as of December 31, 1996 and who
transfers employment to another Affiliated Company, such
Participant shall continue to be entitled to receive his Accrued
Benefit in accordance with the terms of this Plan and its
Appendices that were applicable to him on December 31, 1996.
ARTICLE IV
Retirement Income Benefits
Normal Retirement
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<PAGE> 12
SECTION 4.1 A Participant who retires upon reaching his
Normal Retirement Age shall be entitled to receive his Accrued
Benefit. This benefit shall commence on the Participant's Normal
Retirement Date unless a later date is chosen in accordance with
the provisions of Section 5.4 and shall be paid in the form
selected pursuant to the provisions of Article V.
Early Retirement Benefit
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SECTION 4.2 Eligibility requirements for unreduced and
reduced early retirement benefits, and, in the case of reduced
early retirement benefits, the reduction factors, are set forth
in the Appendices.
Deferred Retirement
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SECTION 4.3 Provisions for deferred retirement are set
forth in the Appendices.
The actual benefit paid to the Participant shall be in the
form selected pursuant to the provisions of Article V.
Disability Benefit
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SECTION 4.4 Provisions for disability benefit payments are
set forth in the Appendices.
Deferred Vested Benefit
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SECTION 4.5 Provisions for deferred vested benefits are set
forth in the Appendices.
Cash out of Accrued Benefit
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SECTION 4.6 If a Participant terminates participation in
the Plan at a time when the present value of his non-forfeitable
Accrued Benefit attributable to Employer contributions is $3,500
or less, the present value of the benefit shall be paid in a lump
sum in cash within one year of termination of participation.
<PAGE> 13
Unless the Participant makes a repayment of the cashout
distribution as provided below, all years of participation to
which the cashout relates shall be disregarded in any subsequent
determination of his Accrued Benefit under Article III.
If an individual to whom this cashout provision applies
later resumes participation in the Plan, he may repay the full
amount of the cashout distribution to the date of repayment,
compounded annually at the rate required under Code section
411(c)(2)(C). If such repayment is made before the Participant
has five consecutive one year Breaks in Service beginning after
the distribution, the Accrued Benefit previously disregarded
shall be restored.
Except for certain Participants whose benefits have been
merged into this Plan from a Plan of an Affiliated Company as set
forth in the Appendices, no cashout shall be permitted under this
Plan if the present value of a Participant's Accrued Benefit
exceeds $3,500.
Normal Retirement Benefit
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SECTION 4.7 The amount of the normal retirement benefit
provided shall be the greater of what a Participant or Former
Participant could have received under the early retirement
provisions of the Plan or the benefit commencing at his Normal
Retirement Date.
Benefits Not Affected by Subsequent Social Security Changes
- -----------------------------------------------------------
SECTION 4.8 Any benefits which are being paid to a
Participant, Former Participant, Beneficiary or Contingent
Annuitant under this Plan and the vested benefit of a Participant
or Former Participant who has separated from the service of the
Employer shall not be decreased by reason of any post-separation
increase in the benefit levels or the wage base under Title II of
the Social Security Act effective after the later of September 2,
1974, or the date of first receipt of any benefit provided by
this Plan. In the case of a Participant who separates from the
service of the Employer with a vested benefit and who returns to
employment and participation in the Plan, his vested benefit
<PAGE> 14
shall not be decreased by reason of any post-separation increase
in Social Security benefit levels or the wage base effective
after September 2, 1974, and during separation from service which
would decrease the benefits to which he would have been entitled
had he not returned to service after his separation.
Maximum Benefit
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SECTION 4.9 The maximum annual benefit (i.e., the benefit
computed under Article III) payable under this Plan and all other
defined benefit plans of the Employer shall be limited to the
maximum amounts permitted under Code section 415. In general,
section 415 limits a Participant's annual benefit to the lesser
of $90,000 or the Participant's average annual compensation
during the three consecutive Years of Service as a Participant
affording the highest such average, or during all years if less
than three. If the Participant has not completed ten years of
participation, such maximum annual dollar benefit shall be
reduced in the ratio which the number of his years of
participation bears to ten; if the Participant has less than 10
years of service with the Employer, the compensation limit shall
be reduced by one-tenth for each year of service (or part
thereof) less then ten. The maximum dollar limitation applies to
a benefit payable at the Social Security retirement age and shall
be adjusted in accordance with cost of living increases in the
amount determined by the Commissioner of Internal Revenue.
For any benefit payment which is to commence after the
Social Security retirement age, the maximum dollar limitation
shall be the actuarial equivalent of the maximum dollar
limitation at the Social Security retirement age. In computing
actuarial equivalency, the interest assumption shall be the
lesser of five percent or the percent specified in the Plan's
definition of Actuarial Equivalent.
For any benefit payment which is to commence before the
Social Security retirement age, the maximum dollar limitation
shall be reduced in accordance with this paragraph. The dollar
limitation for a Participant who has reached age 62 but not the
Social Security retirement age shall be reduced by 5/9 of 1
percent for each month by which benefits commence before the
month in which the Participant attains age 65 (assuming this is
<PAGE> 15
the Participant's Social Security retirement age). If the
Participant's Social Security retirement age exceeds 65, the
dollar limit shall be reduced by 5/9 of one percent for each of
the first 36 months and 5/12 of 1 percent for each additional
month that the date the Participant's Annuity Starting Date
precedes his Social Security retirement age. For persons who
retire prior to age 62 pursuant to the early retirement
provisions of Section 4.2 the maximum dollar limitation shall be
further reduced for months prior to age 62 on an actuarial basis,
using for this purpose an interest assumption of 5 percent and
the 1984 George B. Buck Mortality Table assuming a blend of 55
percent male and 45 percent female. The dollar limitation for
any other benefits paid prior to age 62 shall be reduced
actuarially for months prior to age 62 using the Actuarial
Equivalent assumptions set forth in Section 2.2 of this Plan.
Notwithstanding the foregoing, if a Participant's annual
benefit does not exceed $10,000 and he had not at any time
participated in a defined contribution plan maintained by the
Employer, he may receive the full amount of such retirement
income benefit without regard to the limitations provided in this
Section.
For purposes of this Section, a Participant's compensation
means the total remuneration paid to the Participant by the
Employer during the Plan Year for personal services actually
rendered, after the application of any salary reduction agreement
the Participant may have entered into with the Employer,
excluding Employer contributions to this Plan or any other plan
of deferred compensation, amounts realized upon the exercise of a
stock option or the lifting of restrictions on restricted stock,
amounts realized upon a disqualifying disposition of stock
acquired pursuant to an ISO or other qualified stock option or
other amounts which receive special tax benefits provided in this
Section.
If the maximum dollar limitation under this Section 4.9 and
under section 415 of the Code is increased in accordance with
cost of living adjustments pursuant to section 415, all benefits
in pay status that are subject to such limitation shall increase
to the maximum level permitted taking into account the cost of
living adjustment, provided that in no event shall the benefit be
<PAGE> 16
increased to more than the benefit level calculated under this
Plan without regard to the Code's dollar limitation.
Limits for Combined Plans
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SECTION 4.10 If a person participates at any time in both a
defined benefit plan and a defined contribution plan ever
maintained by the Employer or any Affiliated Company, the sum of
the defined benefit plan fraction and the defined contribution
plan fraction for any Year may not exceed 1.0. For purposes of
this Section, the defined contribution plan fraction for any Year
is the person's annual additions, as defined in section 415 of
the Code, in such Year and all prior Years of Service over the
lesser of the following amounts for such Year and for each prior
Year: (a) 1.25 times the dollar limitation of Code
section 415(c)(1)(A) for the pertinent Year or (b) 1.4 times the
amount that could be contributed under the percentage limitation
of Code section 415(c)(1)(B) for the individual. The defined
benefit plan fraction for any Year is the person's projected
annual benefit under all defined benefit plans maintained by the
Employer and any Affiliated Company over the lesser of the
following amounts for such Year and for each prior Year: (a)
1.25 times the dollar limitation of Code section 415(b)(1)(A) for
the pertinent Year or (b) 1.4 times the amount that could be
taken into account under the percentage limitation of Code
section 415(b)(1)(B) for the individual.
In the case of a Participant in the Plan as of the
limitation year beginning January 1, 1987, the limitations of
this Section 4.10 and of Section 4.9 shall not require a
reduction in the Participant's Accrued Benefit earned as of the
last limitation year ending December 31, 1986. Excess Accrued
Benefits shall be eliminated as of the limitation year commencing
January 1, 1987.
The Committee shall monitor the contributions and benefits
with respect to each Participant under all plans maintained by
the Employer and any Affiliated Company. The Committee in its
discretion shall reduce any such contributions or benefits to
prevent the combined defined benefit plan and defined
contribution plan fractions from exceeding 1.0.
<PAGE> 17
Suspension of Benefits
- ----------------------
SECTION 4.11 Neither an eligible Employee who continues working
beyond Normal Retirement Age nor an eligible Employee who has
commenced receiving Plan benefits and is subsequently re-employed
by the Employer shall be entitled to receive benefits from this
Plan during his period of employment with the Employer. Any such
withholding of benefits shall apply only with respect to any
month during which the Participant has 40 or more Hours of
Service with the Employer or an Affiliated Company which
maintains this Plan.
The Committee shall notify each Participant to whom this
suspension applies by personal delivery or first class mail
during the first month in which payments are withheld that the
Participant's benefits are suspended. Such notification shall
contain a description of the specific reasons why benefit
payments are being suspended, a general description and a copy of
this Section and a statement that the applicable Department of
Labor regulations may be found in section 2530.203-3 of Title 29
of the Code of Federal Regulations.
A Participant whose benefits have been suspended in
accordance with this Section shall be entitled to have his
benefit payments commence or resume, as the case may be, as of
the first payment date following the Participant's cessation of
employment. The amount of such payment shall be the greater of
(1) the benefit the Participant had been entitled to receive
immediately prior to the suspension provided for in this Section,
or (2) the benefit the Participant would be entitled to receive
upon his ultimate cessation of employment taking into account,
where required by the applicable benefits provisions, his service
and compensation figures during the suspension. No actuarial
adjustment shall be made to account for the period of suspension
or the fact that benefits commence after Normal Retirement Age
except, in the latter case, as may be provided for in the
deferred retirement provisions of Section 4.3.
<PAGE> 18
Subsidized Pre-ERISA Joint and Survivor Annuity
- -----------------------------------------------
SECTION 4.12 Appendix A sets forth the subsidized pre-ERISA
joint and survivor annuity for Employees who were Participants in
this Plan before the 1995 and 1996 mergers.
QDROs
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SECTION 4.13 Benefits shall be payable under this Plan to
an alternate payee pursuant to the terms of any qualified
domestic relations order. The Committee has the responsibility
for determining if a domestic relations order is qualified and
whether its payment terms are consistent with the terms of the
Plan.
Cost of Living
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SECTION 4.14 Cost of living increases are available as set
forth in the Appendices. Increases
Benefit Enhancements
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SECTION 4.15 Benefit enhancements are set forth in the
Appendices.
ARTICLE V
Form of Benefit Payments
Normal Form of Payment
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SECTION 5.1 The normal form of payment of retirement income
benefits shall be monthly installments determined as follows:
Unmarried Participant
(a) If the Participant is not married when he becomes
eligible to receive any benefits under this Plan, his retirement
income benefit shall be payable in the form of a straight life
annuity unless a different form of payment is indicated in
Appendix M. Under such annuity, retirement income payments will
be made monthly during the Participant's lifetime with no further
payments on his behalf after his death.
<PAGE> 19
Married Participant
(b) If the Participant is married when he becomes eligible
to receive any benefits under this Plan, the normal form of
benefit shall be a Qualified Joint and Survivor Annuity. The
amount of benefit payable in this form shall be the Actuarial
Equivalent of the benefit determined under Article III.
Election of Optional Method of Payment
(c) In accordance with the terms of this subsection, a
Participant may elect not to receive his benefit in the normal
form of payment and elect instead one of the optional forms of
benefits set forth in Section 5.2. The Committee shall provide
each Participant, not less than nine months before his Early
Retirement Date, a retirement application form describing the
normal and optional forms of benefit payments, including their
relative financial effects in terms of dollars per annuity
payment on the Participant. The form shall indicate the
Participant's right to waive a survivor annuity and his spouse's
right to consent to such waiver or refuse such consent. This
form shall provide a place for the Participant to indicate his
Annuity Starting Date, the election of the normal or an optional
method of payment and his Beneficiary or Contingent Annuitant,
whichever is applicable. The completed form shall be signed by
the Participant and bear the written consent of his spouse. The
spouse's consent shall acknowledge the effect of the election and
the form shall either be notarized or be witnessed by a Plan
representative and must be returned to the Committee within the
Election Period. Failure to obtain the spouse's consent or to
designate an optional form of payment or the revocation of a
previously designated optional method shall result in the
Participant's receiving his benefits in the normal form of
payment unless another election is made within the Election
Period.
In the event of the death of a Participant before his Early
or Normal Retirement Date, no optional benefit shall be paid.
Optional Forms of Benefits
- --------------------------
SECTION 5.2 The optional forms of benefit are set forth in
the Appendices.
<PAGE> 20
Facility of Payment
- -------------------
SECTION 5.3 If the Committee shall find that any person to
whom a benefit is payable from the Plan is unable to care for his
affairs, any payment due (unless a prior claim therefor shall
have been made by a duly appointed guardian, committee or legal
representative) may be paid to the spouse, child, parent or to
any person deemed by the Committee to have incurred expense for
such person otherwise entitled to payment. Any such payment
shall discharge the liability of the Plan therefor.
Time of Benefit Payments
- ------------------------
SECTION 5.4 In the event benefits become payable to a
Participant or, in the event of his death, become payable to his
Beneficiary, the Committee shall consult with the Participant or
his Beneficiary, as the case may be, concerning the manner and
the timing of benefit payments. Based on such consultation and
any other pertinent factors, the Committee in its sole discretion
shall direct the Trustee in writing concerning the manner and
timing of benefits to the recipient. In any event, all
distributions required under this Section shall be determined and
made in accordance with the Income Tax Regulations under Code
section 401(a)(9), including the minimum distribution incidental
benefit requirement of section 1.401(a)(9)-2 of the regulations,
which regulations are summarized generally in the following
paragraphs.
Unless the Committee in its discretion determines otherwise,
payments shall begin no later than the April 1 following the
calendar year during which the Participant dies, suffers a
Disability or reaches his Normal, Early or Deferred Retirement
Date, as the case may be, and has terminated employment with the
Employer or an Affiliated Company. In any event, benefit
payments must commence no later than the April 1 following the
calendar year in which a Participant attains age 70 1/2 if the
Participant has terminated employment with the Employer. In no
event shall payments begin later than sixty days after the close
of the Plan Year in which the latest of the following occurs:
(1) the Participant's attainment of age 65; (2) the termination
of the Participant's service with the Employer; (3) the 10th
anniversary of the Participant's commencement of participation in
<PAGE> 21
this Plan; or (4) for a Participant who commences participation
in the Plan after age 60, the fifth anniversary of the
Participant's commencement of participation in this Plan; or (5)
the date specified in writing to the Committee by the Participant
(but not later than the year in which the Participant attains age
70 1/2). Notwithstanding any direction by the Participant to the
contrary, all payments must be payable pursuant to a schedule
whereby the Participant's entire interest in the Plan is paid
over a period that does not extend beyond the life of the
Participant or over the lives of the Participant and any
individual he has designated as his Beneficiary (or over the life
expectancies of the Participant and his designated individual
Beneficiary). In addition, unless the benefit is payable as a
Qualified Joint and Survivor Annuity with the Participant's
spouse as the contingent annuitant, the payment method selected
must provide that more than 50 percent of the present value of
the payments projected to be paid to the Participant and his
Beneficiary will be paid to the Participant during his life
expectancy.
In the event of the death of a Participant, Former
Participant or Beneficiary while benefits are being paid under a
schedule which meets the requirements of the preceding paragraph
payments shall continue over a schedule at least as rapid as the
period selected. In the event of the death of a Participant or
Former Participant before benefit payments have commenced, any
death benefit shall be distributed within five years of death
unless the following conditions are met:
(a) payments are made to an individual Beneficiary
designated by the Participant;
(b) payments are made for the life of such individual
Beneficiary or over a period not extending beyond his life
expectancy; and
(c) payments commence within one year of death.
If the designated Beneficiary is the Participant's spouse,
payments may be delayed until the date the Participant would have
attained age 70 1/2. If the spouse dies before payments begin,
the rules of this paragraph shall be applied as if the spouse
were the Participant.
<PAGE> 22
Small Benefits
- --------------
SECTION 5.5 In the case of a Participant whose vested
percentage is 100 percent and whose monthly installments of
retirement income would be less than $10, the Committee may adopt
alternate payment procedures in lieu of making monthly
installments, provided that a benefit of actuarially equivalent
value is paid. In the case of a Participant whose vested
percentage is less than 100 percent, and whose monthly
installment of retirement income would be less than $10, the
Committee may adopt alternate payment procedures consistent with
the cash out rules of Section 4.6.
Rollovers
- ---------
SECTION 5.6 This Section applies to from Plan distributions
made on or after January 1, 1993. Notwithstanding any provision
of the Plan to the contrary that would otherwise limit a
Participant's election under this Section, a Participant may
elect, at the time and in the manner prescribed by the Committee,
to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the
Participant in a direct rollover.
An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the Participant
except that an eligible rollover distribution does not include
any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually made for the
life (or life expectancy) of the Participant or the joint lives
(or joint life expectancies) of the Participant and the
Participant's designated Beneficiary, or for a specified period
of ten years or more, any distribution to the extent such
distribution is required under section 401(a)(9) of the Code:
and the portion of any distribution that is not includable in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to Employer securities).
An eligible retirement plan is an individual retirement
account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a
<PAGE> 23
qualified trust described in section 401(a) of the Code, that
accepts the Participant's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
A Participant includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations
order, as defined in section 414(p) of the Code, are Participants
with regard to the interest of the spouse or former spouse. A
direct rollover is a payment by the Plan to the eligible
retirement plan specified by the Participant.
ARTICLE VI
Death Benefits
Intent of Plan
- --------------
SECTION 6.1 This Plan is designed primarily to provide
retirement income. There are, however, the circumstances set
forth in the following Sections under which death benefits are
payable from this Plan.
Contingent Annuity
- ------------------
SECTION 6.2 Upon the death of a Participant who was
receiving his benefit in the form of a contingent annuity, his
Contingent Annuitant shall receive the payments designated for
the Contingent Annuitant.
Pre-retirement Spouse's Benefit
- -------------------------------
SECTION 6.3 Upon the death of a married Participant before
retirement but after becoming vested in any part of his Accrued
Benefit, his surviving spouse shall be entitled to receive a
Qualified Pre-Retirement Survivor Annuity. In the case of a
Participant who had attained his Early Retirement Date on or
before his date of death, this benefit shall commence on the
first day of the month next following the date of death. In
other cases the benefit shall commence on the first day of the
<PAGE> 24
month following what would have been the Participant's earliest
retirement age. "Earliest Retirement Age" means the earliest
date on which, under the Plan, the Participant could have elected
to receive retirement benefits based on his service at the time
of his death.
The spouse of the Participant may have the right to elect a
form of payment other than the Qualified Pre-Retirement Survivor
Annuity as set forth in the Appendices.
SECTION 6.4 Other death benefits are available as set forth
in the Appendices.
ARTICLE VII
Employer Contributions
Employer Contributions
- ----------------------
SECTION 7.1 The Employer shall contribute such amounts as
it determines to be required for the purpose of meeting the costs
of the Plan. The contributions will be determined by annual
actuarial valuations on the basis of such actuarial methods and
assumptions as are adopted by the Committee after consultation
with an Actuary. The Employer shall comply with the applicable
minimum funding standards provided in section 412 of the Code.
Employee Contributions
- ----------------------
SECTION 7.2 Employee contributions are neither required nor
permitted under this Plan.
Diversion from Employees' Benefit Prohibited
- ---------------------------------------------
SECTION 7.3 All contributions by the Employer are for the
exclusive benefit of Participants and any other person entitled
to benefits under the Plan. Prior to the satisfaction of all
liabilities with respect to such Participants and other persons,
no amounts arising from the Employer's contributions will revert
to the Employer.
<PAGE> 25
Return of Erroneous Contributions
- ---------------------------------
SECTION 7.4 Notwithstanding Section 7.3, upon the
Committee's request any contribution which was made by a mistake
of fact or which is disallowed as a deduction under the Code, or
which is made for a Year in which in the Plan is held not to be
initially qualified under the Code, shall be returned to the
Employer within one year after the payment of the contribution,
the disallowance of the deduction (to the extent disallowed) or
the denial of the initial qualification, whichever is applicable.
All contributions to this Plan are made contingent upon their
being deductible under the Code.
Funding Policy
- --------------
SECTION 7.5 The Committee shall from time to time
communicate the liquidity and other needs of the Plan to the
Trustee.
ARTICLE VIII
Trust Fund
All contributions under this Plan shall be paid to the
Trustee and deposited in the Trust Fund. The assets in the Trust
Fund, including investment income, shall be held and invested by
the Trustee or, if one has been appointed, by an Investment
Manager in accordance with the terms of the trust agreement or
investment manager agreement as the case may be. Benefits
payable under this Plan shall be provided from the Trust Fund as
the circumstances require. All assets of the Trust Fund,
including investment income, shall be retained for the exclusive
benefit of Participants, Former Participants, Contingent
Annuitants and Beneficiaries and shall be used to pay benefits to
such persons or to pay administrative expenses of the Plan and
Trust Fund to the extent not paid by the Employer and shall not
revert to or inure to the benefit of the Employer.
ARTICLE IX
Employees' Benefit Committee and Other Fiduciaries
<PAGE> 26
Appointment of Committee
- ------------------------
SECTION 9.1 The Board shall appoint an Employees' Benefit
Committee to administer the Plan. Any person, including an
employee of the Employer or an Affiliated Company, is eligible
for appointment as a member of the Committee. Such members shall
serve at the pleasure of the Board. Any member may resign by
delivering his written resignation to the Board. Vacancies in
the Committee arising by resignation, death, removal or
otherwise, shall be filled by the Board.
Named Fiduciary and Plan Administrator
- --------------------------------------
SECTION 9.2 The Committee shall be the named fiduciary and
plan administrator as these terms are used in ERISA. The
Committee shall appoint a secretary to assist it in administering
this Plan. The secretary shall also be the agent for the service
of legal process. The Committee may appoint other assistants as
may be required to administer this Plan, including one or more
departmental or Affiliated Company committees which shall have
such authority as may be delegated by the Committee.
Powers and Duties of Committee
- ------------------------------
SECTION 9.3 The Committee shall administer the Plan in
accordance with its terms and shall have all powers necessary to
carry out the provisions of the Plan, except such powers as are
specifically reserved to the Board or some other person. The
Committee's powers include the power to make and publish such
rules and regulations as it may deem necessary to carry out the
provisions of the Plan. The Committee shall interpret the Plan
and shall determine all questions arising in the administration,
interpretation, and application of the Plan. Any such
determination by the Committee shall be conclusive and binding on
all persons.
Operation of Committee
- ----------------------
SECTION 9.4 The Committee shall act by
a majority of its members at the time in office, and such action
may be taken either by a vote at a meeting or without a meeting.
Any action taken without a meeting shall be reflected in a
<PAGE> 27
written instrument signed by a majority of the members of the
Committee. A member of the Committee who is also a Participant
shall not vote on any question relating specifically to himself.
Any such question shall be decided by the majority of the
remaining members of the Committee. The Committee may authorize
any one or more of its members to execute any document or
documents on behalf of the Committee, in which event the
Committee shall notify the Trustee and the Investment Manager in
writing of such action and the name or names of its member or
members so designated. The Trustee and the Investment Manager
thereafter shall accept and rely upon any document executed by
such member or members as representing action by the Committee
until the Committee shall file with the Trustee and the
Investment Manager a written revocation of such designation. The
Committee may adopt such by-laws or regulations as it deems
desirable for the conduct of its affairs. The Committee shall
keep a record of all its proceedings and acts and shall keep all
such books of account, records, and other data as may be
necessary for the proper administration of the Plan.
Power to Appoint Advisors
- -------------------------
SECTION 9.5 The Committee may appoint such Actuaries,
accountants, attorneys, specialists, and other persons as it
deems necessary or desirable in connection with the
administration of this Plan. Such accountants and attorneys may,
but need not, be accountants and attorneys for the Employer. The
Committee shall be entitled to rely upon any opinions or reports
which shall be furnished to it by any such Actuary, accountant,
attorney or other specialist.
Expenses of Committee
- ---------------------
SECTION 9.6 The members of the Committee shall serve
without compensation for services as such, but all reasonable
expenses of the Committee shall be paid by the Employer. Such
expenses shall include any expenses incident to the functioning
of the Committee, including, but not limited to, fees of
Actuaries, accountants, attorneys, and other specialists, and
other costs of administering the Plan.
<PAGE> 28
Duties of Fiduciaries
- ---------------------
SECTION 9.7 All fiduciaries under the Plan and Trust shall
act solely in the interests of the Participants and their
Beneficiaries and in accordance with the terms and provisions of
the Plan and Trust insofar as such documents are consistent with
ERISA, and with the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent person acting in
a like capacity and familiar with such matters would use in the
conduct of an enterprise of like character and with like aims.
Any person may serve in more than one fiduciary capacity with
respect to the Plan and Trust.
Liability of Members
- --------------------
SECTION 9.8 No member of the Committee shall incur any
liability for any action or failure to act, excepting only
liability for his own breach of fiduciary duty. To the extent
not covered by insurance, the Employer shall indemnify each
member of the Committee and any employee acting on its behalf
against any and all claims, loss, damages, expense, and liability
arising from any action or failure to act under this Plan.
Allocation of Responsibility
- ----------------------------
SECTION 9.9 The Board, Trustee, Investment Manager and the
committees established to administer the Plan possess certain
specified powers, duties, responsibilities and obligations under
the Plan and Trust. It is intended under this Plan that each be
solely responsible for the proper exercise of its own functions
and that each shall not be responsible for any act or failure to
act of another, unless otherwise responsible as a breach of its
own fiduciary duty.
a. Generally, the Board shall be responsible for
appointing the members of the committees it may establish to
administer this Plan. If this Plan shall at any time permit
employees to invest any portion of Plan assets in Employer
securities, the Board shall have sole authority to terminate this
Plan and to make any discretionary amendments, while any Board-
appointed committee given such authority shall be responsible for
making mandatory, non-discretionary amendments and for
<PAGE> 29
recommending to the Board any other Plan amendments it deems
appropriate.
b. The Board-appointed committees so authorized shall
have the responsibilities of making Plan amendments not
specifically reserved to the Board in the preceding subsection,
including sole discretion to amend the Plan if employees are not
authorized to invest Plan assets in Employer securities, to
select Investment Managers, to direct the Trustee and the
Investment Managers with respect to all matters relating to the
investment of Plan assets, to review and report to the Board on
the investment policy and performance of Plan assets and
generally to administer the Plan according to its terms.
c. The Trustee or the Investment Manager, as the case
may be, is responsible for the management and control of the
Plan's assets as specifically provided in the trust agreement or
investment manager agreement.
d. The Board may dissolve any committee it appoints
or reserve to itself any of its powers previously delegated to a
Board-appointed committee. In addition, the Board may reorganize
the committees it establishes from time to time and reallocate
their responsibilities between them or assign them to other
persons or committees provided that the Employees' Benefit
Committee shall at all times continue as plan administrator and
named fiduciary as these terms are defined in ERISA unless the
Board formally amends the Plan to reallocate these
responsibilities. The Board and the various committees may
designate persons, including committees, other than named
fiduciaries to carry out their responsibilities (other than
trustee responsibilities) under the Plan.
Claims Review Procedure
- -----------------------
SECTION 9.10 The Committee shall maintain a procedure under
which any Participant or Beneficiary (hereinafter called
"claimant") whose claim for benefits under the Plan has been
denied will receive written notice which clearly sets forth the
specific reason or reasons for such denial, the specific Plan
provision or provisions on which the denial is based, any
additional information necessary for the claimant to perfect the
<PAGE> 30
claim, if possible, an explanation of why such additional
information is needed, and an explanation of the Plan's claims
review procedure. Said procedure should allow a claimant at
least 60 days after receipt of the written notice of denial to
request a review of such denied claim, and the Committee shall
make its decision based on such review within 60 days (120 days
if special circumstances require more time) of its receipt of the
request for review. The decision on review shall be in writing
and shall clearly describe the reasons for the Committee's
decision.
ARTICLE X
Amendments
Any amendment may be made to this Plan which does not cause
any part of the Plan's assets to be used for, or diverted to, any
purpose other than the exclusive benefit of Participants, Former
Participants, Contingent Annuitants or Beneficiaries, provided
however, that any amendment may be made, with or without
retroactive effect, if such amendment is necessary or desirable
to comply with applicable law. Except in the case where approved
by the Secretary of Labor because of substantial business
hardship, as provided in section 412(c)(8) of the Code, no
amendment shall be made to the Plan if it would decrease the
Accrued Benefit of any Participant, eliminate or reduce an early
retirement benefit or a retirement-type subsidy or eliminate an
optional form of benefit as may be provided in regulations under
Code section 411(d)(6).
ARTICLE XI
Successor Employer and Merger or
Consolidation of Plans
Successor Employer
- ------------------
SECTION 11.1 In the event of the dissolution, merger,
consolidation or reorganization of the Employer, provision may be
made by which the Plan and Trust will be continued by the
successor, and, in that event, such successor shall be
substituted for the Employer under the Plan. The substitution of
the successor shall constitute an assumption of Plan liabilities
by the successor and the successor shall have all of the powers,
<PAGE> 31
duties and responsibilities of the Employer under the Plan.
Plan Assets
- ------------
SECTION 11.2 In the event of any merger or consolidation of
the Plan with, or transfer in whole or part, of the assets and
liabilities of the Trust after September 2, 1974, to another
trust held under any other plan of deferred compensation
maintained or to be established for the benefit of all or some of
the Participants of this Plan, the assets of the Plan applicable
to such Participants shall be transferred to the other trust only
if:
(a) each Participant would (if either this Plan or the
other plan then terminated) receive a benefit immediately after
the merger, consolidation or transfer which is equal to or
greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer (if this
Plan had then terminated);
(b) resolutions of the Boards of Directors of the
Employer under this Plan, and of any new or successor employer of
the affected Participants, shall authorize such transfer of
assets; and, in the case of the new or successor employer of the
affected Participants, its resolutions shall include an
assumption of liabilities with respect to such Participants'
inclusion in the new employer's plan; and
(c) such other plan and trust are qualified under
Sections 401(a) and 501(a) of the Code.
ARTICLE XII
Plan Termination
Right to Terminate
- -------------------
SECTION 12.1 In accordance with the procedures set forth in
this Article, and consistent with the provisions of title IV of
ERISA, the Board may terminate this Plan at any time. In the
event the Plan is terminated or partially terminated, whether by
formal action or in actual operation, the funded Accrued Benefits
of all affected Participants shall become fully vested.
<PAGE> 32
Partial Termination
- -------------------
SECTION 12.2 Upon termination of the Plan with respect to a
group of Participants which constitutes a partial termination of
the Plan, the Accrued Benefits of all affected Participants shall
become fully vested. The Trustee shall, in accordance with the
directions of the Committee, allocate and segregate for the
benefit of the Participants or Former Participants with respect
to which the Plan is being terminated the proportionate interest
of such Participants in the Trust Fund.
Allocation of the Plan's Assets
- -------------------------------
SECTION 12.3 If the Plan is to be of the terminated, by
written notice or in Plan's Assets actual operation, it shall
first be amended to provide for the allocation of the Plan's
assets in accordance with the priorities established by
section 4044 of ERISA and regulations thereunder. Any excess
assets remaining after all liabilities of the Plan to
Participants and their Beneficiaries have been satisfied shall be
distributed to the Employer. In the event that Plan liabilities
exceed Plan assets, the Employer's liability shall be limited to
paying only such additional amounts which when added to existing
Plan assets may be required to pay benefits which are guaranteed
by the Pension Benefit Guaranty Corporation under Section 4022 of
ERISA.
Nondiscrimination Payment of Benefits
- -------------------------------------
SECTION 12.4 In the event of plan termination, the benefits
paid from this Plan in to any current or former Highly
Compensated Employee shall be limited as necessary to satisfy the
nondiscrimination requirements of Code section 401(a)(4).
Benefit Limits for Restricted Employees
- ---------------------------------------
SECTION 12.5 (a) Subject to subsection (b), benefit
payments to a "restricted employee" shall not exceed the periodic
amounts payable under a single life annuity that is actuarially
equivalent to the employee's entire Plan benefit. This limit
shall not apply if either of the following is true:
<PAGE> 33
(1) Immediately after a payment of a benefit to the
restricted employee Plan assets equal at least 110 percent of the
Plan's current liabilities.
(2) The value of the benefit paid is less than one
percent of the Plan's current liabilities.
For this purpose, "benefits" means all accrued and other Plan
benefits; "benefits paid" includes regular payments, and death
and disability payments; and "restricted employee" means one of
the highest-paid 25 of the current and former Highly Compensated
Employees with benefits under the Plan.
(b) Benefits may be paid to a restricted employee in a
lump sum or in faster installments than permitted under
subsection (a) if the following conditions are met:
(1) Before receiving any payments the restricted
employee agrees in writing to repay the actuarial value of the
amounts by which the payments exceed the amounts otherwise
allowed under subsection (a) if the Plan is terminated at a time
when neither of the tests (1) and (2) in subsection (a) are met.
(2) The employee guarantees repayment under (1) by
fulfilling the following conditions:
(i) Providing security acceptable to the
Committee equal to 125 percent of the amount that would have to
be repaid if the Plan terminated on the date of distribution.
(ii) Agreeing to keep the security arrangement in
effect and to provide additional security from time to time as
may be needed to restore the security to the 125 percent level if
the market value of the security ever becomes less than 110
percent of the repayable amount.
ARTICLE XIII
Top-Heavy Provisions
Rules to Apply if Plan Top-Heavy
- --------------------------------
<PAGE> 34
SECTION 13.1 Notwithstanding any other relevant provision
of this Plan to the contrary, the following rules will apply for
any Plan Year that the Plan becomes "top-heavy" (as defined in
Section 13.2):
(a) Vesting. Vesting shall continue at 100% at all
times.
(b) Minimum Benefit and Accrual. For each Year the
Plan is deemed "top-heavy" each participant who is a non-key
employee shall have a minimum formula benefit and Accrued Benefit
equal to the lesser of: (i) 20 percent of such non-key
employee's average compensation; or (ii) 2 percent of his average
compensation times his Years of Service. Such benefit shall be
in the form of a life annuity. For the purposes of making this
computation, the term "average compensation" means the average of
the five consecutive Plan Years during which such Participant has
the greatest aggregate compensation from the Employer.
Compensation means the compensation of the Participant from the
Employer for the year. The minimum benefit shall be payable
regardless of a non-key employee's level of compensation or
whether he is employed on a specified date, such as the last day
of the Plan Year.
(c) Limitation on Benefits. In applying the dollar
limitations under Section 415(e) of the Code, the 1.25 limitation
shall be supplanted by a 1.0 limitation for each year during
which the Plan is top-heavy.
(d) Maximum Compensation. The maximum annual
compensation of each employee that may be taken into account
under the Plan shall not exceed $150,000 (or such larger amount
based on cost of living adjustments as may be permitted under the
Code).
Top-Heavy Definition
- --------------------
SECTION 13.2 For purposes of this Section, the Plan will be
considered "top-heavy" if on any given determination date (the
last day of preceding Plan Year or, in the case of the Plan's
first year, the last day of such Year) the sum of the present
value of the total accrued benefits for key employees is more
<PAGE> 35
than 60 percent of the present value of the total accrued
benefits of all employees. The present value of accrued benefits
shall be determined on the annual valuation date (the date used
for computing plan costs for minimum funding purposes) that falls
within the 12-month period ending on the determination date. The
present value shall include distributions made during any given
Plan Year containing the determination date and the preceding
four Plan Years but shall not include the present value of the
benefits for any person who has not received any compensation
from the Employer at any time during the five-year period ending
on the determination date. The method of determining the
top-heavy ratio shall be made in accordance with Code
section 416.
In making the top-heavy calculation, (a) all the Employer's
plans in which a key employee participates shall be aggregated
with all other Employer plans which enable a plan in which a key
employee participates to satisfy the Code's non-discrimination
requirements; and (b) all Employer plans not included in
subparagraph (a), above, may be aggregated with the Employer's
plans included in subparagraph (a), above, if all of the
aggregated plans would be comparable and satisfy the Code's
non-discrimination requirements.
Key Employee Definition
- -----------------------
SECTION 13.3 A key employee is any employee or former
employee who at any time during the Plan Year or the four
preceding Plan Years is such within the meaning of Code
section 416. As of the effective date, the term key employee
includes the following individuals:
(a) an officer (but not more than 50 persons or, if
lesser, the greater of 3 or 10 percent of employees) having an
annual compensation greater than 50 percent of the dollar limit
for benefits payable from a defined benefit plan under Code
section 415(b)(1)(A);
(b) one of 10 employees owning the largest interests
of the Employer (and having an annual compensation from the
Employer which is at least equal to the dollar limitation for
contributions to defined contribution plans as specified in Code
section 415(c)(1)(A));
<PAGE> 36
(c) a five-percent owner of the Employer; and
(d) a one-percent owner of the Employer whose annual
compensation from the Employer exceeds $150,000.
Relationship of the Normal and the Top-Heavy Vesting Schedules
- --------------------------------------------------------------
SECTION 13.4 If the Plan's top-heavy status changes and
this change alters the Plan's normal vesting schedule, no
Participant's vested accrued benefit immediately prior to such
change in status shall be diminished on account of the change in
the vesting schedule. In addition, the vesting for each
Participant in the Plan at the time of the change in status shall
be determined under whichever schedule provides the greatest
vested benefit at any particular point in time.
Participation in Other Plans
- ----------------------------
SECTION 13.5 A non-key employee who participates in both a
defined contribution plan and a defined benefit plan of the
Company shall not be entitled to receive minimum benefits and/or
minimum contributions under all such plans. Instead, the
employee shall receive the minimum benefit as set forth in
Section 13.1(b).
ARTICLE XIV
Miscellaneous
Non-guarantee of Employment
- --------------------------
SECTION 14.1 Nothing contained in this Plan shall be
construed as a contract of employment between the Employer and
any Employee, or as a right of any Employee to be continued in
the employment of the Employer, or as a limitation on the right
of the Employer to discharge any of its Employees, with or
without cause.
Right to Former Plan Assets
- ---------------------------
SECTION 14.2 No Participant, Former Participant, Contingent
Annuitant or Beneficiary shall have any right to, or interest in,
any assets of the Plan upon termination of employment or
<PAGE> 37
otherwise, except as provided from time to time under this Plan,
and then only to the extent of the benefits payable under the
Plan to such Participant, Former Participant, Contingent
Annuitant or Beneficiary out of the assets of the Plan. All
payments of benefits provided for in this Plan shall be made
solely out of the assets of the Plan.
Non-alienation of Benefits
- -------------------------
SECTION 14.3 Benefits payable under this Plan shall not be
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution, or levy of any kind, either voluntary or involuntary,
including any such liability which arises from the Participant's
bankruptcy prior to actually being received by the person
entitled to the benefit under the terms of the Plan. Any attempt
to anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge or otherwise dispose of any right to benefits
payable hereunder, shall be void. The Plan shall not in any
manner be liable for, or subject to, the debts, contracts,
liabilities, engagements or torts of any person entitled to
benefits hereunder.
Notwithstanding the foregoing, Plan benefits may be paid
pursuant to a qualified domestic relations order as defined in
Code section 414(p) pursuant to procedures adopted by the
Committee. In addition, a Participant, Beneficiary or Contingent
Annuitant whose benefits are in pay status may make a voluntary,
revocable assignment or alienation of future benefit payments not
to exceed, when all such amounts are aggregated, 10 percent of
each benefit payment. No part of any such voluntary assignment
or alienation may be used for defraying plan administrative
costs. All requests for benefit assignments shall be in writing
to the Committee on a form approved by it and pursuant to such
rules as the Committee may prescribe.
Governing Law
- -------------
SECTION 14.4 To the extent not preempted by federal law,
this Plan shall be interpreted and enforced in accordance with
the laws of New York.
<PAGE> 38
IN WITNESS WHEREOF, the Employer has caused its duly
authorized officer to execute this Plan document on its behalf
this 31st day of December, 1996.
FRONTIER CORPORATION
By: /s/ Barbara J. LaVerdi
--------------------------
Barbara J. LaVerdi
Its: Assistant Secretary
<PAGE> 39
APPENDIX A
FRONTIER CORPORATION/ROCHESTER PLAN
The provisions set forth in this Appendix pertain to those
Participants who had frozen benefits under this Plan prior to the
1995 and 1996 mergers.
Actuarial Equivalent, Section 2.2:
Interest: 8%
Mortality Table: 1984 George B. Buck Mortality Table assuming
55% male and 45% female;
provided, however, that for purposes of determining the present
value of any lump sum payout: (1) for amounts not in excess of
$25,000 the interest assumption shall be the rate that would have
been used by the Pension Benefit Guaranty Corporation ("PBGC") as
of the distribution date for purposes of determining the present
value of a lump sum distribution on termination of a plan; (2) if
the lump sum payout exceeds $25,000 using the PBGC rate, the
interest assumption shall be 120 percent of the PBGC rate,
provided that the amount determined under the 120 percent formula
shall never cause the amount to be less than $25,000.
Disability, Section 2.14: Disability means a physical or mental
condition which, in the judgment of the Committee, based on
medical reports and other evidence satisfactory to the Committee,
will permanently prevent an Employee from satisfactorily
performing his usual duties for the Employer.
Disability Benefit, Section 4.4: A Participant who suffers a
Disability and is eligible to receive benefits under the
Employer's Long Term Disability Benefit Plan or under the
Employer's Short Term Disability Plan shall be attributed, for
purposes of determining eligibility to receive early retirement
benefits only, with a period of service of not longer than one
Year of Service for the period during which he was absent from
work due to his Disability. If the Participant is not eligible
for early retirement and does not return to employment within one
year following the first day of his absence from work because of
<PAGE> 40
the Disability, he shall be considered a terminated Participant,
eligible for deferred vested benefits under Section 4.5.
Normal Retirement Age, Section 2.25: Normal Retirement Age means
the later of age 65 or the fifth anniversary of the Participant's
commencement of participation in the Plan.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse which is 50% of the amount which is payable
during the joint lives of the Participant and his spouse. The
amount payable during the joint lives of the Participant and his
spouse shall be the Actuarial Equivalent, determined on an
individual Participant basis, of the amount otherwise payable to
the Participant as a life annuity in accordance with the
applicable benefit formula of Article III, provided that in no
event shall any reduction from the life annuity exceed 10 percent
of the life annuity amount. If the Participant's spouse
predeceases the Participant, the benefits thereafter payable to
the Participant shall revert to the unreduced amount to which the
Participant is entitled in accordance with the applicable benefit
formula of Article III.
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant in an amount equal to the
amount payable to such surviving spouse if benefits had been paid
as a Qualified Joint and Survivor Annuity. If the Participant
dies after his Early Retirement Date the benefit amount shall be
determined as if the Participant had retired with an immediate
Qualified Joint and Survivor Annuity on the day before his death.
In the case of a Participant who has any vested Accrued Benefit
and who dies on or before his earliest retirement date, the
benefit amount shall be calculated as if he had (a) separated
from service on his date of death; (b) survived to his earliest
retirement date; (c) retired with an immediate Qualified Joint
and Survivor Annuity on his earliest retirement date; and (d)
died on the day after what would have been his earliest
retirement date. "Earliest retirement date" means the earliest
date on which, under the Plan, the Participant could have elected
to receive retirement benefits based on his service at the time
of his death.
<PAGE> 41
Year of Service, Section 2.35: Year of Service means any Plan
Year during which an Employee completes at least 1,000 Hours of
Service with the Employer or with an Affiliated Company. A
Participant shall also be given credit for each month of service
not included in a period for which a Year of Service has been
earned under the 1,000 hour rule, subject to the following:
- the Participant must have worked at least 130 Hours of
Service in the month;
- the service must have been performed before the
Participant commenced participation in this Plan;
- the service must have been performed for Frontier
Corporation but not already credited under any defined benefit
plan of Frontier Corporation or any Affiliated Company; and
- the service will be credited only to calculate the amount
of a Participant's entitlement to an early or normal retirement
service pension.
Accrued Benefit, Section 3.1: Accrued Benefits under this Plan
are frozen as of December 31, 1996. For purposes of calculating
Accrued Benefits as of December 31, 1996, effective with respect
to all Participants on the active payroll (or the inactive
payroll but receiving benefits under the Employer's Long Term
Disability Benefit Plan) on or after August 16, 1995, the annual
rate of retirement income benefit commencing on a Participant's
Normal Retirement Date shall be the sum of (1) and (2) where
(1) equals 1.39 percent times the Participant's Years of
Service times the Participant's average annual Compensation
during the three consecutive Years of Service during which the
Participant was paid the highest annual Compensation, but not to
exceed the Social Security Wage Base in effect during the
calendar year preceding retirement; and
(2) equals 1.54 percent times the Participant's Years of
Service times the average of his last three years of Compensation
preceding retirement in excess of the Social Security Wage Base
in effect during the calendar year preceding retirement.
<PAGE> 42
The three year average compensation factor used in (1) above
shall be the higher of the average obtained using calendar years
of service or the average obtained using 12-consecutive-month
years of service ending on a Participant's date of retirement or
any anniversary thereof.
In applying this formula with respect to any Participant
whose Compensation includes amounts he has contributed to the
Employer's Employees' Retirement Savings Plan, all such employee
tax-deferred contributions shall be deemed to be Compensation in
excess of the Social Security Wage Base.
This formula benefit is computed on the basis of the benefit
being payable in the form of an annuity for the life of the
Participant with no further payments after his death. The actual
amount of accrual or monthly benefit shall depend on the actual
form of payment being paid in accordance with Article V which
shall, in any event, be a benefit of actuarially equivalent value
of the rate determined under this Section 3.1.
In addition to the Accrued Benefit calculated in the
previous paragraph, each Plan Participant who is on the active
payroll (or on the inactive payroll but receiving benefits under
the Employer's Long Term Disability Benefit Plan) on or after
August 16, 1995, who has five or more Years of Service under this
Plan upon the earlier of (1) termination of employment or (2)
December 31, 1996, shall have his or her Accrued Benefit at the
earlier of (1) termination of employment or (2) December 31,
1996, increased by 20 percent; provided, however, that such 20%
increase shall apply only to the Participant's Accrued Benefit
under this Section 3.1, and shall not apply to any enhanced
benefit otherwise available under this Plan.
Unreduced Early Retirement Benefit, Section 4.2: A Participant
who reaches age 52 and completes at least 17 Years of
Service or who completes at least 27 Years of Service, regardless
of his age, may elect early retirement. The amount of his early
retirement benefit shall be his Accrued Benefit. This benefit
shall be payable on the Participant's Early Retirement Date
without reduction to take into account payment prior to Normal
Retirement Age.
<PAGE> 43
Reduced Early Retirement Benefit, Section 4.2: Each Participant
who reaches age 47 but not 52 and who has completed at least 22
Years of Service may elect early retirement. The amount of this
benefit shall be his Accrued Benefit. If the benefit is payable
prior to age 52 it shall be reduced by 0.5 percent for each
calendar month or part thereof by which his age at termination of
employment is less than 52 years.
Deferred Retirement, Section 4.3: Any Participant who continues
in employment after reaching his Normal Retirement Age shall
receive a benefit equal to his Accrued Benefit. No actuarial
adjustment shall be made to account for the benefit payments
commencing after Normal Retirement Age.
Deferred Vested Benefit, Section 4.5: Effective August 16, 1995,
all Accrued Benefits are 100% vested. The amount of a
Participant's benefit shall be equal to his Accrued Benefit as of
his termination date. The deferred vested benefit shall be paid
commencing on what would have been the Participant's Normal
Retirement Date unless it is cashed out earlier in accordance
with Section 4.6 or, at the Participant's election, is paid at
what would have been the Participant's Early Retirement Date,
providing that the Participant has sufficient service and has
reached the age or ages described above for reduced or unreduced
early retirement. If a Participant does not meet the
requirements for early retirement and elects to have his deferred
vested benefit paid prior to Normal Retirement Age, the monthly
benefit shall be reduced to the Actuarial Equivalent of the
benefit which would have been payable at his Normal Retirement
Date.
Subsidized Pre-ERISA Joint and Survivor Annuity, Section 4.12:
Effective with the first benefit payment payable on or after July
1, 1989, benefits paid in the form of a joint and one-third
survivor annuity to pre-ERISA retirees and to surviving
annuitants of pre-ERISA retirees shall be paid in the form of a
joint and 50 percent survivor annuity. The benefit payable
during the joint lives of the retiree and the retiree's spouse
shall not be decreased actuarially to reflect the increase from
33 1/3 percent to 50 percent in the benefit payable to the
retiree's surviving annuitant. In addition, any actuarial
reduction for the survivor option shall not exceed 10 percent of
<PAGE> 44
the life annuity amount. The increased benefits payable under
this Section shall apply only to future monthly payments.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
Both optional forms are Actuarial Equivalents.
OPTION A: In the case of a married Participant, a straight
life annuity.
OPTION B: A reduced benefit payable during the
Participant's life equal to 90 percent of the benefit to which he
would otherwise be entitled with the provision that after his
death an income at one-half the rate of his reduced benefit
payable to his designated parent as Contingent Annuitant during
the parent's life. If the parent predeceases the Participant,
the benefits thereafter payable to the Participant shall revert
to the unreduced amount to which he would have otherwise been
entitled.
Sickness and Pensioner Death Benefits, Section 6.4: In the event
of the death of any pensioner who retired on or prior to December
31, 1996, and who is receiving normal, early, deferred or
disability pension benefits in accordance with the provisions of
Sections 4.1, 4.2, 4.3, or 4.4, which death is caused by sickness
or injury, a death benefit will be paid to:
(a) the spouse of the deceased pensioner if the spouse is
legally married to him at the time of his death; or
(b) the unmarried child or children under the age of 23
years (or over that age if physically or mentally incapable of
self-support) of the deceased pensioner who was actually
supported in whole or in part by the deceased pensioner at the
time of his death; or
(c) a dependent parent who lives in the same household with
the pensioner or who lives in a separate household in the
vicinity which is provided for the parent by the pensioner; or
(d) a trust for the benefit of any of the above
beneficiaries.
<PAGE> 45
If none of the enumerated beneficiaries survives the
pensioner, no death benefit will be paid under this Plan. If two
or more of the enumerated beneficiaries survive the pensioner,
the Committee, in its sole discretion, may pay the death benefit
to one of the beneficiaries or allocate it among the
beneficiaries in such portions as it may determine.
The amount of the death benefit shall equal 12 months' wages
computed at the pensioner's most recent rate of pay at the date
of death or at retirement, as the case may be. If the pensioner
was not employed full time, the death benefit shall be prorated
in accordance with the ratio that the individual's usual Hours of
Service during a Plan Year bear to the Hours of Service of full
time employees during a Plan Year. For purposes of this section,
the term rate of pay means the total of the following amounts:
(1) the Employee's annualized base rate of pay at death, (2) all
bonuses paid to the Employee in the calendar year preceding his
death and (3) all commissions paid to the Employee in the
calendar year preceding his death. The term rate of pay shall
not include overtime, tier payments or any other form of special
or nonrecurring compensation except for bonuses and commissions
included under the preceding sentence.
The term rate of pay shall not include overtime or any other
form of special or nonrecurring compensation except for bonuses
and commissions included under the preceding sentence, or any
amounts in excess of $150,000 (as adjusted for cost of living
increases) paid to an Employee during any Plan Year.
A pensioner may file with the Committee a written direction
that the death benefit will be paid to his Beneficiary in equal
monthly installments over any period of years up to ten. In the
absence of such written direction, the Committee in its sole
discretion may pay the death benefit in a lump sum or in
installment payments, the number and size of which may be varied
by the Committee as circumstances may indicate.
<PAGE> 46
APPENDIX B
FRONTIER COMMUNICATIONS OF MINNESOTA, INC.
The provisions set forth in this Appendix pertain to those
Participants who have frozen benefits which were transferred to
this Plan from the Frontier Communications of Minnesota, Inc.
Retirement Pension Plan.
Actuarial Equivalent, Section 2.2:
Interest: 8%
Mortality Assumptions: 1979 George B. Buck Mortality Table
set forward one year for both males and females, assuming 60%
male and 40% female;
provided, however, that for purposes of determining the present
value of any lump sum payout: (1) for amounts not in excess of
$25,000 the interest assumption shall be the rate that would have
been used by the Pension Benefit Guaranty Corporation ("PBGC") as
of the distribution date for purposes of determining the present
value of a lump sum distribution on termination of a plan; (2) if
the lump sum payout exceeds $25,000 using the PBGC rate, the
interest assumption shall be 120 percent of the PBGC rate,
provided that the amount determined under the 120 percent formula
shall never cause the amount to be less than $25,000.
When calculating Actuarial Equivalent under Section 5.1(b),
table set forth at the end of this Appendix shall be used.
Disability, Section 2.14: Disability means that an Employee
suffers a disability as this term is used in the Employer's long
term disability policy, provided that the Committee shall
determine whether a disability has occurred in its sole
discretion for the purposes of this Plan.
Disability Benefit, Section 4.4: A Participant who suffers a
Disability and is eligible to receive benefits under the
Employer's Long Term Disability Benefit Plan or under the
Employer's Short Term Disability Plan shall be attributed, for
purposes of determining eligibility to receive early retirement
<PAGE> 47
benefits only, with a period of service of not longer than one
Year of Service for the period during which he was absent from
work due to his Disability. If the Participant is not eligible
for early retirement and does not return to employment within one
year following the first day of his absence from work because of
the Disability, he shall be considered a terminated Participant,
eligible for deferred vested benefits under Section 4.5.
Year of Service, Section 2.35: Year of Service means each full
year of elapsed service, computed on the basis of one full year
of elapsed service for each 365 days of elapsed service. Elapsed
service means the time elapsed between an Employee's Employment
Date and his last severance from service date, subject to the
following rules:
(a) Elapsed service shall not include any period of
severance occurring between such Employee's Employment Date and
last severance from service Date;
(b) Elapsed Service shall not include any elapsed service
previously completed by the Employee before five consecutive
one-year Breaks in Service if such five consecutive one-year
Breaks in Service occur before the Employee has a non-forfeitable
right to benefits derived from Employer contributions under the
Plan and if the number of consecutive one-year Breaks in Service
equals or exceeds the aggregate number of full years of elapsed
service completed by the Employee (after disregarding any elapsed
service not required to be taken into consideration by reason of
a prior application of this rule) prior to such one-year Breaks
in Service.
Severance from service Date means the earlier of:
(a) the date on which an Employee terminates employment
with an Affiliated Company by reason of a divestiture,
resignation, retirement, discharge or death (including such a
termination while an employee is on a maternity or paternity
leave, other approved leave of absence or layoff, regardless of
whether such termination occurs before the first anniversary of
such leave or layoff); or
<PAGE> 48
(b) the first anniversary of the beginning of an Employee's
separation from service with an Affiliated Company (including a
separation by reason of a maternity or paternity leave, any other
approved leave of absence or layoff) which is longer than 12
consecutive months and is not interrupted by a termination
described in paragraph (a) above.
Notwithstanding the foregoing, an Employee's severance from
service date shall not begin until any period of disability for
such Employee has expired.
Period of severance means the period of time commencing on
an Employee's severance from service date and ending on his next
occurring re-employment commencement date.
Re-employment commencement date means the first date after
an Employee's severance from service date on which he completes
an Hour of Service.
Normal Retirement Age, Section 2.25: Normal Retirement Age is
age 65.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse which is 50% of the amount which is payable
during the joint lives of the Participant and his spouse and
which is the actuarial equivalent of a single annuity for the
life of the Participant.
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant as described in (a) or (b)
below, whichever is applicable:
(a) If a Participant who, while an active employee of the
Employer, or an Affiliated Company, or while on a period of
Disability, dies subsequent to his 50th birthday and prior to his
Annuity Starting Date, such Participant's surviving spouse, if
any, shall be entitled to receive a monthly survivor benefit,
commencing as of the first day of the first month following the
<PAGE> 49
Participant's death. Such survivor benefit shall be equal to the
monthly amount such spouse would have received if such
Participant had terminated employment with the Employer and all
Affiliated Companies on the date of his death, survived until age
55 (if he had not already attained that age), and commenced
receiving retirement income under the joint and 100% survivor
annuity option described in Section 5.2. The amount of a
surviving spouse's benefits under this paragraph shall be
determined under the table set forth at the end of this Appendix.
(b) If a Participant who is not described in paragraph (a)
above has a vested benefit under the Plan and dies before his
Annuity Starting Date, such Participant's surviving spouse, if
any, shall be entitled to receive a monthly survivor benefit,
commencing as of the first day of the first month following the
Participant's death or, if later, the first day of the first
month following the month in which such Participant would have
attained age 55 (if he had not already attained that age). Such
survivor benefit shall be equal to the monthly amount such spouse
would have received if such Participant had terminated employment
with the Employer and all Affiliated Companies on the date of his
death (if the Participant had not already done so), survived
until age 55 (if the Participant had not already attained that
age) and commenced receiving retirement income under the joint
and 50% survivor annuity described in Section 5.2 beginning on
the day before his death. The amount of a surviving spouse's
benefits under this paragraph shall be determined under the table
set forth at the end of this Appendix. Notwithstanding the
foregoing, in the event a Participant described in this paragraph
(b) properly elected pursuant to Section 5.2(c) to receive a
joint and 75% survivor annuity, or a joint and 100% survivor
annuity, in either case with his surviving spouse named as joint
annuitant, and such Participant dies before his Annuity Starting
Date, then such Participant's surviving spouse shall be entitled
to a survivor benefit under this paragraph (b) based upon the
actual form of joint and survivor annuity elected by the
Participant, instead of the Qualified Joint and 50% Survivor
Annuity form referred to above.
(c) In lieu of receiving such survivor benefits commencing
at the time set forth in paragraph (a) or (b) above (whichever is
applicable), the surviving spouse of a Participant can elect to
<PAGE> 50
receive the Actuarial Equivalent of such survivor benefits
commencing as of the first day of any subsequent month, but no
later than the Participant's Normal Retirement Date, by filing an
election with the Committee on such form and in such manner as it
may require. Such Actuarial Equivalent shall be based upon the
factors and dollar amount(s) referred to above determined by
reference to the age the Participant would have attained had he
survived to the date the surviving spouse benefits payable under
Section 6.3 commence. Straight line interpolation shall be
employed where fractional years are involved.
(d) If a surviving spouse who is eligible to receive a
survivor benefit prescribed by Section 6.3 dies before his actual
benefit commencement date as set forth in paragraph (a), (b) or
(c) above, no benefit shall be payable under the Plan.
Reduced Early Retirement Benefit, Section 4.2: A Participant may
retire early after attaining age 52 and completing two Years of
Service. Such benefit shall be payable at age 57 or older
without reduction. In the event that the Participant elects to
commence receipt of benefits prior to age 57, his benefit shall
be reduced to an amount equal to his Accrued Benefit payable at
Normal Retirement Age times the applicable percentage below
corresponding to the age at which benefits are to commence:
Age at Applicable
Commencement Percentage
57 or more 100.0%
56 96.4
55 92.8
54 89.2
53 85.6
52 82.0
Straight line interpolation shall be employed where fractional
years are involved. This retirement income may, at the written
election of the Participant delivered to the Committee prior to
the date retirement income payments are to begin, be adjusted
further when payable under the normal form of benefit to take
into consideration future benefits from Social Security in order
<PAGE> 51
to provide a level monthly retirement income before and after
Social Security retirement age.
Deferred Retirement, Section 4.3: A Participant who continues in
employment after reaching Normal Retirement Age shall be entitled
to receive his Accrued Benefit. His benefit commencing on his
Deferred Retirement Date shall be his Accrued Benefit. No
actuarial adjustment shall be made to account for the benefit
payments commencing after Normal Retirement Age.
Deferred Vested Benefit, Section 4.5: Unless the vested benefit
is paid out in accordance with the provisions of Section 4.6,
such benefit shall be payable commencing at what would otherwise
have been the Former Participant's Normal Retirement Date, except
the Former Participant may elect (by notifying the Committee in
writing) to receive such vested benefit starting with the first
day of any month following the month in which he would have been
eligible for early retirement benefits under Section 4.2. In the
event payments are to commence prior to such Former Participant's
Normal Retirement Date, the benefit shall be reduced to an amount
equal to his Accrued Benefit payable at Normal Retirement Age
times the applicable percentage below corresponding to the age at
which benefits are to commence:
Age at Applicable
Commencement Percentage
65 or more 100.0%
64 96.4
63 92.8
62 89.2
61 85.6
60 82.0
59 78.4
58 74.8
57 71.2
56 67.6
55 64.0
54 58.1043%
53 52.8217%
52 48.0784%
<PAGE> 52
Straight line interpolation shall be employed where fractional
years are involved. This retirement income may, at the written
election of the Participant delivered to the Committee prior to
the date retirement income payments are to begin, be adjusted
further when payable as a straight life annuity for the life of
the Participant to take into consideration future benefits from
Social Security in order to provide a level monthly retirement
income before and after Social Security retirement age.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
Except for Option A, the optional forms of benefit are Actuarial
Equivalents.
OPTION A: A retirement income of 95 percent of a straight
life annuity payable monthly during the Participant's life with
the provision that in the event of his death prior to receiving
120 monthly installments, the remainder thereof shall be paid to
his Beneficiary.
OPTION B: A retirement income payable during his life with
the provision that, after his death, 100 percent of such income
shall continue during the life of, and shall be paid to, a
Contingent Annuitant.
OPTION C: A retirement income payable during his life with
the provision that, after his death, an income at 75 percent of
the rate of his income shall be continued during the life of, and
shall be paid to, a Contingent Annuitant.
OPTION D: A retirement income payable during his life with
the provision that after his death, an income at 1/2 the rate of
his income shall be continued during the life of, and shall be
paid to, a Contingent Annuitant.
OPTION E: In the case of a married Participant, a straight
life annuity.
Joint Annuity Factors and Early Reduction Factors
- --------------------------------------------------
The joint annuity shall equal the product of:
a. the applicable percentages set forth in the table
below, and
<PAGE> 53
b. 1.00 increased by 0.01 for each full year by which the
spouse is older than the deceased Participant, or decreased by
0.01 for each full year by which the spouse is younger than the
deceased Participant.
Percentages
Participant's Age Amount Continued to
On the Birthday Early Early Joint Annuitant After
Nearest His Retirement Commencement Participant's Death
Annuity Starting Reduction of Benefit
Date* Factors Factor 100% 75% 50%
65 or more 100.0% 100.0% 77% 82% 88%
64 100.0% 96.4% 77% 83% 88%
63 100.0% 92.8% 78% 83% 89%
62 100.0% 89.2% 79% 84% 89%
61 100.0% 85.6% 79% 84% 91%
60 100.0% 82.0% 81% 85% 92%
59 100.0% 78.4% 82% 87% 92%
58 100.0% 74.8% 82% 88% 92%
57 100.0% 71.2% 82% 88% 92%
56 96.4% 67.6% 83% 88% 92%
55 92.8% 64.0% 84% 89% 93%
54 89.2 58.1043% 85% 89% 94%
53 85.6 52.8217% 85% 90% 94%
52 82.0 48.0784% 86% 90% 94%
* Or nearest age Participant would have attained had he survived to
the date surviving spouse benefits commence.
In no event, however, shall the application of the above factors
result in the amount payable to the Participant under a joint and
survivor annuity exceeding the amount he would have received as a
straight life annuity. Any survivor benefits payable under such
joint and survivor annuity after the participant's death shall be
based upon such adjusted amount payable to the Participant.
<PAGE> 54
APPENDIX C
FRONTIER COMMUNICATIONS OF NEW YORK, INC.
The provisions set forth in this Appendix pertain to those
Participants who have frozen benefits which were transferred to
this Plan from the Frontier Communications of New York, Inc.
Management Employee Benefit and Retirement Plan.
Actuarial Equivalent, Section 2.2:
Interest: 8%
Mortality Table: 1971 Combined Group Annuity Table with 50%
male and 50% female assumption;
provided, however, that for purposes of determining the present
value of any lump sum payout: (1) for amounts not in excess of
$25,000 the interest assumption shall be the rate that would have
been used by the Pension Benefit Guaranty Corporation ("PBGC") as
of the distribution date for purposes of determining the present
value of a lump sum distribution on termination of a plan; (2) if
the lump sum payout exceeds $25,000 using the PBGC rate, the
interest assumption shall be 120 percent of the PBGC rate,
provided that the amount determined under the 120 percent formula
shall never cause the amount to be less than $25,000.
Disability, Section 2.14: Disability means a physical or mental
condition which, in the judgment of the Committee, based on
medical reports and other evidence satisfactory to the Committee,
will permanently prevent an Employee from satisfactorily
performing his usual duties for the Employer and will entitle the
Employee to receive Social Security disability benefits.
Disability Benefit, Section 4.4: A Participant who suffers
a Disability shall be entitled to receive 100 percent of his
Accrued Benefit. This benefit shall be paid commencing either at
what would have been the Participant's Normal Retirement Date or
at an earlier date in an amount actuarially reduced in accordance
with the same method used in Section 4.2 for adjusting early
retirement benefits which are paid prior to Normal Retirement
Age.
<PAGE> 55
Normal Retirement Age, Section 2.25: Normal Retirement Age is
the later of age 65 or the fifth anniversary of the date an
employee commenced participation in the plan.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse which is 50% of the amount which is payable
during the joint lives of the Participant and his spouse and
which is the actuarial equivalent of a single annuity for the
life of the Participant with 120 payments guaranteed.
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant in an amount equal to the
amount payable to such surviving spouse if benefits had been paid
as a Qualified Joint and Survivor Annuity. If the Participant
dies after his Early Retirement Date the benefit amount shall be
determined as if the Participant had retired with an immediate
Qualified Joint and Survivor Annuity on the day before his death.
In the case of a Participant who has any vested Accrued Benefit
and who dies on or before his earliest retirement date, the
benefit amount shall be calculated as if he had (a) separated
from service on his date of death; (b) survived to his earliest
retirement date; (c) retired with an immediate Qualified Joint
and Survivor Annuity on his earliest retirement date; and (d)
died on the day after what would have been his earliest
retirement date. "Earliest retirement date" means the earliest
date on which, under the Plan, the Participant could have elected
to receive retirement benefits based on his service at the time
of his death.
Year of Participation, Section 2.34: Year of Participation means
any Plan Year during which a Participant completes at least 1,000
Hours of Service with the participating employer. Years prior to
the Effective Date and Years prior to the Participant's entry
into the Plan shall be considered Years of Participation provided
that the Hours of Service requirement is satisfied.
Notwithstanding the foregoing, service prior to January 1, 1987
with AuSable Valley Telephone Company shall be disregarded for
the purpose of determining a Participant's Years of Participation
under this Plan unless the Participant has made a rollover
<PAGE> 56
contribution of his interest in the AuSable Valley Telephone
Company Profit Sharing Plan.
Year of Service, Section 2.35: Year of Service means any Plan
Year during which an Employee completes at least 1,000 Hours of
Service with the Employer or with an Affiliated Company.
Unreduced Early Retirement Benefit, Section 4.2: A Participant
who has completed 27 or more Years of Service may retire. The
Participant may commence receipt of his benefit at his actual
retirement date without reduction in his benefit to take into
account payment of benefits prior to Normal Retirement Age.
Reduced Early Retirement Benefit, Section 4.2: A Participant may
retire early after attaining age 52 and completing 12 Years of
Service. In the event that the Participant elects to commence
receipt of benefits prior to Normal Retirement Age, his benefit
shall be reduced by the lesser of the following two amounts: (1)
1/180 for each of the first 60 months that retirement precedes
the first day of the month following the first day of the month
following the Participant's 62nd birthday, and 1/360 for each of
the next 60 months that retirement precedes the first day of the
month following the first day of the month following the
Participant's 62nd birthday, or (2) three percent for each whole
total number that his age plus Years of Participation is less
than 74.
Deferred Retirement, Section 4.3: A Participant who retires
after reaching his Normal Retirement Age, shall be entitled to
his Accrued Benefit. No actuarial adjustment shall be made to
account for the benefit payments commencing after Normal
Retirement Age.
Deferred Vested Benefit, Section 4.5: Effective August 16, 1995,
all Accrued Benefits are 100% vested. The amount of a
Participant's benefit shall be equal to his Accrued Benefit as of
his termination date. Unless the vested benefit is paid out in
accordance with the provisions of Section 4.6, such benefit shall
be payable commencing at what would otherwise have been the
Former Participant's Normal Retirement Date, except the Former
Participant may elect (by notifying the Committee in writing) to
receive such vested benefit starting with the first day of any
<PAGE> 57
month following the month in which he would have been eligible
for early retirement benefits under Section 4.2. In the event
payments are to commence prior to such Former Participant's
Normal Retirement Date, the benefit shall be reduced by 1/180 for
each of the first 60 months that retirement precedes a
Participant's Normal Retirement Date, 1/360 for each of the next
60 months that retirement precedes a Participant's Normal
Retirement Date, and for each month prior to the 120 months in
accordance with the Actuarial Equivalent factors set forth in
Section 2.2.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
All of the optional forms are Actuarial Equivalents.
OPTION A: A retirement income payable monthly during his life
with the provision that in the event of his death prior to
receiving either 60, 120 or 180 monthly installments, as the
Participant elects, the remainder thereof shall be paid to his
Beneficiary.
OPTION B: A retirement income payable during his life with the
provision that after his death such income shall continue during
the life of, and shall be paid to, a Contingent Annuitant.
OPTION C: A retirement income payable during his life with the
provision that after his death an income at 3/4 the rate of his
income shall be continued during the life of, and shall be paid
to, a Contingent Annuitant.
OPTION D: A retirement income payable during his life with the
provision that after his death an income at l/2 the rate of his
income shall be continued during the life of, and shall be paid
to, a Contingent Annuitant.
OPTION E: In the case of a married Participant, a straight life
annuity.
Death Benefits, Section 6.5: Prior to January 1, 1976, contracts
providing permanent life insurance on the lives of Participants
were issued by certain insurance companies. Effective January 1,
1976, the Committee surrendered these policies to the applicable
<PAGE> 58
insurance companies with directions that the cash values thereof,
if any, were to be paid to the Trustee and placed in a separate
bookkeeping account and treated as a fully vested Employer
contribution.
Upon the death of any covered Participant, his designated
Beneficiary or his estate, as the case may be, shall be entitled
to receive such segregated amounts as a death benefit. Upon the
retirement, Disability, or termination of employment of any
Participant, the Committee shall direct the Trustee to remove the
cash value from any separate account and treat it as an Employer
contribution to the Trust Fund.
Prior to the Effective Date, Frontier Communications of New
York, Inc. maintained a profit sharing plan for its Employees.
As of the Effective Date, the amounts allocated to each
Employee's account in the profit sharing plan became fully vested
and were allocated to the Employees' accounts in the prior plan
to provide the benefits under such prior plan. If, under the
present Plan, a Participant dies, his designated Beneficiary
shall receive a death benefit which shall be at least as great as
the amount of benefits purchased under the prior plan from
amounts attributable to the Employee's vested interest in the
profit sharing plan. Upon the death of a Participant who made a
rollover contribution from his distribution from the terminated
AuSable Valley Telephone Company Profit Sharing Plan, his
Beneficiary shall receive a death benefit which, when aggregated
with other benefits paid under the Plan, shall at least equal the
value of his Employee-derived Accrued Benefit.
<PAGE> 59
APPENDIX D
FRONTIER COMMUNICATIONS OF PENNSYLVANIA, INC.
The provisions set forth in this Appendix pertain to those
Participants who have frozen benefits which were transferred to
this Plan from the Frontier Communications of Pennsylvania, Inc.
Pension Plan.
Actuarial Equivalent, Section 2.2:
(a) For purposes of determining the amount of any form of
retirement income payable, other than a lump sum distribution, an
interest rate of 8% per year, compounded annually, and mortality
rates in accordance with UP84 shall be used.
(b) If an benefit determined as of or after a Participant's
Normal Retirement Date is payable at a later date, it shall be
increased at the rate of 8% per year, compounded annually, with
respect to the period commencement is deferred.
(c) For purposes of Sections 4.9 and 4.10, Actuarial
Equivalent shall mean the lesser of the adjusted benefit as
determined above or in accordance with the UP84 mortality table
with 5% interest.
(d) For purposes of determining the present value of an
accrued benefit under Article XIII, an interest rate of 6% per
year, compounded annually, and mortality rates in accordance with
UP84 shall be used.
(e) For purposes of determining the present value of any
lump sum payout: (1) for amounts not in excess of $25,000 the
interest assumption shall be the rate that would have been used
by the Pension Benefit Guaranty Corporation ("PBGC") for the
month preceding the distribution date for purposes of determining
the present value of a lump sum distribution on termination of a
plan; (2) if the lump sum payout exceeds $25,000 using the PBGC
rate, the interest assumption shall be 120 percent of the PBGC
rate, provided that the amount determined under the 120 percent
formula shall never cause the amount to be less than $25,000.
<PAGE> 60
Disability, Section 2.14 and 4.4: No disability benefit is
offered.
Normal Retirement Age, Section 2.25: Normal Retirement Age is
the later of age 65 or the fifth anniversary of the date an
employee commenced participation in the plan.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse which is 50% of the amount which is payable
during the joint lives of the Participant and his spouse and
which is the actuarial equivalent of a single annuity for the
life of the Participant with 120 monthly payments guaranteed.
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant in an amount equal to the
amount payable to such surviving spouse if benefits had been paid
as a Qualified Joint and Survivor Annuity. If the Participant
dies after his Early Retirement Date the benefit amount shall be
determined as if the Participant had retired with an immediate
Qualified Joint and Survivor Annuity on the day before his death.
In the case of a Participant who has any vested Accrued Benefit
and who dies on or before his earliest retirement date, the
benefit amount shall be calculated as if he had (a) separated
from service on his date of death; (b) survived to his earliest
retirement date; (c) retired with an immediate Qualified Joint
and Survivor Annuity on his earliest retirement date; and (d)
died on the day after what would have been his earliest
retirement date. "Earliest retirement date" means the earliest
date on which, under the Plan, the Participant could have elected
to receive retirement benefits based on his service at the time
of his death.
Year of Service, Section 2.35: Year of Service means any Plan
Year during which an Employee completes at least 1,000 Hours of
Service with the Employer or with an Affiliated Company.
Unreduced Early Retirement Benefit, Section 4.2: A Participant
may retire early when the sum of his age and number of Years of
<PAGE> 61
Service equals 74, and commence receiving his Accrued Benefit
upon retirement without reduction.
Reduced Early Retirement Benefit, Section 4.2: Participant may
retire early after attaining age 52 and completing seven Years of
Service. In the event that the Participant elects to commence
receipt of benefits prior to Normal Retirement Age, his benefit
shall be reduced by 5/9 of 1% for each of the first 60 months and
5/18 of 1% for each of the next 60 months by which the date he
begins to receive benefits precedes the first day of the month
following his 62nd birthday.
Deferred Retirement, Section 4.3: A Participant who continues in
employment after reaching Normal Retirement Age shall be entitled
to his Accrued Benefit. If it is larger than his Accrued
Benefit, the Participant shall receive as a deferred benefit his
Accrued Benefit at Normal Retirement Age actuarially adjusted
pursuant to Section 2.2.
Deferred Vested Benefit, Section 4.5: Effective August 16, 1995,
all Accrued Benefits are 100% vested. The amount of a
Participant's benefit shall be equal to his Accrued Benefit as of
his termination date. Unless the vested benefit is paid out in
accordance with the provisions of Section 4.6, such benefit shall
be payable commencing at what would otherwise have been the
Former Participant's Normal Retirement Date, except the Former
Participant may elect (by notifying the Committee in writing) to
receive such vested benefit starting with the first day of any
month following the month in which he would have been eligible
for early retirement benefits under Section 4.2. In the event
payments are to commence prior to such Former Participant's
Normal Retirement Date, the benefit shall be the Actuarial
Equivalent of his vested Accrued Benefit. The retirement income
payable to a Participant under a form of annuity other than as a
ten year certain annuity shall be the Actuarial Equivalent of the
retirement income of such Participant computed under this
Section 4.5 as a ten year certain annuity.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
All of the optional forms are Actuarial Equivalents.
<PAGE> 62
OPTION A: A retirement income payable during his life with the
provision that after his death 100 percent of such income shall
continue during the life of, and shall be paid to, a Contingent
Annuitant.
OPTION B: A retirement income payable during his life with the
provision that after his death 50 percent of such income shall
continue during the life of, and shall be paid to, a Contingent
Annuitant.
OPTION C: A retirement income payable during his life with the
provision that after his death an income at 75 percent of the
rate of his income shall be continued during the life of, and
shall be paid to, a Contingent Annuitant.
OPTION D: A retirement income payable monthly during the
Participant's life with the provision that in the event of his
death prior to receiving 180 monthly installments the remainder
thereof shall be paid to his Beneficiary.
OPTION E: A straight life annuity.
<PAGE> 63
APPENDIX E
FRONTIER COMMUNICATIONS OF GEORGIA, INC.
The provisions set forth in this Appendix pertain to those
Participants who have frozen benefits which were transferred to
this Plan from the Pension Plan for Employees of Statesboro
Telephone Company, Inc.
Actuarial Equivalent, Section 2.2:
Interest: 6%
Mortality Table: 1951 Group Annuity Table, male rates
projected to 1970 by Scale C Group Annuity Table, using a one
year age setback for any joint annuitant, and using either a one
year or a six year age setback for a Participant, which ever
results in the greater benefit.
If a Participant elects a one-sum cash payment, present
value will be determined on the basis of the following mortality
and interest assumptions:
Mortality: Except as provided in the following sentence,
the healthy participant mortality assumptions used by the Pension
Benefit Guaranty Corporation in valuing annuities of a terminated
single-employer plan. If the Pension Benefit Guaranty
Corporation uses mortality assumptions which vary on the basis of
gender, the Plan shall utilize the healthy male mortality
assumptions (set back three years) established by such
Corporation for use in valuing annuities of a terminated single-
employer plan.
Interest: A rate of interest based on the interest
rates used by the Pension Benefit Guaranty Corporation in valuing
annuities of a terminated single-employer plan. The rate of
interest is equal to the lesser of (a) and (b) if present value,
determined on the basis of (c) and the mortality assumptions
described above, is $25,000 or less. Otherwise, the rate of
interest is equal to the lesser of (a) and (c).
(a) is (i) or (ii), whichever is applicable;
<PAGE> 64
(i) with respect to a cash payment which becomes
payable on or after January 1 and prior to July 1, the interest
rate used by the Pension Benefit Guaranty Corporation on the
preceding November 1 to value immediate annuities;
(ii) with respect to a cash payment which becomes
payable after June 30 and on or prior to December 31, the
interest rate used by the Pension Benefit Guaranty Corporation on
the preceding May 1 to value immediate annuities.
(b) is the interest rate used by the Pension Benefit
Guaranty Corporation to value immediate annuities.
(c) is 120% of the interest rate used by the Pension
Benefit Guaranty Corporation to value immediate annuities,
provided that the amount determined under the 120 percent formula
shall never cause the amount to be less than $25,000.
For the purposes of (b) and (c), Pension Benefit
Guaranty Corporation interest rates which are in effect on the
first day of a Plan Year shall be used in the determination of
one-sum cash payments which become payable during such year.
To ascertain whether the actuarial equivalent of a stated
benefit is less than $3,500, present value will be determined on
the basis of the following mortality and interest assumptions:
Mortality: the 1951 Group Annuity Table male rates
projected to 1970 by Scale C, using a six year age setback;
Interest: the lesser of (a) and (b), where
(a) is 6%, and
(b) is (i) or (ii), whichever is applicable;
(i) with respect to a benefit which is payable as
of the date present value is determined, the interest rate used
by the Pension Benefit Guaranty Corporation to value immediate
annuities of a terminated single-employer plan;
<PAGE> 65
(ii) with respect to a benefit which is payable
subsequent to the date present value is determined, the interest
rate which is equivalent to the interest rate or rates that would
be used by the Pension Benefit Guaranty Corporation to value the
benefit if the Plan terminated.
For the purposes of (i) and (ii), Pension Benefit
Guaranty Corporation interest rates in effect on the first day of
a Plan Year shall be used for all determinations made during such
year.
Disability, Section 2.14 and 4.4: No disability benefit is
offered.
Normal Retirement Age, Section 2.25: Normal Retirement Age is
the later of age 65 or the fifth anniversary of the date an
employee commenced participation in the plan.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse which is 50% of the amount which is payable
during the joint lives of the Participant and his spouse, and
which is the actuarial equivalent of a single annuity for the
life of the Participant with 120 monthly payments guaranteed.
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant in an amount equal to the
amount payable to such surviving spouse if benefits had been paid
as a Qualified Joint and Survivor Annuity, or an alternate form
of survivor annuity, if the Participant had elected such
alternate form of annuity and such alternate form meets the
requirements of a Qualified Joint and Survivor Annuity. If the
Participant dies after his Early Retirement Date the benefit
amount shall be determined as if the Participant had retired with
an immediate Qualified Joint and Survivor Annuity on the day
before his death. In the case of a Participant who has any
vested Accrued Benefit and who dies on or before his earliest
retirement date, the benefit amount shall be calculated as if he
had (a) separated from service on his date of death; (b) survived
to his earliest retirement date; (c) retired with an immediate
<PAGE> 66
Qualified Joint and Survivor Annuity on his earliest retirement
date; and (d) died on the day after what would have been his
earliest retirement date. "Earliest retirement date" means the
earliest date on which, under the Plan, the Participant could
have elected to receive retirement benefits based on his service
at the time of his death.
Payment of the Qualified Pre-Retirement Survivor Annuity
shall commence in accordance with Section 6.3. However, in the
case of a Participant who dies prior to his Normal Retirement
Date, the surviving spouse may elect to have the annuity begin as
of the first day of the month following the death of the
Participant. If the spouse makes such an election, the monthly
amount of the benefit will be equal to the monthly amount that
would have been payable to the spouse if the Participant had
begun receipt of benefits on the day before his death and an
annuity had been payable in the form of a joint and survivor
annuity.
Year of Service, Section 2.35: Year of Service means any Plan
Year during which an Employee completes at least 1,000 Hours of
Service with the Employer or with an Affiliated Company.
Reduced Early Retirement Benefit, Section 4.2: A Participant may
retire early upon reaching age 57. If he elects to begin payment
of benefits prior to his Normal Retirement Date, his benefit
shall be equal to the greater of (1) his Accrued Benefit reduced
by .416% for each month that retirement precedes the first day of
the month following his 62nd birthday, (2) the Actuarial
Equivalent of his Accrued Benefit, or (3) the largest monthly
amount of benefit he would have been entitled to receive at any
earlier time.
Deferred Retirement, Section 4.3: A Participant who retires
after reaching his Normal Retirement Age, shall receive his
Accrued Benefit. Notwithstanding the foregoing, if greater, the
Participant shall receive the benefit to which he was entitled on
his Normal Retirement Date increased by .416% for each month that
his actual retirement date occurs after his Normal Retirement
Date.
<PAGE> 67
Deferred Vested Benefit, Section 4.5: Effective August 16, 1995,
all Accrued Benefits are 100% vested. The amount of a
Participant's benefit shall be equal to his Accrued Benefit as of
his termination date. Unless the vested benefit is paid out in
accordance with the provisions of Section 4.6, such benefit shall
be payable commencing at what would otherwise have been the
Former Participant's Normal Retirement Date, except that the
Former Participant may elect (by notifying the Committee in
writing) to receive such vested benefit starting with the first
day of any month following the month in which he would have been
eligible for early retirement benefits under Section 4.2. If he
elects to begin payment of benefits prior to his Normal
Retirement Date, his benefit shall be equal to the greater of (1)
his Accrued Benefit reduced by .416% for each month that
retirement precedes the first day of the month following his 65th
birthday, (2) the Actuarial Equivalent of his Accrued Benefit.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
All of the optional forms are Actuarial Equivalents.
OPTION A: A retirement income payable during his life with the
provision that after his death an income at 100 percent or a
reduced percentage of the rate of his income shall be continued
during the life of, and shall be paid to, a Contingent Annuitant.
OPTION B: A retirement income payable monthly during his life
with the provision that in the event of his death prior to
receiving 60 or 180 monthly installments, the remainder thereof
shall be paid to his Beneficiary or the commuted value of the
balance of the stipulated monthly payments will be paid to the
Beneficiary.
OPTION C: A straight life annuity.
OPTION D: An annuity payable from Early Retirement Date to a
specified date, or death if earlier, that will provide an
approximately level amount of benefit, inclusive of Social
Security and any annuity not converted to a temporary annuity,
before and after receipt of Social Security.
OPTION E: In the event that the amount of a Participant's monthly
benefit would be equal to or less than $50, a single sum payment.
<PAGE> 68
APPENDIX F
FRONTIER COMMUNICATIONS OF WISCONSIN, INC.
The provisions set forth in this Appendix pertain to those
Participants who have frozen benefits which were transferred to
this Plan from the Frontier Communications of Wisconsin, Inc.
Pension Plan.
Actuarial Equivalent, Section 2.2:
Interest: 8%
Mortality Table: Unisex Pension 1984;
provided, however, that for purposes of determining the present
value of any lump sum payout: (1) for amounts not in excess of
$25,000 the interest assumption shall be the rate that would have
been used by the Pension Benefit Guaranty Corporation ("PBGC") as
of the distribution date for purposes of determining the present
value of a lump sum distribution on termination of a plan; (2) if
the lump sum payout exceeds $25,000 using the PBGC rate, the
interest assumption shall be 120 percent of the PBGC rate,
provided that the amount determined under the 120 percent formula
shall never cause the amount to be less than $25,000.
Disability, Section 2.14 and 4.4: No disability benefit is
offered.
Normal Retirement Age, Section 2.25: Normal Retirement Age is
the later of age 65 or the fifth anniversary of the date an
employee commenced participation in the plan.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse which is 50% of the amount which is payable
during the joint lives of the Participant and his spouse and
which is the actuarial equivalent of a single annuity for the
life of the Participant.
<PAGE> 69
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant in an amount equal to the
amount payable to such surviving spouse if benefits had been paid
as a Qualified Joint and Survivor Annuity. If the Participant
dies after his Early Retirement Date the benefit amount shall be
determined as if the Participant had retired with an immediate
Qualified Joint and Survivor Annuity on the day before his death.
In the case of a Participant who has any vested Accrued Benefit
and who dies on or before his earliest retirement date, the
benefit amount shall be calculated as if he had (a) separated
from service on his date of death; (b) survived to his earliest
retirement date; (c) retired with an immediate Qualified Joint
and Survivor Annuity on his earliest retirement date; and (d)
died on the day after what would have been his earliest
retirement date. "Earliest retirement date" means the earliest
date on which, under the Plan, the Participant could have elected
to receive retirement benefits based on his service at the time
of his death.
Year of Participation, Section 2.34: Year of Participation means
any Plan Year commencing with and following the Plan Year in
which a Participant begins participation in the Plan during which
he completes at least l,000 Hours of Service with the Employer.
Year of Service, Section 2.35: Year of Service shall be
determined in accordance with the following:
(a) Prior to January 1, 1976, an Employee's Years of
Service shall be determined according to the provisions of the
Plan in effect prior to such date. Nothing herein shall result
in a change in the determination of the Years of Service of an
Employee who was a Participant on December 31, 1975.
(b) After January 1, 1976, Years of Service shall accrue at
the rate of one (1) Year of Service for each Plan Year in which
an Employee completes 1000 or more Hours of Service.
(c) Notwithstanding paragraph (b), effective for Plan Years
beginning on and after January 1, 1985 and ending on and before
December 31, 1990, if an Employee does not complete 1000 Hours of
Service during the Plan Year in which the Employee first
<PAGE> 70
completes one (1) Hour of Service, or during the Plan Year in
which the Employee terminates employment, the Employee shall
accrue a partial Year of Service as follows:
Hours of Service Partial Year of
During Plan Year Service
1,000 or More 1.0
999 - 900 0.9
899 - 800 0.8
799 - 700 0.7
699 - 600 0.6
599 - 500 0.5
499 - 400 0.4
399 - 300 0.3
299 - 200 0.2
199 - 100 0.1
99 or Less 0
(d) Notwithstanding paragraphs (b) and (c), effective for
Plan Years beginning on and after January 1, 1991, Years of
Service shall accrue at the rate of one (1) Year of Service for
each Plan Year in which an Employee completes 1000 or more Hours
of Service.
Reduced Early Retirement Benefit, Section 4.2: A Participant may
retire early after attaining age 52 and completing twelve Years
of Service. In the event that the Participant elects to commence
receipt of benefits prior to Normal Retirement Age, his benefit
shall be equal to the Actuarial Equivalent of his Accrued Benefit
reduced from the first day of the month following his 62nd
birthday.
Deferred Retirement, Section 4.3: A Participant who retires
after reaching his Normal Retirement Age, shall receive his
Accrued Benefit. Notwithstanding the foregoing, if greater, the
Participant shall receive the benefit to which he was entitled on
his Normal Retirement Date actuarially adjusted to account for
the benefit payments commencing after Normal Retirement Age.
Deferred Vested Benefit, Section 4.5: Effective August 16, 1995,
all Accrued Benefits are 100% vested. The amount of a
<PAGE> 71
Participant's benefit shall be equal to his Accrued Benefit as of
his termination date. Unless the vested benefit is paid out in
accordance with the provisions of Section 4.6, such benefit shall
be payable commencing at what would otherwise have been the
Former Participant's Normal Retirement Date, except that the
Former Participant may elect (by notifying the Committee in
writing) to receive such vested benefit starting with the first
day of any month following the month in which he would have been
eligible for early retirement benefits under Section 4.2. If
payments are to commence prior to such Former Participant's
Normal Retirement Date, the benefit shall be equal to the
Actuarial Equivalent of his Accrued Benefit.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
Both of the optional forms are Actuarial Equivalents.
OPTION A: A single life annuity, for a married Participant.
OPTION B: A lump sum payment.
Pre-retirement Spouse's Benefit, Section 6.3: In the event that
the Participant dies before retirement and his spouse becomes
eligible to receive the Qualified Pre-Retirement Survivor
Annuity, the spouse of the Participant may instead elect a lump
sum payment.
<PAGE> 72
APPENDIX G
FRONTIER COMMUNICATIONS - LAKESHORE, INC.
The provisions set forth in this Appendix pertain to those
Participants who have frozen benefits which were transferred to
this Plan from the Frontier Communications - Lakeshore, Inc.
Defined Benefit Plan.
Actuarial Equivalent, Section 2.2:
Interest: Pre-retirement interest at 6%
Post-retirement interest at 5%
Post retirement Mortality Table: 1983 IAM weighted 50%
male-female;
provided, however, that for purposes of determining the present
value of any lump sum payout: (1) for amounts not in excess of
$25,000 the interest assumption shall be the rate that would have
been used by the Pension Benefit Guaranty Corporation ("PBGC")
for the month preceding the distribution date for purposes of
determining the present value of a lump sum distribution on
termination of a plan; (2) if the lump sum payout exceeds $25,000
using the PBGC rate, the interest assumption shall be 120 percent
of the PBGC rate, provided that the amount determined under the
120 percent formula shall never cause the amount to be less than
$25,000.
Disability, Section 2.14: Disability means a physical or mental
condition which, in the judgment of the Committee, based on
medical reports and other evidence satisfactory to the Committee,
will permanently prevent an Employee from satisfactorily
performing his usual duties for the Employer.
Disability Benefit, Section 4.4: A Participant who suffers a
Disability that continues for a period of at least six
consecutive months and results in the Participant's termination
of employment shall be entitled to receive 100 percent of his
Accrued Benefit. This benefit shall be paid commencing as of the
first day of the Plan Year following termination and paid
pursuant to the provisions of Article V as if the Participant had
retired on his Normal Retirement Date. Benefits payable under
<PAGE> 73
this Section shall be paid only for as long as the Disability
continues.
Normal Retirement Age, Section 2.25: Normal Retirement Age is
age 65.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse which is 50% of the amount which is payable
during the joint lives of the Participant and his spouse, and
which is the actuarial equivalent of a single annuity for the
life of the Participant.
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant in an amount equal to the
amount payable to such surviving spouse if benefits had been paid
as a Qualified Joint and Survivor Annuity. If the Participant
dies after his Early Retirement Date the benefit amount shall be
determined as if the Participant had retired with an immediate
Qualified Joint and Survivor Annuity on the day before his death.
In the case of a Participant who has any vested Accrued Benefit
and who dies on or before his earliest retirement date, the
benefit amount shall be calculated as if he had (a) separated
from service on his date of death; (b) survived to his earliest
retirement date; (c) retired with an immediate Qualified Joint
and Survivor Annuity on his earliest retirement date; and (d)
died on the day after what would have been his earliest
retirement date. "Earliest retirement date" means the earliest
date on which, under the Plan, the Participant could have elected
to receive retirement benefits based on his service at the time
of his death.
Year of Service, Section 2.35: Year of Service means any Plan
Year during which an Employee completes at least 1,000 Hours of
Service with the Employer or with an Affiliated Company.
Reduced Early Retirement Benefit, Section 4.2: A Participant who
reaches age 52 and completes seven Years of Service may elect
early retirement. In the event that the Participant elects to
commence receipt of benefits prior to Normal Retirement Age, his
<PAGE> 74
benefit shall be reduced by 1/180 for each of the first 60 months
that retirement precedes the Participant's 62nd birthday, and
1/360 for each of the next 60 months that retirement precedes the
first day of the month following the Participant's 62nd birthday.
Deferred Retirement, Section 4.3: A Participant who has at least
one Hour of Service in any Plan Year and who retires after
reaching his Normal Retirement Age, shall receive his Accrued
Benefit. No actuarial adjustment shall be made to account for
the benefit payments commencing after Normal Retirement Age.
Deferred Vested Benefit, Section 4.5: Effective August 16, 1995,
all Accrued Benefits are 100% vested. The amount of a
Participant's benefit shall be equal to his Accrued Benefit as of
his termination date. Unless the vested benefit is paid out in
accordance with the provisions of Section 4.6, such benefit shall
be payable commencing at what would otherwise have been the
Former Participant's Normal Retirement Date, except the Former
Participant may elect (by notifying the Committee in writing) to
receive such vested benefit starting with the first day of any
month following the month in which he would have been eligible
for early retirement benefits under Section 4.2. In the event
payments are to commence prior to such Former Participant's
Normal Retirement Date, the benefit shall be reduced by 1/180 for
each of the first 60 months that retirement precedes a
Participant's Normal Retirement Date, 1/360 for each of the next
60 months that retirement precedes a Participant's Normal
Retirement Date and for each month prior to the 120 months in
accordance with the Actuarial Equivalent factors set forth in
Section 2.2.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
All of the following forms are Actuarial Equivalents.
OPTION A: A lump sum payment.
OPTION B: Payment over a period certain, provided, however that
the period over which payments will be made shall not extend
beyond the Participant's life expectancy or the joint life
expectancy of the Participant and his designated Beneficiary.
<PAGE> 75
OPTION C: A retirement income payable during his life with the
provision that after his death an income at 75% of the rate of
his income shall be continued during the life of, and shall be
paid to, a Contingent Annuitant.
OPTION D: A retirement income payable during his life with the
provision that after his death an income at 100% of the rate of
his income shall be continued during the life of, and shall be
paid to, a Contingent Annuitant.
OPTION E: Purchase of an annuity, provided, however, that the
annuity will not be in any form which will provide payments
beyond the Participant's life expectancy or the joint life
expectancy of the Participant and his designated Beneficiary.
Time of Benefit Payments, Section 5.4: Notwithstanding any
provision to the contrary concerning the timing of benefits,
whenever a benefit becomes payable for any of the reasons
specified in Article IV, all of the forms of benefit specified in
Sections 5.1 and 5.2 may be immediately payable in accordance
with the terms of those Sections.
Pre-retirement Spouse's Benefit, Section 6.3: In the event that
the Participant dies before retirement and his spouse becomes
eligible to receive the Qualified Pre-Retirement Survivor
Annuity, the spouse of the Participant may elect an alternative
form of benefit from among the following choices:
(1) One lump sum payment; or
(2) Periodic payments over a period to be determined by the
Participant or the Beneficiary.
<PAGE> 76
APPENDIX H
FRONTIER COMMUNICATIONS OF MONDOVI, INC.
The provisions set forth in this Appendix pertain to those
Participants who have frozen benefits which were transferred to
this Plan from the Frontier Communications of Mondovi, Inc.
Defined Benefit Pension Plan.
Actuarial Equivalent, Section 2.2:
Interest: 7%
Mortality Table: 1971 IAM Table, Male Mortality;
provided, however, that for purposes of determining the present
value of any lump sum payout in Plan Years beginning after
December 31, 1984: (1) for amounts not in excess of $25,000 the
interest assumption shall be the rate that would have been used
by the Pension Benefit Guaranty Corporation ("PBGC") for the
month preceding the distribution date for purposes of determining
the present value of a lump sum distribution on termination of a
plan; (2) if the lump sum payout exceeds $25,000 using the PBGC
rate, the interest assumption shall be 120 percent of the PBGC
rate, provided that the amount determined under the 120 percent
formula shall never cause the amount to be less than $25,000.
Disability, Section 2.14: Disability means a physical or mental
condition which, in the judgment of the Committee, based on
medical reports and other evidence satisfactory to the Committee,
will permanently prevent an Employee from satisfactorily engaging
in any substantial gainful activity.
Disability Benefit, Section 4.4: A Participant who suffers a
Disability that can be expected to last for a continuous period
of not less than twelve months and results in the Participant's
termination of employment shall be entitled to receive
100 percent of his Accrued Benefit. This benefit shall be paid
commencing at the Participant's Normal Retirement Age, except
that the Participant may elect to commence receiving benefits at
an earlier date, but not earlier than what would have been his
<PAGE> 77
Early Retirement Date. If the Participant elects to commence
receiving benefits prior to his Normal Retirement Date, his
benefit shall be the Actuarial Equivalent of his Accrued Benefit.
Normal Retirement Age, Section 2.25: Normal Retirement Age is
the later of age 65 or the fifth anniversary of the date an
employee commenced participation in the Plan.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse which is 50% of the amount which is payable
during the joint lives of the Participant and his spouse and
which is the actuarial equivalent of a single annuity for the
life of the Participant.
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant in an amount equal to the
amount payable to such surviving spouse if benefits had been paid
as a Qualified Joint and Survivor Annuity. If the Participant
dies after his Early Retirement Date the benefit amount shall be
determined as if the Participant had retired with an immediate
Qualified Joint and Survivor Annuity on the day before his death.
In the case of a Participant who has any vested Accrued Benefit
and who dies on or before his earliest retirement date, the
benefit amount shall be calculated as if he had (a) separated
from service on his date of death; (b) survived to his earliest
retirement date; (c) retired with an immediate Qualified Joint
and Survivor Annuity on his earliest retirement date; and (d)
died on the day after what would have been his earliest
retirement date. "Earliest retirement date" means the earliest
date on which, under the Plan, the Participant could have elected
to receive retirement benefits based on his service at the time
of his death.
Year of Service, Section 2.35: Year of Service means any Plan
Year during which an Employee completes at least 1,000 Hours of
Service with the Employer or with an Affiliated Company.
Unreduced Early Retirement Benefit, Section 4.2: If the
Participant has completed 27 Years of Service, he shall be
<PAGE> 78
entitled to retire and commence receiving his Accrued Benefit
upon retirement without reduction.
Alternatively, if the sum of the age and Years of Service of the
Participant equals or exceeds 79, and the Participant has
attained age 52, he shall be entitled to retire and commence
receiving his Accrued Benefit upon retirement without reduction.
Reduced Early Retirement Benefit, Section 4.2: A Participant
may retire early after attaining age 52 and completing seven
Years of Service. In the event that the Participant elects to
commence receipt of benefits prior to Normal Retirement Age, his
benefit shall be reduced by 1/180 for each of the first 60 months
that retirement precedes the first day of the month following the
Participant's 62nd birthday, and 1/360 for each of the next 60
months that retirement precedes the first day of the month
following the Participant's 62nd birthday.
Deferred Retirement, Section 4.3: A Participant who has at least
one Hour of Service in any Plan Year and who retires after
reaching his Normal Retirement Age, shall receive a benefit equal
to Accrued Benefit. The Participant's benefit shall be
actuarially adjusted to account for the benefit payments
commencing after Normal Retirement Age.
Deferred Vested Benefit, Section 4.5: A Participant's deferred
vested benefit may, at the election of the Participant, be paid
commencing at one of the following three times:
(1) at what would otherwise have been the Former
Participant's Normal Retirement Date; or
(2) in the event that the Participant had completed seven
Years of Service prior to his termination of employment, starting
with the first day of any month following the month in which he
would have been eligible for early retirement benefits under
Section 4.2. If payments are to commence when the Participant
would have been eligible to begin receiving early retirement
benefits, the benefit shall be reduced by 1/180 for each of the
first 60 months that retirement precedes a Participant's Normal
Retirement Date and 1/360 for each of the next 60 months that
retirement precedes a Participant's Normal Retirement Date; or
<PAGE> 79
(3) if the Participant is not yet eligible for a benefit
under (1) or (2) above, at the time of his termination of
employment in any form of payment permitted in Article V or in
the form of a lump sum payment subject to the provisions of
Section 4.6 and the consent requirements of Section 5.1, provided
that the $3,500 limit of Section 4.6 shall not apply. In the
event a Participant elects a benefit under this option (3) in any
form other than a lump sum payment, the benefit shall be reduced
for each of the first 120 months that payment precedes the
Participant's Normal Retirement Date by the 1/180 and 1/360
factors under option (2) above and for each month prior to the
120 months in accordance with the Actuarial Equivalent factors
set forth in Section 2.2.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
All of the optional forms are Actuarial Equivalents.
OPTION A: A lump sum payment.
OPTION B: Payment over a period certain, provided, however that
the period over which payments will be made shall not extend
beyond the Participant's life expectancy or the joint life
expectancy of the Participant and his designated Beneficiary.
OPTION C: A single life annuity.
OPTION D: An annuity extending over the life of the Participant
and the Participant's beneficiary.
Time of Benefit Payments, Section 5.4: Notwithstanding any
provision to the contrary concerning the timing of benefits,
whenever a benefit becomes payable for any of the reasons
specified in Article IV, all of the forms of benefit specified in
Sections 5.1 and 5.2 may be immediately payable in accordance
with the terms of those Sections.
Pre-retirement Spouse's Benefit, Section 6.3: In the event that
the Participant dies before retirement and his spouse becomes
eligible to receive the Qualified Pre-Retirement Survivor
<PAGE> 80
Annuity, the spouse of the Participant may elect an alternative
form of benefit from among the following choices:
(1) One lump sum payment; or
(2) Periodic payments over a period to be determined by the
Participant or the Beneficiary.
<PAGE> 81
APPENDIX I
FRONTIER COMMUNICATIONS OF VIROQUA, INC.
The provisions set forth in this Appendix pertain to those
Participants who have frozen benefits which were transferred to
this Plan from the Viroqua Telephone Company, Inc. Pension Plan
and Trust Agreement.
Actuarial Equivalent, Section 2.2:
Interest: Pre-retirement interest at 6%
Post-retirement interest at 5%
Post retirement Mortality Table: UP 1984 Mortality Table;
provided, however, that for purposes of determining the present
value of any lump sum payout: (1) for amounts not in excess of
$25,000 the interest assumption shall be the rate that would have
been used by the Pension Benefit Guaranty Corporation ("PBGC") as
of the distribution date for purposes of determining the present
value of a lump sum distribution on termination of a plan; (2) if
the lump sum payout exceeds $25,000 using the PBGC rate, the
interest assumption shall be 120 percent of the PBGC rate,
provided that the amount determined under the 120 percent formula
shall never cause the amount to be less than $25,000.
Disability, Section 2.14 and 4.4: No disability benefit is
offered.
Normal Retirement Age, Section 2.25: Normal Retirement Age is
the later of age 65 or the fifth anniversary of the date an
employee commenced participation in the plan.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse which is 50%, or, if the Participant so
elects, 75% or 100% of the amount which is payable during the
joint lives of the Participant and his spouse and which is the
<PAGE> 82
actuarial equivalent of a single annuity for the life of the
Participant.
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant in an amount equal to the
amount payable to such surviving spouse if benefits had been paid
as a Qualified Joint and 50% Survivor Annuity. If the
Participant dies after his Early Retirement Date the benefit
amount shall be determined as if the Participant had retired with
an immediate Qualified Joint and Survivor Annuity on the day
before his death. In the case of a Participant who has any
vested Accrued Benefit and who dies on or before his earliest
retirement date, the benefit amount shall be calculated as if he
had (a) separated from service on his date of death; (b) survived
to his earliest retirement date; (c) retired with an immediate
Qualified Joint and Survivor Annuity on his earliest retirement
date; and (d) died on the day after what would have been his
earliest retirement date. "Earliest retirement date" means the
earliest date on which, under the Plan, the Participant could
have elected to receive retirement benefits based on his service
at the time of his death.
Year of Service, Section 2.35: Year of Service means any Plan
Year during which an Employee completes at least 1,000 Hours of
Service with the Employer or with an Affiliated Company.
Reduced Early Retirement Benefit, Section 4.2: A Participant
may retire early after completing 22 Years of Service may
commence receiving benefits following his attainment of age 52.
Alternatively, a Participant may retire early after completing
two Years of Service and commence receiving benefits following
his attainment of age 57. In the event that the Participant
elects to commence receipt of benefits prior to Normal Retirement
Age, his benefit shall be reduced by .5% for each month that
retirement precedes the first day of the month following the
Participant's 62nd birthday.
Deferred Retirement, Section 4.3: A Participant who continues in
employment after his Normal Retirement Age shall have the option
to begin receiving his benefit, or to defer receipt of his
benefit until actual retirement. No actuarial adjustment shall
<PAGE> 83
be made to account for the benefit payments commencing after
Normal Retirement Age.
Deferred Vested Benefit, Section 4.5: Effective August 16, 1995,
all Accrued Benefits are 100% vested. The amount of a
Participant's benefit shall be equal to his Accrued Benefit as of
his termination date. Unless the vested benefit is paid out in
accordance with the provisions of Section 4.6, such benefit shall
be payable commencing at what would otherwise have been the
Former Participant's Normal Retirement Date, except the Former
Participant may elect (by notifying the Committee in writing) to
receive such vested benefit starting with the first day of any
month following the month in which he would have been eligible
for early retirement benefits under Section 4.2. In the event
that the Participant elects to commence receipt of benefits prior
to Normal Retirement Age, his benefit shall be reduced by .5% for
each month that retirement precedes his Normal Retirement Date.
Cost of Living Increases, Section 4.14: The amount of any
benefit payable under this Plan shall be adjusted, each April, to
account for any increase in the cost of living which occurred
during the prior calendar year. Benefit payments first beginning
after the date of such adjustment but before the end of the Plan
Year in which such adjustment occurred shall also be adjusted in
accordance with the preceding sentence. The amount of the
increase shall be the same percentage used by the Internal
Revenue Service to make cost of living adjustments to the maximum
benefit limitation under 415(b)(1)(A) of the Code. Should the
Service discontinue making such adjustments for any reason, the
adjustment under this Plan shall be measured by increases in the
consumer Price Index for All Urban Consumers in Small
Metropolitan Areas, December 1982-1984 Base = 100, maintained by
the Bureau of Labor Statistics of the U.S. Department of Labor.
In either case, however, the adjustment shall be limited, in any
year, to a maximum increase of four percent (4%). In any year in
which an adjustment is made, the April Pension payment shall also
include the sum of the monthly adjustments for the prior three
months of that year.
<PAGE> 84
Notwithstanding the previous paragraph, cost-of-living increases
shall not be made to that portion of a Participant's Accrued
Benefit attributable to the supplemental benefits set forth under
Appendix M.
Enhanced Retirement Benefits, Section 4.15: Enhanced retirement
benefits are available to Participants who were employed by the
Employer on December 31, 1993, and who, without the application
of the terms of this Section, have at least seven Years of
Service on that date.
Each eligible Participant's Accrued Benefit, determined as of
December 31, 1993 under the terms of the Viroqua Telephone
Company Pension Plan and Trust Agreement, shall be calculated by
adding five years to the Participant's actual age on such date
and by adding five years to his actual number of Years of Service
on such date. Further, the Participant's Average Monthly
Compensation, as of such date, shall be calculated by dividing
the total compensation of the Participant during the three (3)
consecutive years of Service out of the prior ten (10) years of
Service which produce the largest total, by thirty-six (36). All
other factors used in computing a Participant's Accrued Benefit
on December 31, 1993 shall be those actually in effect on such
date. Any Participant who becomes entitled to receive a benefit
from the Plan on and after December 31, 1993 shall receive the
higher of his or her Accrued Benefit determined under this
Section as of such date or the benefit calculated in the normal
fashion using relevant factors on the determination date without
the addition of the five years of age and service, and the
revised definition of Average Monthly Compensation set forth
above.
For purposes of this Section, Average Monthly Compensation means,
before the application of the previous paragraph, the result
obtained by dividing the total Compensation of a Participant
during the five consecutive Years of Service out of the ten Years
of Service prior to retirement which produce the largest total,
by 60 (or by the actual number of months of credited service if
fewer than 60). If two periods of credited service are separated
by a period of service which is not also considered credited
service, the two periods of credited service shall be considered
consecutive for the purpose of the paragraph.
<PAGE> 85
For purposes of this Section, Compensation means the total of all
wages, within the meaning of Code section 3401, and all other
payments of compensation to the Employee (in the course of the
Employer's trade or business) for which the Employer is required
to furnish the Employee a written statement (Form W-2) under Code
section 6041(d) or 6051(a)(3). Compensation under this paragraph
must be determined without regard to any rules under Code section
3401(a) that limit remuneration included in wages based on the
nature or location of the employment on the services performed
(such as the exception for agricultural labor). Notwithstanding
the foregoing, the compensation of any Participant for any year
shall not exceed $150,000, as adjusted by the Secretary of the
Treasury from time to time.
As of December 31, 1993, each eligible Participant shall have
five years added to his or her actual age and five years added to
his or her actual number of Years of Service for purposes of
determining eligibility to receive a normal retirement benefit
under Section 4.1, an early retirement benefit under Section 4.2,
and a deferred vested benefit under Section 4.5. As of December
31, 1993, each eligible Participant shall have five years added
to his or her actual age for purposes of calculating the amount
of reduction for commencement of payment of a vested benefit
under Section 4.5 of the Plan prior to a Participant's Normal
Retirement Date. This paragraph applies only to the portion of a
Participant's Accrued Benefit which has accrued as of December
31, 1993.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
All of the optional forms are Actuarial Equivalents.
OPTION A: A straight life annuity.
OPTION B: A retirement income payable during his life with the
provision that after his death an income at 50 percent of the
rate of his income shall be continued during the life of, and
shall be paid to, a Contingent Annuitant.
OPTION C: A retirement income payable during his life with the
provision that after his death an income at 75 percent of the
<PAGE> 86
rate of his income shall be continued during the life of, and
shall be paid to, a Contingent Annuitant.
OPTION D: A retirement income payable during his life with the
provision that after his death 100 percent of such income shall
continue during the life of, and shall be paid to, a Contingent
Annuitant.
Death Benefits, Section 6.5: If an unmarried Participant dies
before his benefit payments have commenced, or before receiving
36 monthly benefit payments, monthly payments shall be made to
the Participant's Beneficiary until the total number of payments
made to both the Participant and the Beneficiary equals 36. If
the Participant had not begun to receive payments, the amount of
such payments shall be calculated based on his or her Accrued
Benefit at the time of death. If payments had begun, the amount
of the payments to the Beneficiary shall be the amount that was
being paid to the Participant. This death benefit is fully
subsidized by the Plan.
<PAGE> 87
APPENDIX J
FRONTIER COMMUNICATIONS SUBSIDIARY TELCOS
Includes:
Frontier Corporation of Breezewood, Inc.
Frontier Corporation - Oswayo River, Inc.
Frontier Corporation of Canton, Inc.
Frontier Corporation of Thorntown, Inc.
Frontier Corporation - Lakewood, Inc.
Frontier Corporation of Lamar County, Inc.
Frontier Corporation of Fairmount, Inc.
Frontier Corporation of Mississippi, Inc.
Frontier Corporation - St. Croix, Inc.
The provisions set forth in this Appendix pertain to those
Participants who have frozen benefits which were transferred to
this Plan from the Retirement Pension Plan for Employees of
Frontier Corporation Subsidiary Telcos.
Actuarial Equivalent, Section 2.2:
Interest: 8%
Mortality Table: 1971 Combined Group Annuity Table with 50%
male and 50% female;
provided, however, that for purposes of determining the present
value of any lump sum payout: (1) for amounts not in excess of
$25,000 the interest assumption shall be the rate that would have
been used by the Pension Benefit Guaranty Corporation ("PBGC") as
of the distribution date for purposes of determining the present
value of a lump sum distribution on termination of a plan; (2) if
the lump sum payout exceeds $25,000 using the PBGC rate, the
interest assumption shall be 120 percent of the PBGC rate,
provided that the amount determined under the 120 percent formula
shall never cause the amount to be less than $25,000.
Disability, Section 2.14: Disability means a physical or mental
condition which, in the judgment of the Committee, based on
medical reports and other evidence satisfactory to the Committee,
will permanently prevent an Employee from satisfactorily
<PAGE> 88
performing his usual duties for the Employer and will entitle the
Employee to receive Social Security disability benefits.
Disability Benefit, Section 4.4: A Participant who suffers a
Disability shall be entitled to receive 100 percent of his
Accrued Benefit. This benefit shall be paid commencing either at
what would have been the Participant's Normal Retirement Date or
at an earlier date in an amount actuarially reduced in accordance
with the same method used in Section 4.2 for adjusting early
retirement benefits which are paid prior to Normal Retirement
Age.
Normal Retirement Age, Section 2.25: Normal Retirement Age is
the later of age 65 or the fifth anniversary of the date an
employee commenced participation in the plan.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse which is 50 percent of the amount which is
payable during the joint lives of the Participant and his spouse
and which is the actuarial equivalent of a single annuity for the
life of the Participant.
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant in an amount equal to the
amount payable to such surviving spouse if benefits had been paid
as a Qualified Joint and Survivor Annuity. If the Participant
dies after his Early Retirement Date the benefit amount shall be
determined as if the Participant had retired with an immediate
Qualified Joint and Survivor Annuity on the day before his death.
In the case of a Participant who has any vested Accrued Benefit
and who dies on or before his earliest retirement date, the
benefit amount shall be calculated as if he had (a) separated
from service on his date of death; (b) survived to his earliest
retirement date; (c) retired with an immediate Qualified Joint
and Survivor Annuity on his earliest retirement date; and (d)
died on the day after what would have been his earliest
retirement date. "Earliest retirement date" means the earliest
date on which, under the Plan, the Participant could have elected
<PAGE> 89
to receive retirement benefits based on his service at the time
of his death.
Year of Participation, Section 2.34: Year of Participation means
any Plan Year commencing on and after January 1, 1989 during
which a Participant completes at least 1,000 Hours of Service
with a participating employer. In addition, each Participant
shall be given credit for one Year of Participation for each year
during which a Participant accrued a benefit under a predecessor
plan (Breezewood Telephone Company Pension Plan, Canton Telephone
Company Employees Pension Plan, Oswayo River Telephone Company
Money Purchase Pension Plan, and Thorntown Telephone Company,
Inc. Employees Pension Plan), provided that the assets related to
such accruals have been transferred to this Plan.
Year of Service, Section 2.35: Year of Service means any Plan
Year during which an Employee completes at least 1,000 Hours of
Service with the Employer or with an Affiliated Company.
Unreduced Early Retirement Benefit, Section 4.2: A Participant
who has completed 27 or more Years of Service may retire. The
Participant may commence receipt of his benefit at his actual
retirement date without reduction in his benefit to take into
account payment of benefits prior to Normal Retirement Age.
Reduced Early Retirement Benefit, Section 4.2: A Participant
who reaches age 52 and completes 12 Years of Service may elect
early retirement. Participants of certain Affiliated Companies
may also elect reduced early retirement as set forth below:
Those Participants who are employees of Frontier
Communications of Breezewood, Inc. may retire early after
reaching age 60 and completing five Years of Service.
Those Participants who are employees of Frontier
Communications of Thorntown, Inc. may retire early after reaching
age 55 and completing eight Years of Service.
Those Participants who are employees of Frontier
Communications - St. Croix, Inc. may retire early after reaching
age 55 and completing ten Years of Service.
<PAGE> 90
In the event that the Participant elects to commence receipt
of benefits prior to Normal Retirement Age, his benefit shall be
reduced by the lesser of the following amounts: (a) three
percent for each whole total number that his age plus Years of
Participation is less than 74; or (b) 1/180 for each of the first
60 months that retirement precedes the first day of the month
following the Participant's 62nd birthday and l/360 for each of
the next 60 months that retirement precedes the first day of the
month following the Participant's 62nd birthday.
Deferred Retirement, Section 4.3: A Participant who retires
after reaching his Normal Retirement Age, shall receive his
Accrued Benefit. No actuarial adjustment shall be made to
account for the benefit payments commencing after Normal
Retirement Age.
Deferred Vested Benefit, Section 4.5: Effective August 16, 1995,
all Accrued Benefits are 100% vested. The amount of a
Participant's benefit shall be equal to his Accrued Benefit as of
his termination date. Unless the vested benefit is paid out in
accordance with the provisions of Section 4.6, such benefit shall
be payable commencing at what would otherwise have been the
Former Participant's Normal Retirement Date, except the Former
Participant may elect (by notifying the Committee in writing) to
receive such vested benefit starting with the first day of any
month following the month in which he would have been eligible
for early retirement benefits under Section 4.2. In the event
payments are to commence prior to such Former Participant's
Normal Retirement Date, the benefit shall be reduced by 1/180 for
each of the first 60 months that retirement precedes a
Participant's Normal Retirement Date, l/360 for each of the next
60 months that retirement precedes a Participant's Normal
Retirement Date, and for each month prior to the 120 months in
accordance with the Actuarial Equivalent factors set forth in
Section 2.2.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
All of the optional forms are Actuarial Equivalents.
<PAGE> 91
OPTION A: A retirement income payable monthly during his life
with the provision that in the event of his death prior to
receiving either 60, 120 or 180 monthly installments, as the
Participant elects, the remainder thereof shall be paid to his
Beneficiary.
OPTION B: A retirement income payable during his life with the
provision that after his death such income shall continue during
the life of, and shall be paid to, a Contingent Annuitant.
OPTION C: A retirement income payable during his life with the
provision that after his death an income at 3/4 the rate of his
income shall be continued during the life of, and shall be paid
to, a Contingent Annuitant.
OPTION D: A retirement income payable during his life with the
provision that after his death an income at l/2 the rate of his
income shall be continued during the life of, and shall be paid
to, a Contingent Annuitant.
OPTION E: In the case of a married Participant, a straight life
annuity.
Participants who were in the Retirement Pension Plan for
Employees of Frontier Corporation Subsidiary Telcos and who are
or were employed by the following Affiliated Companies shall also
have the additional options listed below for that portion of
their Accrued Benefit that is attributable to their service prior
to the merger of their benefit into the Retirement Pension Plan
for Employees of Frontier Corporation Subsidiary Telcos (January
1, 1989 for Frontier Communications of Canton, Inc. and Frontier
Communications of Thorntown, Inc., and January 1, 1992 for
Frontier Communications of St. Croix, Inc.):
Frontier Communications of Canton, Inc.:
- Lump sum
- Installment payments over any period of time but not
extending beyond life expectancy
<PAGE> 92
Frontier Communications of Thorntown, Inc.:
- Installment payments over a period of 240 months
Frontier Communications of St. Croix, Inc.:
- Lump sum
Death Benefits, Section 6.5: Upon the death of a Participant who
has not received or whose spouse will not receive under Section
6.3 a benefit greater than the Actuarial Equivalent of his
Accumulated Contributions, his Beneficiary shall be paid a
benefit attributable to the excess of his Accumulated
Contributions over the Actuarial Equivalent of any other death
benefit that may be payable under the Plan. "Accumulated
Contributions" means the aggregate of the amounts contributed by
a Participant under the terms of a predecessor plan (Breezewood
Telephone Company Pension Plan, the Canton Telephone Company
Employees Pension Plan, the Oswayo River Telephone Company Money
Purchase Pension Plan, and The Thorntown Telephone Company, Inc.
Employees' Pension Plan) with interest credited at the rate in
effect under a predecessor plan to January 1, 1989 and at a rate
of 120 percent of the Federal mid-term rate (as in effect under
section 1274 of the Code as of the first month of a Plan Year)
for all Plan Years commencing after the January 1, 1989.
<PAGE> 93
APPENDIX K
FRONTIER COMMUNICATIONS OF INDIANA, INC.
The provisions set forth in this Appendix pertain to those
Participants who have frozen benefits which were transferred to
this Plan from the Telco Subs Consolidated Pension Plan.
Actuarial Equivalent, Section 2.2:
Interest: Interest assumption that would be used by the
Pension Benefit Guaranty Corporation ("PBGC") to value benefits
under an insufficient trusteed single employer plan with a
termination date that (i) in the case of an immediate
distribution, coincides with the month in which the Participant
terminates employment or dies, and (ii) in the case of all other
distributions, coincides with the date as of which payment is to
be made or commence. For purposes of determining the present
value of any lump sum payout: (1) for amounts not in excess of
$25,000 the interest assumption shall be the rate that would have
been used by the Pension Benefit Guaranty Corporation ("PBGC") as
of the distribution date for purposes of determining the present
value of a lump sum distribution on termination of a plan; (2) if
the lump sum payout exceeds $25,000 using the PBGC rate, the
interest assumption shall be 120 percent of the PBGC rate,
provided that the amount determined under the 120 percent formula
shall never cause the amount to be less than $25,000.
Mortality Table: UP 1984 Table
Disability, Section 2.14 and 4.4: No disability benefit is
offered.
Normal Retirement Age, Section 2.25: Normal Retirement Age is
age 65.
Qualified Joint and Survivor Annuity, Section 2.29: Qualified
Joint and Survivor Annuity means an immediate annuity for the
life of the Participant with a survivor annuity for the life of
the Participant's spouse which is 50 percent of the amount which
is payable during the joint lives of the Participant and his
<PAGE> 94
spouse and which is the Actuarial Equivalent of a single annuity
for the life of the Participant.
Qualified Pre-Retirement Survivor Annuity, Section 2.30:
Qualified Pre-Retirement Survivor Annuity means an annuity for
the surviving spouse of a Participant in an amount equal to the
amount payable to such surviving spouse if benefits had been paid
as a Qualified Joint and Survivor Annuity. If the Participant
dies after his Early Retirement Date the benefit amount shall be
determined as if the Participant had retired with an immediate
Qualified Joint and Survivor Annuity on the day before his death.
In the case of a Participant who has any vested Accrued Benefit
and who dies on or before his earliest retirement date, the
benefit amount shall be calculated as if he had (a) separated
from service on his date of death; (b) survived to his earliest
retirement date; (c) retired with an immediate Qualified Joint
and Survivor Annuity on his earliest retirement date; and (d)
died on the day after what would have been his earliest
retirement date. "Earliest retirement date" means the earliest
date on which, under the Plan, the Participant could have elected
to receive retirement benefits based on his service at the time
of his death.
Year of Participation, Section 2.34: Year of Participation means
each Plan Year after the effective date of that plan during which
a Participant completes at least 1,000 Hours of Service with an
Affiliated Company which had adopted the Telco Subs Consolidated
Pension Plan. In addition, each "Year of Retirement Service"
credited to a Participant under the National Telephone
Cooperative Association Plan shall be considered as a Year of
Participation under that Plan.
Year of Service, Section 2.35: Year of Service means any Plan
Year during which an Employee completes at least 1,000 Hours of
Service with the Employer or with an Affiliated Company.
Unreduced Early Retirement Benefits, Section 4.2: If the
Participant has reached age 52 and the sum of his age and Years
of Participation equals or exceeds 79, he shall be entitled to
retire and commence receiving his Accrued Benefit upon retirement
without reduction.
<PAGE> 95
Reduced Early Retirement Benefits, Section 4.2: A Participant
may retire early on the first day of any month after reaching age
52. In the event that the sum of the Participant's age and Years
of Service does not equal or exceed 79 and the Participant elects
to commence receipt of benefits prior to Normal Retirement Age,
his benefit shall be reduced by l/4% for each of the first 60
months that retirement precedes the first day of the month
following the Participant's 62nd birthday and l/2% for each of
the next 60 months that retirement precedes the first day of the
month following the Participant's 62nd birthday.
Deferred Retirement, Section 4.3: A Participant who continues in
employment after reaching Normal Retirement Age shall be entitled
to his Accrued Benefit, increased by 1/4 percent for each month
that his actual retirement date exceeds his Normal Retirement
Date.
Deferred Vested Benefit, Section 4.5: Effective August 16, 1995,
all Accrued Benefits are 100% vested. The amount of a
Participant's benefit shall be equal to his Accrued Benefit as of
his termination date. Unless the benefit is paid out in
accordance with the provisions of Section 4.6, such benefit shall
be payable commencing at what would otherwise have been the
Former Participant's Normal Retirement Date, except the Former
Participant may elect (by notifying the Committee in writing) to
receive such vested benefit starting with the first day of any
month following the month in which he would have been eligible
for early retirement benefits under Section 4.2. In the event
payments are to commence prior to such Former Participant's
Normal Retirement Date, the benefit shall be reduced by l/4% for
each of the first 60 months that retirement precedes the
Participant's Normal Retirement Date, l/2% for each of the next
60 months that retirement precedes the Participant's Normal
Retirement Date, and for each month prior to the 120 months in
accordance with the Actuarial Equivalent factors set forth in
Section 2.2.
Optional Forms of Benefit, Section 5.2: The following optional
forms of benefit are available, subject to the provisions of 5.1.
All of the optional forms are Actuarial Equivalents.
<PAGE> 96
OPTION A: A retirement income payable monthly during his life
with the provision that in the event of his death prior to
receiving 60 monthly installments, the remainder thereof shall be
paid to his Beneficiary.
OPTION B: A retirement income payable during his life with the
provision that after his death such income shall continue during
the life of, and shall be paid to, a Contingent Annuitant.
OPTION C: A retirement income payable during his life with the
provision that after his death an income at 2/3 the rate of his
income shall be continued during the life of, and shall be paid
to, a Contingent Annuitant.
OPTION D: In the case of a married Participant, a straight life
annuity with payments guaranteed for ten years.
OPTION E: A straight life annuity.
OPTION F: A lump sum payment.
OPTION G: A retirement income payable during his life with the
provision that after his death an income at 1/2 the rate of his
income shall be continued during the life of, and be paid to, a
Contingent Annuitant; provided, however, that if the Participant
dies before receiving 120 monthly payments, the amount being paid
on the date of his death shall continue to his spouse or, if the
spouse does not survive, to the designated Beneficiary for the
remainder of the ten year period.
OPTION H: A retirement income payable during his life with the
provision that after his death an income at 2/3 the rate of his
income shall be continued during the life of, and be paid to, a
Contingent Annuitant; provided, however, that if the Participant
dies before receiving 120 monthly payments, the amount being paid
on the date of his death shall continue to his spouse or, if the
spouse does not survive, to the designated Beneficiary for the
remainder of the ten year period.
OPTION I: A retirement income payable during his life with the
provision that after his death an income at the same rate of his
income shall be continued during the life of, and be paid to, a
<PAGE> 97
Contingent Annuitant; provided, however, that if the Participant
dies before receiving 120 monthly payments, the amount being paid
on the date of his death shall continue to his spouse or, if the
spouse does not survive, to the designated Beneficiary for the
remainder of the ten year period.
A Participant who does not elect to receive benefits in the
form of a lump sum may elect to receive benefits in any of the
other optional forms described in this Section as further
adjusted by this paragraph. The annualized pension payable under
this paragraph: (i) shall be increased by a temporary supplement
payable until either age 62 or the applicable Social Security
retirement age, as elected by the Participant, and (ii) shall be
reduced by the actuarial value of the temporary supplement for
pension payments made after the date Participant attains (or, in
the event of death, would have attained) either age 62 or the
applicable Social Security retirement age, as so elected. The
amount of the temporary supplement shall be elected by the
Participant, but shall not exceed the amount of the Participant's
estimated Social Security benefit and shall not have the effect
of increasing the value of the annualized pension otherwise
payable. The adjusted pension payable under this paragraph shall
be the Actuarial Equivalent to the unadjusted form of the pension
otherwise elected and payable under this Section.
Time of Benefit Payments, Section 5.4: Notwithstanding any
provision to the contrary concerning the timing of benefits, a
Participant may elect to take a lump sum distribution of his
entire Accrued Benefit, even if the present value of his Accrued
Benefit exceeds $3,500, immediately upon termination of
employment subject to the consent provisions of Section 5.1. In
addition, a Participant may elect to commence payment of a
Qualified Joint and Survivor Annuity immediately upon termination
of employment, subject to the provisions of Section 5.1.
Death Benefits, Section 6.5: In the case of a Participant who,
at the time of death, was employed (or was last employed) by a
Frontier Communications of Indiana, Inc. and who was accruing a
benefit under the Plan, improved death benefits shall be payable
under this paragraph. The Beneficiary of such a Participant
shall receive benefits with a present value of the greater of the
following two amounts: (1) The first amount is 100 times the
<PAGE> 98
monthly pension that would have been payable, had such
Participant survived until his Normal Retirement Date (or until
the first day of the month following death, if later) and retired
at that time with benefits payable in form of a single life
annuity with ten years certain. For purposes of this
calculation, it shall be assumed that the Participant continued
to receive the amount of Compensation payable at the time of
death, and that contributions on behalf of the Participant
continued at the rate in effect at the time of death; (2) The
second amount is the present value of his Accrued Benefit,
provided that the amount payable with respect to a Participant
who has attained age 65 is always the amount described in this
sentence. The benefit payable under this provision shall be
reduced by the present value of any benefit payable pursuant to
the provisions of Section 6.3.
<PAGE> 99
APPENDIX L
PLANS OF AFFILIATED COMPANIES WHICH HAVE BEEN MERGED INTO THIS
PLAN AND AFFILIATED COMPANIES WHICH HAVE ADOPTED THIS PLAN
The following plans of Affiliated Companies have been merged
into this Plan as of the date indicated:
Effective
Name of Plan Date of Merger
Frontier Communications -
Lakeshore, Inc. Defined Benefit Plan 12/31/96
Frontier Communications of
Minnesota, Inc. Retirement Pension Plan 12/31/95
Frontier Communications of
Mondovi, Inc. Defined Benefit Pension Plan 12/31/96
Frontier Communications of
New York, Inc. Management Employee Benefit
and Retirement Plan 12/31/96
Frontier Communications of
Wisconsin, Inc. Pension Plan 12/31/96
Frontier Communications of
Pennsylvania, Inc. Pension Plan 12/31/96
Pension Plan for Employees of
Statesboro Telephone Company, Inc. 12/31/96
Retirement Pension Plan for
Employees of Frontier Corporation
Subsidiary Telcos 12/31/96
Telco Subs Consolidated Pension Plan 12/31/96
Viroqua Telephone Company
Pension Plan and Trust Agreement 12/31/96
<PAGE> 100
The following Affiliated Companies have adopted this Plan
for the benefit of their employees:
Frontier Corporation
Frontier Communications of Rochester, Inc.
Rochester Telephone Corp.
Frontier Information Technologies, Inc.
Frontier Communications International, Inc.
Frontier Network Systems, Inc.
Frontier Communications of Mid-Atlantic, Inc.
<PAGE> 101
APPENDIX M
FROZEN ACCRUED BENEFITS
The following sets forth the frozen Accrued Benefits of
those Participants whose Accrued Benefits were merged into this
Plan from a plan of an Affiliated Company.
Frontier Communications - Lakeshore, Inc.
Defined Benefit Plan
- -----------------------------------------------------------------
Name of Participant Accrued Benefit
Frontier Communications of Minnesota, Inc.
Retirement Pension Plan
- -----------------------------------------------------------------
Name of Participant Accrued Benefit
Frontier Communications of Mondovi, Inc.
Defined Benefit Pension Plan
- -----------------------------------------------------------------
Name of Participant Accrued Benefit
Frontier Communications of New York, Inc.
Management Employee Benefit and Retirement Plan
- -----------------------------------------------------------------
Name of Participant Accrued Benefit
Frontier Communications of Pennsylvania, Inc. Pension Plan
- -----------------------------------------------------------------
Name of Participant Accrued Benefit
<PAGE> 102
Retirement Pension Plan for Employees of
Frontier Corporation Subsidiary Telcos
- ---------------------------------------------------------------
Name of Participant Accrued Benefit
Telco Subs Consolidated Pension Plan
- ----------------------------------------------------------------
Name of Participant Accrued Benefit
Viroqua Telephone Company Pension Plan and Trust Agreement
- ----------------------------------------------------------------
Name of Participant Accrued Benefit
Supplemental Benefit: Included in the above Accrued Benefit are
supplemental benefits which were given to Participants who had
Accrued Benefits or who were receiving benefits under the Viroqua
Telephone Company Pension Plan and Trust Agreement on April 8,
1990, equal to 25% of the individual's current monthly benefit or
projected monthly benefit at age 65. The supplemental benefits
are set forth below and are determined on the basis of a straight
life annuity, except for Georgia Hoffland and Freda Jacobs whose
supplemental benefit is determined on the basis of a joint and
50% survivor annuity. The supplemental benefit shall not be
subject to cost of living increases as set forth in Section 4.14.
Active Participants
- ---------------------------------------------
Anderson, Carolyn $183.56
Anderson, Diane 99.53
Daulton, Cevil 226.74
Drake, Mary 74.04
Endicott, James 97.72
Frank, Margaret 79.65
<PAGE> 103
Garvin, Edwina 90.82
Getter, Wayne 676.23
Gudgeon, Alene 110.65
Halverson, Avenelle 215.83
Harter, James 272.67
Hoffland, Debra 49.66
LePage, Brenda 169.69
Lothen, Arden 366.78
McGarry, Larry 416.24
McNeal, Marvin 496.40
Olson, Carol Ann 303.97
Olson, Rodney 127.25
Sisbach, Hope 194.04
Switz, Duane 362.85
Timmerman, Jorda 5.58
Wymer, Lois 74.94
Zielke, Janet 127.76
Retired and Terminated Vested Employees
- -----------------------------------------------------------
Bigley, James $921.55
Buxton, Betty 30.14
Farrell, Sharon 21.55
Harris, Colleen 64.24
Henrickson, Ruby 91.33
Hoffland, Georgia 95.83
Jacobs, Freda 196.84
Klein, Mildred 54.08
Morrison, Ruth 136.99
Nelson, Arlene 251.57
Oftedahl, norman 22.90
Ostrem, Yvonne 20.58
Stokke, Larry 8.66
Tisthammer, Gwendolyn 92.13
<PAGE> 1
EXHIBIT 10.18
PROMISSORY NOTE
$300,000.00 March 6, 1997
FOR VALUE RECEIVED, Ronald L. Bittner, residing at 7 Hidden
Bridge, Pittsford, New York 14534 ("Maker") promises to pay to
the order of Frontier Corporation, at its office and principal
place of business at 180 South Clinton Avenue, Rochester, New
York 14646 ("Payee"), the principal amount of Three Hundred
Thousand Dollars ($300,000.00). Maker promises to repay the
principal amount, in five equal annual installment payments of
Sixty Thousand Dollars ($60,000) each, beginning on the first
anniversary date of this Note and continuing on each of the
succeeding four anniversary dates of this Note, together with
interest that has accrued on the Note to the date of each
payment. Interest shall be calculated at the applicable federal
rate.
If Maker ceases to be employed by Payee or any of its
subsidiaries or affiliates for any reason whatsoever, the
principal amount of this Note then outstanding and interest
thereon since the last accrual date at the then applicable
federal rate shall become immediately due and payable without
notice, presentation or demand of any kind, all of which are
hereby waived.
No failure or delay on the part of Payee in the exercise of any
power or right in this Note shall operate as a waiver thereof,
and no exercise or waiver of any single power or right, or the
partial exercise thereof, shall affect Payee's rights with
respect to any and all other rights and powers.
Maker waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Note.
<PAGE> 2
The provisions of this Note shall inure to the benefit of and
extend to Payee or any holder hereof or any assigns of Payee.
Any notice given pursuant to this Note shall be in writing and
shall be deemed to have been given when delivered by hand or
deposited for certified mail delivery in the United States mail
with postage prepaid or recognized overnight service and
addressed to the party for whom it is intended at the address for
such party set forth above or at such other address as to which
the parties may from time to time notify each other in like
manner.
This Note shall be governed by and construed under the laws of
the State of New York, without reference to and regardless of the
application of any of its principles of conflicts of law.
In the event that this Note is placed in the hands of an attorney
for the collection hereof, Maker agrees to pay all reasonable
costs of collection, including reasonable attorneys' fees.
IN WITNESS WHEREOF, Maker has executed and issued this Note on
the day and year first set forth above.
/s/R. L. Bittner
---------------------------------
R. L. Bittner
STATE OF NEW YORK )
COUNTY OF MONROE ) ss.:
On the 6th day of March, 1997, before me personally
came Ronald L. Bittner, to me known and known to me to be the
same person described in and who executed the foregoing
instrument, and he duly acknowledged to me that he executed the
same.
/s/Karen L. Markle
--------------------------
Karen L. Markle
Notary Public
EXHIBIT 10.19
Ronald L. Bittner Medical Expense Reimbursement
The Corporation has agreed, effective January 27, 1997, it
shall reimburse to Ronald L. Bittner, during the period of his
employment, any medical expenses incurred by him in connection
with his own personal medical treatments which are not covered by
the provisions of his health care coverage.
<PAGE>
Exhibit 11
Frontier Corporation
Computation of Earnings per Share of Common Stock
on a Fully Diluted Basis (Unaudited)
3 Months Ended
March 31,
(In thousands, except per share data) 1997 1996
- -------------------------------------------------------------
Income (loss) applicable to common $(13,814) $ 56,830
stock
Add: Interest on convertible - 139
debentures
- -------------------------------------------------------------
(13,814) 56,969
Less: Increase in related federal
income taxes - 49
- -------------------------------------------------------------
Adjusted income (loss) applicable to
common stock $(13,814) $ 56,920
Average Common Shares Outstanding
(excluding common stock equivalents) 163,474 160,178
Adjustments for:
Convertible Debentures (1) - 503
Stock Options (1) - 3,420
- -------------------------------------------------------------
Adjusted common shares assuming
conversion of outstanding Convertible
Debentures and Stock Options at
beginning of each period 163,474 164,101
=============================================================
Earnings (loss) per share of common
stock on a fully diluted basis $ (.08) $ .35
=============================================================
(1) Convertible debentures and common stock equivalents are not
applicable to the calculation when earnings are negative.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FRONTIER
CORPORATION'S FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED MARCH 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000084567
<NAME> FRONTIER CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 37,312
<SECURITIES> 0
<RECEIVABLES> 404,129
<ALLOWANCES> 30,992
<INVENTORY> 14,720
<CURRENT-ASSETS> 492,300
<PP&E> 2,270,307
<DEPRECIATION> 1,326,689
<TOTAL-ASSETS> 2,268,992
<CURRENT-LIABILITIES> 481,295
<BONDS> 709,966
0
22,611
<COMMON> 164,081
<OTHER-SE> 825,421
<TOTAL-LIABILITY-AND-EQUITY> 2,268,992
<SALES> 0
<TOTAL-REVENUES> 573,411
<CGS> 15,352
<TOTAL-COSTS> 599,711
<OTHER-EXPENSES> (87)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,510
<INCOME-PRETAX> (15,778)
<INCOME-TAX> (2,217)
<INCOME-CONTINUING> (13,561)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,561)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
