<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Frontier Corporation
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(Name of Registrant as Specified In Its Charter)
Frontier Corporation
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF FRONTIER CORPORATION/SM/]
Frontier Corporation
Frontier Center
180 South Clinton Avenue
Rochester, New York 14646-0700
Proxy Statement
- ------------------------------
NOTICE OF ANNUAL MEETING
OF COMMON SHAREOWNERS
TO BE HELD ON APRIL 29, 1998
Dear Shareowners:
You are cordially invited to attend the Annual Meeting of Common Shareowners of
Frontier Corporation (the "Company") which is scheduled for 10:30 a.m., local
time, on April 29, 1998. We will meet at the Westin Southfield-Detroit Hotel,
1500 Town Center, Southfield, Michigan.
We plan to present to you the following items for your approval:
(1) The election of ten Directors;
(2) The ratification of Price Waterhouse LLP as the Company's public
accountant for the fiscal year ending December 31, 1998; and
(3) Any other matters that may properly come before the meeting or any
adjournments of the meeting.
Consistent with recent changes in New York law, effective March 1, 1998, the
Board of Directors amended Article I, Section 11, of the By-Laws to permit
fixing a record date not more than 60 days prior to a meeting, and amended
Article I, Section 10, to clarify that proxies may be transmitted, authorized
or executed in any manner permitted by the Business Corporation Law. The Board
of Directors amended Article II, Section 2, of the By-Laws to set the number of
Directors constituting the entire Board at ten, effective April 29, 1998.
Owners of Common Stock of record at the close of business on March 2, 1998, are
entitled to notice of and to vote at the meeting. The meeting will be sign
language interpreted for the hearing impaired.
A copy of this proxy statement and the Company's Annual Report are also
available on the Company's web site which can be reached at:
http://www.frontiercorp.com
Your vote is very important. Please either vote electronically or sign and date
the enclosed proxy card and return it promptly in the enclosed return envelope,
whether or not you expect to attend the meeting. If you do not specify your
choices when you vote, it will be understood that you wish to have your shares
voted in accordance with the Board of Directors' recommendations. You may
revoke your proxy and vote in person if you decide to attend the meeting.
An admission card will be required to gain entry to the meeting. If you are
planning to attend the Annual Meeting, please check the appropriate box on the
proxy card. We will then send to you your admission card. A map identifying the
location of the meeting place appears on the back cover of the proxy statement.
We hope to see you at the meeting on April 29, 1998.
By Action of the Board of Directors,
/s/ Josephine S. Trubek
Josephine S. Trubek
Corporate Secretary
Rochester, New York
March 12, 1998
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Proxy Statement
<S> <C>
Proxy Solicitation 1
Voting at the Annual Meeting 1
Proposal 1 - Election of Directors 1
Nominees for Director 1
Information about the Board of Directors 3
Stock Ownership of Management, Directors
and Certain Beneficial Owners 4
Section 16(a) Beneficial Ownership
Reporting Compliance 5
Report of Committee on Directors 5
Report of Committee on Management 6
Performance Graph 8
Compensation of Company Management 9
Summary Compensation Table 9
Option/SAR Grants in Last Fiscal Year 10
Individual Grants in 1997 Table 10
Aggregated Option/SAR Exercises in
Last Fiscal Year and Fiscal Year-End
Option/SAR Values Table 11
Long-Term Incentive Plans-Awards in
Last Fiscal Year Table 11
Pension Plan Table 12
Employment Contracts 13
Indebtedness of Management 14
Business Transactions and Relationships 14
Compensation Committee Interlocks and
Insider Participation in Compensation
Decisions 14
Indemnification of Certain Persons 14
Proposal 2 - Ratification of Public 15
Accountant
1999 Meeting-Future Proposals of 15
Shareowners
Other Matters 15
</TABLE>
<PAGE>
Proxy Statement
1998 Annual Meeting of Common Shareowners
of Frontier Corporation
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Proxy Solicitation
The board of directors ("Board of Directors") of Frontier Corporation (the
"Company"), a New York corporation, is soliciting proxies for use at the annual
meeting of holders of the Company's $1.00 par value common stock (the "Annual
Meeting"). The meeting will be held on April 29, 1998, at 10:30 a.m., local
time at the Westin Southfield-Detroit Hotel, 1500 Town Center, Southfield,
Michigan 48075, or any later time, if adjourned, for the purposes stated in the
Notice of Annual Meeting of Common Shareowners provided to you. We are sending
you this Proxy Statement and the enclosed proxy card and alternative electronic
voting instructions in connection with the Board's solicitation so that you may
vote your shares.
The Company will pay the cost of proxy solicitation. In addition to the
solicitation of proxies by mail, some officers and employees of the Company,
without additional compensation, may contact you personally or by telephone,
facsimile, telegraph or cable, to solicit your proxy. The Company will also
request brokerage houses, nominees, custodians and fiduciaries to forward
soliciting materials to the beneficial owners of stock held of record and will
reimburse such persons for forwarding such materials. In addition, the Company
has retained Innisfree M&A Incorporated, New York, New York, to aid in the
solicitation of proxies at a fee of $6,000 plus reimbursement for out-of-pocket
expenses incurred by that firm on behalf of the Company.
The principal executive offices of the Company are located at 180 South
Clinton Avenue, Rochester, New York 14646. The main telephone number is
(716) 777-1000.
Voting at the Annual Meeting
The close of business on March 2, 1998, is the Record Date for determination of
the shareowners entitled to notice of, and to vote at, the Annual Meeting. On
that date there were 170,961,366 shares of the Company's $1.00 par value common
stock outstanding and entitled to vote at the meeting. You are entitled to cast
one vote for each share held as of the Record Date on matters properly brought
before the meeting.
Each proxy which is properly executed and returned in the enclosed return
envelope or is properly voted electronically will be voted at the Annual
Meeting. Shares represented by your proxy will be voted in accordance with the
directions you specify on the proxy card or that you specify electronically. If
your proxy does not specify a choice, your shares will be voted for the
election of the Directors nominated in the proxy and in favor of ratification of
the election of Price Waterhouse LLP as public accountant. You have the right to
revoke your proxy by executing a proxy bearing a later date, by attending the
meeting and voting in person, or by otherwise notifying the Company prior to the
meeting.
Both the hard-copy proxy card and the electronic voting proxy card contain
spaces for you to indicate if you wish to abstain on the proposal or to
withhold authority to vote for one or more nominees for Director. Directors are
elected by a plurality of the votes cast. Votes withheld in connection with the
election of one or more of the nominees for Director will not be counted as
votes cast in connection with that nominee's election. The public accountant is
ratified by a majority of the votes cast. Abstentions are not counted in
determining the votes cast in connection with the ratification of the public
accountant.
The New York Stock Exchange allows brokerage firms holding shares for the
benefit of their clients to vote in their discretion on behalf of their clients
with respect to "discretionary items" if the clients have not furnished voting
instructions within ten days of the shareowner meeting. The election of
Directors and the ratification of the public accountant are discretionary items
with respect to which brokerage firms may vote.
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Proposal 1 - Election of Directors
YOUR BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" ALL NOMINEES.
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Nominees for Director
The Board of Directors nominates the ten persons named on pages 2 and 3 for
election to the Board of Directors. All of these people are currently Directors
of the Company, and their terms of office all expire on the date of the Annual
Meeting. If elected, each will serve until the Annual Meeting of Shareowners to
be held in 1999 or until such time as his or her respective successor is
elected. The Board believes that all of the persons it has nominated will be
available and willing to serve as Directors. The accompanying proxy will be
voted for the election of these nominees, unless authority to vote for one or
more nominees is withheld. If any nominee is unable to serve, the shares
represented by all valid proxies will be voted for the election of any
substitute nominee designated by the Board or its Executive Committee, or the
Board may fill the vacancy at a later date after selecting an appropriate
person.
The principal occupation and business experience of each nominee for election
at the Annual Meeting of Common Shareowners to be held on April 29, 1998
appears next to that person's photograph.
This Proxy Statement and Form of Proxy are being first sent to Shareowners on
March 12, 1998.
1
<PAGE>
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[PHOTO OF PATRICIA C. BARRON]
Patricia C. Barron, 55, is Corporate Vice President, Business Operations
Support, Xerox Corporation, a manufacturer of office systems and equipment, and
has held this position since May 1997. From February 1994 until May 1997, she
was President, Xerox Engineering Systems. From March 1992 until February 1994,
she was President, Office Documents Products Division, Xerox Corporation. She is
a Director of Aramark Corporation, Quaker Chemical Corporation, Reynolds Metals
Company, and Teleflex Corporation. She has been a Director of the Company since
1990.
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[PHOTO OF RAUL E. CESAN]
Raul E. Cesan, 50, is President, Schering-Plough Pharmaceuticals and Executive
Vice President, Schering-Plough Corporation, a worldwide manufacturer and
marketer of pharmaceutical and health care products and has held this position
since September 1994. From September 1992 through September 1994, he was
President, Schering Laboratories - U.S. Pharmaceutical Operations. From
September 1988 to September 1992, he was President, Schering-Plough
International. He has been a Director of the Company since 1995.
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[PHOTO OF JOSEPH P. CLAYTON]
Joseph P. Clayton, 48, is Chief Executive Officer and President of the Company
and has held this position since August 1997. He also served as the Company's
President and Chief Operating Officer from June 1997 to August 1997. From March
1992 until December 1996 he was Executive Vice President, Marketing and Sales -
Americas and Asia, Thomson Consumer Electronics, a worldwide leader in the
consumer electronics industry. He has been a Director of the Company since 1997.
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[PHOTO OF BRENDA E. EDGERTON]
Brenda E. Edgerton, 48, is Vice President - Business Development, Campbell Soup
Company, a manufacturer of prepared convenience foods and has held this position
since May 1996. From May 1994 to May 1996, she held the position Vice President,
Finance - U.S. Soup, and from August 1989 through April 1994, she was Vice
President and Treasurer, Campbell Soup Company. She has been a Director of the
Company since 1993.
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[PHOTO OF JAIRO A. ESTRADA]
Jairo A. Estrada, 50, is President and Chief Executive Officer of EMRALD
Enterprises, a private investment firm. He has served in this capacity since
June 1996. Until December 1995, he was Chairman of the Board and Chief
Executive Officer of Garden Way Incorporated, a company which manufactures
outdoor power equipment, as well as Chairman of the Board of Stairmaster, which
manufactures exercise equipment. He is Chairman of the Board of Mercer
Management, Inc., and a member of the Board of Flow Management Technologies,
Inc., and of the Essential Nutrition Company. Mr. Estrada has been a Director
of the Company since 1989.
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[PHOTO OF MICHAEL E. FAHERTY]
Michael E. Faherty, 62, is an active investor in publicly traded securities and
in various venture capital and other private businesses. He is also the
principal of MICO, a general business consulting and contract executive firm.
In connection with this business, he has served as an executive for various
companies. Since 1994, he has served as Chairman of ECCS, Inc., a provider of
open systems-based networked computing solutions which incorporate ECCS's mass
storage enhancement products. From 1994 until June 1996, he was also ECCS's
Chief Executive Officer. From January 1992 to January 1994, he was President
and Chief Executive Officer of Shared Financial Systems, Inc. He has also
served for varying periods of time as President and/or Chairman of Intec Corp.,
and either Chief Executive or Chief Operating Officer of Information Magnetics,
Cable & Wireless North America, Digital Sound Corporation, and Banc Tec, Inc.
He is a Director of Banc Tec, Inc., and of ECCS, Inc. Mr. Faherty has been a
Director of the Company since 1995.
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[PHOTO OF ALAN C. HASSELWANDER]
Alan C. Hasselwander, 64, is Past Chairman of the Board of Rochester Telephone
Corporation (now Frontier Corporation). From February 1992 to April 1992, he was
Chairman of the Company. From July 1984 to February 1992, he was President and
Chief Executive Officer of the Company. He has been a Director of the Company
since 1984.
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[PHOTO OF ROBERT HOLLAND, JR.]
Robert Holland, Jr., 57, is the Chief Executive Officer of Workplace
Integrators, an office furniture distributor, and has held that position since
June 1997. From February 1995 until October 1996, he was Chief Executive
Officer of Ben and Jerry's Homemade, Inc., a manufacturer and marketer of
premium ice cream. From 1991 to 1995, he was Chairman and Chief Executive
Officer of Rokher-J, Inc., a business consulting firm, and from 1990 to 1991,
he was Chairman of Gilreath
2
<PAGE>
Manufacturing, Inc. He is also a Director of Mutual Life Insurance Company of
New York, Olin Corporation, Tricon Global Restaurants, Inc., Trumark Inc., and
A.C. Nielsen Co. Mr. Holland has been a Director of the Company since 1995.
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[PHOTO OF DOUGLAS H. MCCORKINDALE]
Douglas H. McCorkindale, 58, is Vice Chairman and President of Gannett Co.,
Inc., a nationwide diversified communications company and has held that
position since September 1997. Prior to that he held the position of Vice
Chairman and Chief Financial and Administrative Officer. He is a Director of
Gannett Co., Inc., Continental Airlines, and a director or trustee of a number
of investment companies in the family of Prudential Mutual Funds. He has been a
Director of the Company since 1980.
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[PHOTO OF DR. LEO J. THOMAS]
Dr. Leo J. Thomas, 61, retired in May 1996, from Eastman Kodak Company, a
manufacturer of imaging products. From September 1994 to May 1996, he held the
position of Executive Vice President and from September 1991 to September 1994,
he was Group Vice President, Eastman Kodak Company. He is a Director of John
Wiley & Sons, Inc. He has been a Director of the Company since 1984.
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Information About The Board Of Directors
Board of Directors
The Board of Directors of the Company currently consists of eleven persons and
held sixteen meetings during 1997. All of the Directors attended at least 75% of
the total meetings of the Board and its committees which they were eligible to
attend.
Committees of the Board of Directors
The Board of Directors conducts its business through meetings of the Board and
through the activities of its committees. The standing committees of the Board
are the Audit Committee, the Committee on Management, the Committee on
Directors and the Executive Committee.
Audit Committee
The Audit Committee of the Board is currently composed of Jairo A. Estrada,
Chair; Brenda E. Edgerton and Daniel E. Gill. This committee reviews the scope
of audit activities and the financial reports of the Company, and reviews with
management significant and material matters which may result in either potential
liability to the Company or significant exposure to the Company. The Committee
also makes reports and recommendations with respect to audit activities,
findings, and reports of the independent public accountant and the internal
audit staff of the Company. The Audit Committee held six meetings in 1997.
Committee on Management
The present members of the Committee on Management are Dr. Leo J. Thomas, Chair;
Raul E. Cesan and Michael E. Faherty. This committee is responsible for
determining the compensation, benefits and perquisites of all senior executive
officers of the Company, with the exception of the Chief Executive Officer, and
for recommending the compensation, benefits and perquisites of the Chief
Executive Officer to the full Board after an evaluation of his performance. This
committee also develops and administers executive compensation plans and reviews
succession planning for the Company and other significant human resources
issues. The Committee on Management held twelve meetings in 1997.
Committee on Directors
The Committee on Directors serves as the nominating committee and is responsible
for corporate governance issues. The Committee currently consists of Patricia C.
Barron, Chair; Brenda E. Edgerton, Robert Holland, Jr., and Douglas H.
McCorkindale. The Committee reviews all matters relating to the selection,
qualification, evaluation, and compensation of members of the Board of Directors
and all nominees to the Board. The Committee on Directors held six meetings in
1997.
The Committee on Directors will consider nominations by shareowners. Such
suggestions should include sufficient biographical information so that the
Committee can appropriately assess a nominee's qualifications. This information
would include, at a minimum, the nominee's name and address, business and other
experience relevant to serving as a member of Frontier's Board of Directors, and
a listing of any other Boards on which the nominee may be a member. All
submissions should be sent by a letter addressed to the Corporate Secretary,
Frontier Corporation, 180 South Clinton Avenue, Rochester, New York 14646-0700.
Suggestions in connection with the 1999 Annual Meeting of Common Shareowners
must be received by October 30, 1998 in order to receive consideration.
Executive Committee
The present members of the Executive Committee are Douglas H. McCorkindale,
Chair; Patricia C. Barron, Joseph P. Clayton, Jairo A. Estrada, Alan C.
Hasselwander and Dr. Leo J. Thomas. The Chair of the Executive Committee serves
as the lead outside director. The Executive Committee possesses all of the
powers of the Board of Directors except those which, by law or the Company's By-
Laws, cannot be delegated to it. The Executive Committee met five times in 1997.
Compensation of Directors
Directors are paid an annual retainer and meeting fees. The annual retainer
consists of 1,200 shares of Frontier Corporation common stock. The meeting fee
is $1,500 for each Board and/or committee meeting attended. The annual retainer
for each committee chair consists of an additional 300 shares of Frontier
Corporation common stock. New Directors also receive an additional one-time
grant of 1,000 shares of Frontier Corporation common stock which they must hold
during their tenure on the Board. The lead director receives additional
compensation
3
<PAGE>
equal to the cash value of 1,200 shares of the Company's common stock. Mr.
McCorkindale served as lead director in 1997. It is currently expected that he
will continue to serve in this capacity in 1998. Directors who are employees of
the Company or its subsidiaries receive no annual retainer or meeting fees.
Directors may elect to defer payment of their fees to future years.
Pursuant to the Company's Directors' Stock Incentive Plan, Directors annually
receive an option to purchase 4,000 shares of the Company's common stock. These
options expire ten years after issuance, and the exercise price is the closing
price of the stock on the day the option was issued. Each outside Director
received a grant of options for 4,000 shares at an exercise price of $16.375 per
share on May 2, 1997.
Directors also receive cellular telephone equipment and service and other
nominal in-kind items.
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Stock Ownership of Management, Directors
and Certain Beneficial Owners
In 1993, the Committee on Directors first established targets for the minimum
amounts of the Company's common stock which Directors should own. These targets
for stock ownership consider the length of a Director's tenure on the Board. The
1997 target for Directors with at least five years' service on the Board was the
beneficial ownership of approximately 6,800 shares of the Company's common
stock. All Directors with at least five years of service on the Board have met
that target. The new target beginning in 1998 for each outside Director is the
beneficial ownership of at least 12,000 shares of the Company's common stock.
Executive officers of the Company are also encouraged to own shares of the
Company. The recommended stock ownership level is based on each officer's
position in the organization and is a multiple of salary. Mr. Clayton and each
Executive Vice President has a stock ownership target which is the beneficial
ownership of Company common stock equal in value to four times his or her
respective salary. Each other Company executive has a target of beneficial
ownership of Company common stock, varying by salary grade, equal in value to
one to three times his or her respective salary. Each corporate officer is
expected to achieve his or her target by the later of January 1, 1999 or the
fifth anniversary of his or her appointment as an executive officer.
The following table sets forth the number of shares of the Company's common
stock beneficially owned by each Director and nominee, by each of the named
executive officers other than Mr. Bittner, and by Directors and officers of the
Company as a group as of February 10, 1998. Mr. Bittner is not included in the
following table because he died August 31, 1997; any shares beneficially owned
by him at the date of his death are now beneficially owned by his estate or
heirs. No Director, officer or nominee beneficially owns more than 1% of the
Company's outstanding shares of common stock. The group's aggregate holdings
constitute less than 1% of the Company's issued and outstanding common stock.
Management and Directors Stock Ownership Table
as of February 10, 1998
<TABLE>
<CAPTION>
Total
Common Stock Beneficial
Name Stock(1) Options(2) Ownership
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Directors and Nominees:
Patricia C. Barron 10,847 11,399 22,246
Raul E. Cesan 6,976 3,999 10,975
Joseph P. Clayton 309,163 0 309,163
Brenda E. Edgerton 9,395 10,449 19,844
Jairo A. Estrada 21,145 11,999 31,144
Michael E. Faherty 15,808 95,722 111,530
Daniel E. Gill 11,682 11,999 23,681
Alan C. Hasselwander(3) 38,027 9,265 47,292
Robert Holland, Jr. 7,319 3,777 11,096
Douglas H. McCorkindale 11,720 11,999 23,719
Dr. Leo J. Thomas 31,334 11,999 43,333
Named Executive
Officers:
Robert L. Barrett 108,688 149,999 258,687
Joseph P. Clayton 309,163 0 309,163
Jeremiah T. Carr 75,227 155,799 231,026
Louis L. Massaro 94,747 179,465 274,212
Donna L. Reeves-Collins 5,687 28,066 33,753
Directors and Executive
Officers as a Group
(18 persons) 781,031 793,401 1,574,432
- --------------------------------------------------------------------------------
</TABLE>
(Footnotes to Management and Directors Stock
Ownership Table)
(1) Includes all shares which each Director, nominee or officer directly, or
through any contract, arrangement, understanding, relationship or otherwise, has
or shares the power to vote or to direct the voting of such shares or to dispose
or to direct the disposition of such shares. Amounts in this column include both
vested and unvested restricted stock granted to selected executive officers.
(Please see Summary Compensation Table footnote 3 at page 10.) However, these
amounts do not include shares which each such person has the right to acquire
pursuant to options or other rights.
(2) Includes all shares which such persons have the right to acquire within the
sixty days following February 10, 1998, pursuant to options or other rights.
These amounts do not include shares which such persons have the right to acquire
more than sixty days after that date.
(3) Includes 1,400 shares owned by Mr. Hasselwander's spouse. Mr. Hasselwander
disclaims beneficial ownership of these shares.
4
<PAGE>
Set forth below is the name, address and stock ownership of the only person or
group of persons known by the Company to own beneficially more than 5% of the
outstanding shares of common stock.
Stock Ownership of Certain Beneficial Owners
as of December 31, 1997
<TABLE>
<CAPTION>
Number of
Name and Address Shares of Percent of
of Beneficial Owner Common Stock Class
- --------------------------------------------------------------------------------
<S> <C> <C>
Delaware Management
Holdings, Inc. (1) 12,929,159 7.88%
2005 Market Street
Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
</TABLE>
(1) Delaware Management Holdings, Inc., filed with the Securities and Exchange
Commission a Schedule 13G, dated February 9, 1998, stating that it beneficially
owned in the aggregate 12,929,159 shares of the Company's common stock in its
capacity as the parent holding company of Delaware Management Company, Inc. In
its Schedule 13G filing, Delaware Management Holdings, Inc., also disclosed that
with respect to the shares it beneficially owns, it has sole voting power with
respect to 8,839,300 shares, shared voting power with respect to 0 shares, sole
dispositive power with respect to 12,267,459 shares, and shared dispositive
power with respect to 661,700 shares.
- --------------------------------------------------------------------------------
Section 16(a) Beneficial Ownership
Reporting Compliance
The Company's Directors, executive officers and shareowners holding in excess of
10% of the common stock are required to file reports with the Securities and
Exchange Commission and the New York Stock Exchange, with copies to the Company,
concerning ownership of and transactions in the Company's common stock. Based
solely on those reports furnished to the Company and related information, the
Company believes that all such filing requirements for 1997 were complied with
in a timely fashion.
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Report of Committee on Directors
The Company believes that good corporate governance supports the financial
performance of the Company and serves the best interests of the shareowners.
Your Board formed the Committee on Directors in 1993 to focus the Board's
attention on corporate governance and to serve as the nominating committee.
Since then, the Committee initiated several actions designed to increase the
independence of the Board and to enhance the alignment of Directors' interests
with those of shareowners. Many of these actions were already reported to you in
prior proxy statements. During 1997, the Committee continued its efforts to
improve the Company's corporate governance.
The Board adopted a set of Governance Guidelines in 1994. The Guidelines
establish the framework and standards for Board operation, are reviewed annually
and are described generally here.
The Governance Guidelines set the size of the Board to be between 9 and 14
members, each of whom is elected for a one-year term. We expect 100 percent
attendance with a minimum permitted attendance of 75 percent of the meetings.
The minimum number of Board meetings held each year is 5 and, for each
Committee, is 2.
The Board is composed of primarily outside Directors and all Committees,
except the Executive Committee, are composed entirely of independent outside
Directors. A majority of the Executive Committee are independent outside
Directors. Retirement age is 70. If a Director's primary job changes, he or she
submits a resignation to the Committee on Directors which, after consideration,
recommends whether or not to accept it. Retirement is considered a job change in
the context of this provision. The Chair of the Executive Committee serves as
the lead outside director. In recognition of the additional responsibilities of
the lead director function, this Committee recommended that in 1997, and again
in 1998, the lead director receive additional compensation in an amount equal to
the cash value of 1,200 shares of the Company's common stock. This additional
compensation was approved by the full Board of Directors.
The Committee monitors the stock ownership of the members of the Board and
reports that all current outside Board members have met their respective stock
ownership target in effect at the end of 1997. At the end of 1997, the Committee
reviewed the stock ownership target. Rather than continuing the target of four
times the average annual compensation of a Director, the Committee increased the
target to be reached over a period of five years to 12,000 shares, effective
January 1, 1998.
In 1996, the Committee reviewed Board member compensation and determined that
a major shift was desirable to more closely align the Directors' interests with
those of the shareowners. Thus, the Committee recommended that beginning with
the 1996 compensation package, the full retainer paid to each Board member and
each Chair of a Committee would be in the form of shares of Frontier common
stock. The Board approved this plan, and subsequently the shareowners approved
this plan at the April 24, 1996 Annual Meeting of shareowners. This plan
remains in effect for 1998.
In 1995, the Committee utilized a formal system of evaluation of each Director
in its process of nomination of the slate of nominees submitted to shareowners
for a vote at the Annual Meeting of Shareowners. In 1996, the Committee
introduced a full peer evaluation process which provided feedback to the
individual Directors and to the Board as a whole with respect to strengths of
the Board and areas for improvement. This peer evaluation process will be
followed on a two-year cycle. In alternate years, the Board evaluates its
effectiveness as a whole in a number of areas of the Board's responsibility
including the protection of shareowners' interests, CEO performance, strategic
planning and management succession.
5
<PAGE>
Your Committee on Directors will continue to review annually the governance
standards and recommend improvements in governance to the full Board of
Directors. A complete copy of the Governance Guidelines is available from the
Corporate Secretary.
Respectfully submitted,
The Committee on Directors
Patricia C. Barron (Chair)
Brenda E. Edgerton
Robert Holland, Jr.
Douglas H. McCorkindale
January 26, 1998
- --------------------------------------------------------------------------------
Report of Committee on Management
Compensation Philosophy and Policy
The Committee on Management believes that it is imperative for Frontier to offer
an aggressive, competitive compensation program to motivate employees to build
wealth for shareowners. The executive compensation program is designed to reward
employees whose results enable the Company to achieve its vision. The components
of the program are:
. Base Salary
. Annual Incentive Plan (Bonus)
. Stock Incentive Plan
The executive compensation program is structured to attract and retain the
highest caliber executives who are compensated based on the Company's
consolidated performance and the individual's contribution. The program is
designed to be competitive with compensation programs offered by comparable
employers. The Company retained William M. Mercer, Inc. to review its executive
compensation program on an annual basis. Information from this consulting firm,
other independent studies and public information concerning salary, bonus and
long-term incentive payments paid by companies in the telecommunications and
related industries are used by this Committee to determine an appropriate
compensation package for the Company's executives.
The analysis includes information from a peer group of twenty-eight companies
in the telephone, long distance, cable television, cellular and information
technology industries. This group includes most of the companies reported in the
Standard & Poor's Telephone Index and all of the companies reported in the
Standard & Poor's Long Distance Index, together with additional companies. The
Company's policy is to establish benchmarks at the median and 75th percentile of
the comparative companies and to reward results based on performance. On a
comparative basis, the base salary of the Company's CEO and its other
executives, on average, would be considered within the third quartile of this
group of peer companies.
Significant Actions During The Year
In early 1997, Mr. Bittner, then CEO, was diagnosed and treated for a malignant
brain tumor. At the time, the severity of his condition and his ability to
continue to execute the duties of his office were uncertain. Therefore, this
Committee immediately took two actions. First, action was taken to stabilize
the senior executive team during Mr. Bittner's illness. For key senior
executives, this Committee approved stock option grants and grants of
restricted stock with vesting tied to stock price performance targets and
passage of time. Restricted stock awards expire on February 28, 2000. Each
executive must continue to be employed by the Company and specified stock price
targets must be achieved by certain dates for vesting to occur. Executives who
leave the Company for any reason other than retirement, death or disability
forfeit all unvested awards. No greater than one-third of an executive's award
can be paid in either 1998 or 1999. On the grant date the Company's stock price
was $21.875 per share. The stock price performance vesting criteria for the
first one-third of the grant is the achievement of at least a $24.00 stock
price for twenty business days in a thirty business day period. Subsequent
thirds will vest upon achievement, for the same minimum duration, of stock
prices of $26.00 and $29.00, and the passage of time.
Coincident with these actions, a search was begun to identify a Chief
Operating Officer (COO). A candidate was sought who could step in and run the
day-to-day operations and who also possessed the capabilities to move up to the
CEO position. In June, Mr. Clayton was hired to fulfill this role. In August,
shortly preceding Mr. Bittner's death, Mr. Clayton was appointed CEO.
During 1997, Mr. Massaro indicated a desire to retire. In order to allow
adequate time to identify and appoint his successor and to provide an orderly
transition of his duties, the Company and Mr. Massaro entered into a Service
Continuation Agreement. This agreement defines the term of his employment and
the consulting services to be provided to Frontier during the first year
following his retirement.
In October, Mr. Clayton restructured the executive group to better focus the
Company on critical goals for 1998 and beyond. Mr. Bennis, formerly Executive
Vice President, resigned and Mr. Gregory, formerly Senior Vice President,
retired. At that time Ms. Reeves-Collins was promoted to Senior Vice President
responsible for sales and David Carey, an additional Senior Vice President
responsible for marketing, was hired.
In January 1998, the Committee negotiated, with the Board's approval, a new
employment agreement with Mr. Clayton to reflect his duties as Chief Executive
Officer. The term of the agreement is for three years and defines the elements
of his compensation.
6
<PAGE>
Base Salary
The salaries of the executive officers are based on the executive's performance
and an analysis of base salaries paid executive officers having similar
responsibilities in other companies. This analysis included the companies in the
peer group of twenty-eight publicly-traded companies together with additional
companies from other industries with similar revenues and/or asset values. Mr.
Clayton's base salary was set when he was hired in June 1997 and was based on
his responsibilities as Chief Operating Officer as well as his capabilities to
assume the role of Chief Executive Officer. No adjustment was made to his salary
either upon assuming the chief executive role or later in 1997. The base
salaries of the other executive officer positions, other than that of the Chief
Executive Officer, were set during 1997 and are commensurate with the respective
position's responsibilities. This Committee continues to review executive salary
levels in order to ensure competitiveness.
In addition to benchmarking comparative companies' salaries, salary levels for
the executives were based upon a subjective assessment of each individual's
performance and responsibilities as well as overall corporate performance as
measured by actual earnings per share and revenue versus pre-established
targets, strategic goals and business and individual performance. No relative
weights are attributed to any specific measurement factors.
Annual Incentive Plan (Bonus)
The Company's annual incentive plan is a bonus plan designed to provide
performance-based compensation awards to executives for achievement during the
past year. For executive officers, annual incentive awards are a function of
individual performance and consolidated corporate results. Business unit
performance is also a component of the annual incentive plan for certain of
those employees involved in line operations below the executive officer level.
All participants are subject to a discretionary adjustment, either positive or
negative, based on individual performance. The specified qualitative and
quantitative criteria employed by the Committee in determining annual incentive
awards vary individually and from year to year. These criteria, or targets, are
established as a means of measuring executive performance. The corporate target
for 1997 was an equally weighted earnings per share and revenue target
established by this Committee as an incentive to improve the financial
performance of the firm and thus improve long-term stock performance.
Performance objectives and associated payout opportunities were established at
the beginning of the year for executive officers other than Mr. Clayton. The
objectives are identified as threshold, standard and premier targets with
standard performance yielding payouts at the median level competitively. Actual
1997 corporate performance was below the threshold level, and accordingly, there
was no bonus payout for those executives. Mr. Clayton joined Frontier in June
1997, and as part of his initial compensation package, he was guaranteed an
incentive bonus of $300,000 for 1997. In conjunction with his appointment as
Chief Executive Officer in August 1997, the guarantee amount was increased to
$350,000. Payment of this amount was made in early 1998. No guarantee exists for
1998 or beyond.
Stock Incentive Plan
This Committee believes that stock-based plans are an important component of
executive compensation programs because they tie long-term compensation directly
to the interests of shareowners. The Company's Management Stock Incentive Plan
is designed to align executive compensation with long-term performance of the
Company's stock. Stock options issued in 1997 do not expire until 2007, and the
exercise price is the closing price of the stock on the day the option was
granted. This Committee makes a subjective determination of the specific stock
option grant to be awarded to each executive officer. The factors considered by
the Committee in making this determination are:
(a) the executive officer's past performance on previously set objectives;
(b) his or her expected future contribution to the long-term strategic goals and
objectives of the Company; and
(c) industry practices.
No relative weights are attributed to any of these factors. All executive
officers of the Company received options in 1997 based on their position in the
Company, their contribution to the achievement of the Company's long-term
objectives as assessed by Committee members based on their experience with the
executive officers, and upon the recommendation of the Chief Executive Officer.
Upon the recommendation of this Committee, Mr. Bittner received stock option
grants based upon these factors as well. Mr. Clayton and other executive
officers who joined Frontier during 1997 received stock option grants based upon
their expected future contributions to the long-term strategic goals and
objectives of the Company as assessed by Committee members.
Restricted stock awards were granted to incent and retain certain of the named
executive officers. The awards were issued to them based upon their expected
contribution to the achievement of the Company's long-term objectives as
assessed by Committee members based on their experience with the executive
officers, and upon recommendation of Mr. Bittner, the then Chief Executive
Officer. Restricted stock awards issued to them in 1997 carry the terms and
conditions as presented under "Significant Actions During The Year" on page 6.
Upon the recommendation of this Committee, the Board of Directors awarded Mr.
Bittner restricted stock under these terms as well. Under the terms of the
Management Stock Incentive Plan, should these performance targets be achieved
prior to the restricted stock expiration on February 28, 2000, a pro rata
portion of the shares will be awarded to Mr. Bittner's estate. The performance
target associated with the first one-third of the overall grant was met on
January 21, 1998 and vested on February 4, 1998. Mr. Bittner's estate will
receive its pro rata distribution of 19,444 shares during February 1998.
Other Actions
The Committee believes that stock-based programs provide the best long-term
incentives, are excellent motivators and better align the efforts of employees
with the objectives of the shareowners. The Committee had previously established
stock ownership guidelines for the Company's executives. These guidelines are
described elsewhere in this proxy statement.
7
<PAGE>
Section 162(m) of the Internal Revenue Code limits the tax deduction to
$1 million per person for compensation paid to the five highest paid executive
officers unless certain requirements are met. The Management Stock Incentive
Plan, specifically as it relates to performance-based restricted stock, is
designed to comply with Section 162(m) requirements. The Committee favors a
pay-for-performance compensation program and intends to continue to review
executive compensation plans in consideration of the regulation.
No member of this Committee is a former or current officer or employee of the
Company or any of its subsidiaries.
Respectfully submitted,
The Committee on Management
Dr. Leo J. Thomas (Chair)
Raul E. Cesan
Michael E. Faherty
January 26, 1998
- --------------------------------------------------------------------------------
Performance Graph
The following graph charts the Company's cumulative total shareowner return
performance against the Standard & Poor's Telephone Index, the Standard &
Poor's Long Distance Index and the Standard & Poor's 500 Index. A variety of
factors may be used in order to assess a corporation's performance. This
Performance Graph, which reflects the Company's total return against the
selected peer group, reflects one such method. The performance of the Standard
& Poor's Telephone Index and the Standard & Poor's Long Distance Index are
weighted by the stock market capitalization of the companies within each of
these peer groups. These same comparisons have been presented in the last two
proxy statements.
[GRAPH APPEARS HERE]
FIVE YEAR CUMULATIVE RETURNS
0 1993 1994 1995 1996 1997
- -------------------------------------------------------------------------------
(circle) Frontier Corporation $100.00 $128.57 $127.44 $180.06 $142.24 $154.88
(square) S&P 500 $100.00 $110.10 $126.82 $174.54 $212.95 $285.42
(diamond) S&P Long Distance $100.00 $111.53 $111.41 $150.78 $151.17 $212.23
(delta) S&P Telephone $100.00 $110.24 $101.48 $152.25 $153.24 $212.24
- -------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Compensation of Company Management
We have included the following tables and other information to help you
understand the compensation of the Company's executives. These tables reflect
the components of compensation paid the executive officers of Frontier
Corporation. Specifically, these include salary, bonus, stock options and a
long-term incentive plan. The Company does not provide its executives with stock
appreciation rights.
The Report of the Committee on Management of the Board of Directors appears on
pages 6 through 8 of this Proxy Statement. This Report discusses the factors
taken into consideration in setting Mr. Bittner's and Mr. Clayton's compensation
and the compensation of the other executive officers. A Performance Graph
showing the performance of the Company's stock as compared to the Standard &
Poor's 500 Index, the Standard & Poor's Telephone Index, and the Standard &
Poor's Long Distance Index appears on page 8 of this Proxy Statement.
Summary Compensation Table
The following table provides a summary of compensation paid to the former CEO,
the current CEO and the other four most highly compensated executive officers
of the Company for services rendered to the Company and/or its subsidiaries
over the past three fiscal years. The indicated titles are those held by each
named executive officer as of February 10, 1998.
<TABLE>
<CAPTION>
Long Term
Compensation
- ---------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- --------------------------------------------------------------------------------------------------------------
Other Securities
Annual Underlying All Other
Name Compen- Options/ LTIP Compen-
and Principal Salary Bonus sation SARs Payouts sation
Position Year ($) ($) ($)(2) (#) ($)(3) ($)(4)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. L. Bittner 1997 $508,333 $ 0 $ 0 50,000 N/A $580,853
Former Chairman and CEO 1996 $700,000 $ 0 $ 0 175,000 N/A $ 11,276
Frontier Corporation 1995 $575,000 $660,000 $ 0 502,000 $222,850 $ 42,703
J. P. Clayton (1) 1997 $364,583 $350,000 $ 0 500,000 N/A $475,535
CEO and President 1996 N/A N/A N/A N/A N/A N/A
Frontier Corporation 1995 N/A N/A N/A N/A N/A N/A
R. L. Barrett (1) 1997 $322,500 $ 0 $ 0 50,000 N/A $ 4,638
Executive Vice President 1996 $231,250 $ 0 $84,670 200,000 N/A $246,528
Frontier Corporation and 1995 N/A N/A N/A N/A N/A N/A
President--Network
Systems and Services
J. T. Carr 1997 $319,084 $ 0 $ 0 50,000 N/A $ 3,825
Executive Vice President 1996 $270,000 $ 0 $ 0 100,000 N/A $ 5,226
Frontier Corporation and 1995 $258,033 $208,466 $ 0 86,400 $ 67,182 $ 8,152
President--Frontier
Operations
L. L. Massaro (1) 1997 $406,248 $ 0 $ 0 150,000 N/A $ 5,064
Executive Vice President 1996 $285,000 $ 0 $ 0 100,000 N/A $ 6,997
and Chief Financial and 1995 $241,375 $219,199 $ 0 126,400 $ 68,127 $ 17,234
Administrative Officer
Frontier Corporation
D. L. Reeves-Collins (1) 1997 $262,841 $ 65,520 $18,205 70,500 N/A $334,203
Senior Vice President 1996 $146,035 $ 67,388 $ 0 25,000 N/A $ 42,868
and President--Frontier Sales 1995 $110,300 $ 81,270 $ 0 15,000 $ 33,882 $ 3,750
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Footnotes to Summary Compensation Table)
(1) Mr. Clayton became an employee on June 9, 1997 and was named President and
Chief Operating Officer effective June 16, 1997 and Mr. Barrett was named
Executive Vice President effective March 26, 1996. Prior to those dates, neither
had received any remuneration for services to Frontier Corporation or any of its
subsidiaries. See also Long-Term Incentive Plans - Awards in Last Fiscal Year
Table at page 11. The amount reflected as 1997 salary for Mr. Massaro includes a
payment of $100,000 in connection with his Service Continuation Agreement. The
amount reflected as 1997 salary for Ms. Reeves-Collins includes a cost-of-living
adjustment of $84,706 paid to her in connection with her relocation, at that
time, to California in her position as Frontier Corporation's Vice-President-
Western Region. The amounts shown as bonus for Ms. Reeves-Collins in 1996 and in
1997 reflect commissions paid to her in connection with her prior sales
management positions with Frontier's long distance business unit.
9
<PAGE>
(2) The amount reported in this column for 1996 includes $84,670 paid to Mr.
Barrett to offset income tax liabilities incurred by him. The amount reported in
this column for 1997 includes $18,205 paid to Ms. Reeves-Collins to offset
income tax liabilities incurred by her in 1996 and 1997.
(3) The Performance Unit Plan was discontinued in 1994. The 1995 Performance
Unit Plan awards were the final payouts under that plan. In 1995, certain of the
named executives received awards of restricted stock for which vesting is
subject to performance criteria as well as the passage of time and continued
employment. Specifically, Mr. Bittner was awarded 100,000 restricted shares, Mr.
Massaro was awarded 20,000 restricted shares, and Mr. Carr was awarded 10,000
restricted shares. In 1996, Mr. Barrett was awarded 50,000 restricted shares
under this plan. In 1997 Mr. Bittner was awarded 100,000 additional restricted
shares and Messrs. Barrett, Carr and Massaro were each awarded 50,000 additional
restricted shares. The first one-third of the restricted share grants issued in
1997 vested on February 4, 1998. No other restricted share grants have vested.
(4) "All Other Compensation" includes imputed income from term life insurance
coverage and the Company's contributions to both the tax-qualified 401(k) and
nonqualified defined contribution plans. For 1997, the dollar value of term life
insurance coverage premiums paid by the Company for the benefit of the named
executive officers was $25 for Mr. Bittner, $25 for Mr. Barrett, $13 for Mr.
Clayton, $25 for Mr. Carr, $25 for Mr. Massaro and $25 for Ms. Reeves-Collins.
The Company's 1997 contributions on behalf of the named executive officers to
the tax-qualified 401(k) and nonqualified defined contribution plans,
respectively, were as follows: $2,717 and $4,148 for Mr. Bittner; $2,675 and
$1,938 for Mr. Barrett; $0 and $4,823 for Mr. Clayton; $3,800 and $0 for Mr.
Carr; $2,581 and $2,458 for Mr. Massaro and $3,009 and $1,501 for Ms.
Reeves-Collins. For Mr. Clayton and Ms. Reeves-Collins, "All Other Compensation"
also includes the reimbursement of relocation fees in the respective amounts of
$470,699 and $329,668. For Mr. Bittner, who died on August 31, 1997, "All Other
Compensation" includes forgiven loan principal and interest in the amount of
$309,344 and a payment to his estate in the amount of $264,619 representing 86
days of banked vacation.
The following companion tables to the Summary Compensation Table list the stock
options granted during the 1997 fiscal year to the named executive officers,
their stock option exercises in 1997 and the aggregate options they held at the
end of 1997, long-term incentive plan restricted stock awards granted during
1997, and the estimated retirement benefits which would be paid to them at age
65.
Option/SAR Grants in Last Fiscal Year
The following table of Individual Grants includes a column designated as "Grant
Date Present Value." The calculations in this column are based on the
Black/Scholes Present Value Pricing Methodology. This is used to determine the
theoretical value of a stock option. The parameters used in this model are the
exercise or strike price, the term of the option or term to expiration, the
underlying stock price, the weekly volatility of the stock, the prevailing
interest rate, and the stock's dividend rate.
Individual Grants in 1997
<TABLE>
<CAPTION>
% of Total
Number of Options/SARs
Securities Underlying Granted to
Options/SARs Employees in Exercise or Expiration
Granted Fiscal Year Base Price Date Grant Date Value
Grant Date
Name (#)(1) ($/Share) Present Value ($)(4)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. L. Bittner(3) 50,000 1.42% $21.8750 2/04/07 $ 377,700
J. P. Clayton(3) 500,000 14.21% $19.4375 6/09/07 $3,194,500
R. L. Barrett(3) 50,000 1.42% $21.8750 2/04/07 $ 377,700
J. T. Carr(3) 50,000 1.42% $21.8750 2/04/07 $ 377,700
L. L. Massaro(3) 50,000 1.42% $21.8750 2/04/07 $ 377,700
100,000 2.84% $23.3125 11/17/07 $ 753,900
D. L. Reeves-Collins(2) (3) 20,500 0.58% $21.8750 2/04/07 $ 154,851
50,000 1.42% $23.5625 10/13/07 $ 372,300
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The options granted under the Management Stock Incentive Plan have the
following material terms: exercise price is the market price (based on the
closing price of the Company's common stock on the New York Stock Exchange) on
the date of the option grant; 1/3 of the options granted may be exercised
commencing one year following the grant date, a second 1/3 may be exercised
commencing two years following the grant date, and the remaining 1/3 may be
exercised commencing three years following the grant date. Options may not be
transferred other than by will or the laws of descent and distribution. An
option may be exercised upon written notice to the Company accompanied by
payment in full for the shares being acquired. In the event of a "change in
control" as defined by the Management Stock Incentive Plan, all options become
immediately vested and exercisable.
10
<PAGE>
(2) The Options granted Ms. Reeves-Collins on February 4, 1997, were pursuant to
the Employees' Stock Option Plan and have the following material terms: exercise
price is the market price (based on the closing price of the Company's common
stock on the New York Stock Exchange) on the date of the option grant; all of
the options granted may be exercised commencing two years following the grant
date; options may not be transferred other than by will or the laws of descent
and distribution. An option may be exercised upon written notice to the Company
accompanied by payment in full for the shares being acquired. In the event of a
"change in control" as defined by the Employees' Stock Option Plan, all options
become immediately vested and exercisable.
(3) Options were granted to Mr. Clayton on June 9, 1997, at an exercise price
equal to Frontier Corporation's closing stock price on that date of $19.4375 per
share. Options were granted to all other named executive officers on February 4,
1997, at an exercise price equal to Frontier's closing stock price on that date
of $21.8750 per share. Ms. Reeves-Collins received an additional grant of
options on October 13, 1997, at an exercise price equal to Frontier's closing
stock price on that date of $23.5625. Mr. Massaro received an additional grant
of options effective November 17, 1997, at an exercise price equal to Frontier's
closing stock price on that date of $23.3125.
(4) The Black/Scholes pricing model is a methodology by which to determine the
theoretical value of a stock option. The parameter assumptions used in the model
are as follows:
<TABLE>
<CAPTION>
Expected Dividend
Grant Exercise Option Underlying Risk Free Weekly Yield
Date Price Term Stock Price Rate Volatility (Weekly)
<S> <C> <C> <C> <C> <C> <C>
2/4/97 $21.8750 10 yrs. $21.8750 6.420% .309 3.215%
6/9/97 $19.4375 10 yrs. $19.4375 6.490% .322 3.694%
10/13/97 $23.5625 10 yrs. $23.5625 6.070% .322 3.694%
11/17/97 $23.3125 10 yrs. $23.3125 6.170% .329 3.754%
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Unexercised Underlying In-the-Money Options/SARs
Shares Options/SARs at FY End at FY End(2)
Acquired Value -----------------------------------------------------------
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($)(1) (#) (#) ($) ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. L. Bittner 0 N/A 543,799 334,001 $727,675 $ 178,500
J. P. Clayton 0 N/A 0 500,000 $ 0 $2,281,250
R. L. Barrett 0 N/A 66,666 183,334 $ 0 $ 106,250
J. T. Carr 0 N/A 130,333 145,467 $196,475 $ 124,950
L. L. Massaro 0 N/A 153,999 258,801 $181,663 $ 193,700
D. L. Reeves-Collins 0 N/A 46,400 70,550 $ 43,150 $ 65,438
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Aggregate market value of the shares acquired or covered by the option less
the aggregate exercise price.
(2) Options are valued at the market value of Frontier Corporation common stock
at December 31, 1997, (closing price of $24.00) less the per share option
exercise price, multiplied by the number of exercisable/unexercisable options.
Long-Term Incentive Plans - Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Number of Performances or
Shares, Units Other Period Until
or Other Maturation or
Name Rights (#) Payout
- -----------------------------------------------------------------------
<S> <C> <C>
R. L. Bittner 100,000 (1)
J. P. Clayton 0
R. L. Barrett 50,000 (1)
J. T. Carr 50,000 (1)
L. L. Massaro 50,000 (1)
D. L. Reeves-Collins 0
- -----------------------------------------------------------------------
</TABLE>
(1) Messrs. Bittner, Barrett, Carr and Massaro each were awarded shares of
restricted stock on February 4, 1997, under the Management Stock Incentive Plan
which is a long-term incentive plan. Vesting is subject to performance criteria
as well as the passage of time and continued employment. No greater than one-
third of the award can be paid in either 1998 or 1999. The first third vested
February 4, 1998, upon achievement of at least a $24.00 stock price for twenty
business days in a thirty business day period. The remaining two-thirds will
vest upon the achievement of stock prices of $26.00 and $29.00 for twenty
11
<PAGE>
business days in a thirty business day period. Unvested restricted share awards
expire on February 28, 2000. Recipients of restricted shares have full voting
rights on the shares and are entitled to receive accumulated dividends when the
shares vest. In the event of death, disability, or retirement, individuals (or
their estates) will be entitled to a distribution of restricted shares upon the
achievement of the vesting criteria, prorated to reflect their periods of active
participation during the grant term. In the event of a "change in control" as
defined by the Management Stock Incentive Plan, all restricted shares become
immediately vested.
Pension Plans
The following table shows the estimated annual benefits payable upon retirement
at age 65 to individuals in specified remuneration and years of service
classifications. Furthermore, the amounts set forth are neither subject to any
deduction for Social Security benefits or any other offsets nor adjusted to
reflect maximum allowable benefits under the Internal Revenue Code.
Certain of the Company's officers are participants in the Company's Pension
Plan for Non-Bargaining Employees (The "Management Pension Plan") as
supplemented by a Supplemental Management Pension Plan ("SMPP"). Of those listed
in the Summary Compensation Table, Messrs. Bittner, Carr, and Massaro and Ms.
Reeves-Collins participate in these Plans. The annual aggregate pension benefit
for an officer under these Plans is based upon several factors and is largely
determined by the number of years of employment multiplied by a percentage of
the officer's three consecutive years of highest average annual compensation
preceding retirement.
Both the Company's Management Pension Plan and the SMPP have been amended and
were frozen effective December 31, 1996. Benefit calculations under both pension
plans were increased by 20% for all plan participants who had five or more years
of service under the Plans by December 31, 1996. Additionally, early retirement
requirements were reduced by three years of service and three years of age as
final enhancements to both plans.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service/
Remuneration (15) (20) (25) (30) (35)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$250,000 67,648 90,197 112,746 135,295 157,844
300,000 81,508 108,677 135,846 163,015 190,184
350,000 95,368 127,157 158,946 190,735 222,524
400,000 109,228 145,637 182,046 218,455 254,864
450,000 123,088 164,117 205,146 246,175 287,204
500,000 136,948 182,597 228,246 273,895 319,544
550,000 150,808 201,077 251,346 301,615 351,884
600,000 164,668 219,557 274,446 329,335 384,224
650,000 178,528 238,037 297,546 357,055 416,564
700,000 192,388 256,517 320,646 384,775 448,904
750,000 206,248 274,997 343,746 412,495 481,244
800,000 220,108 293,477 366,846 440,215 513,584
850,000 233,968 311,957 389,946 467,935 545,924
900,000 247,828 330,437 413,046 495,655 578,264
950,000 261,688 348,917 436,146 523,375 610,604
1,000,000 275,548 367,397 459,246 551,095 642,944
1,050,000 289,408 385,877 482,346 578,815 675,284
1,100,000 303,268 404,357 505,446 606,535 707,624
- -----------------------------------------------------------------------------
</TABLE>
Messrs. Clayton, Barrett, Carr, and Massaro and Ms. Reeves-Collins each have
executive contracts which may pay a benefit in the event of a "Change in
Control" of the Company. As an executive officer, Mr. Bittner also had such a
contract. These contracts are explained in detail on page 13 of this Proxy
Statement. With the exception of Messrs. Clayton and Barrett, each of them also
participates in the Company's Pension Plan. Under SMPP, the service factor would
include, subject to certain limitations, the amount of service for which payment
is made to each of them under their respective executive contract.
The SMPP also provides that in the event of a Change in Control of the
Company, the Board may not terminate a participant's benefit and the Employees'
Benefit Committee may not change prior decisions regarding a participant's
service factor.
Effective January 1, 1994, the Company established a Supplemental Executive
Retirement Plan ("SERP") which covers Messrs. Carr and Massaro plus three other
current executives and also covered Mr. Bittner during his lifetime. The Plan
has an accrual and vesting schedule based on years of service and age. A maximum
benefit of 60% of final compensation will be paid to an executive retiring at
age 50 or older with 30 or more years of service. Payments made under the
Company's Management Pension Plan and the Supplemental Management Pension Plan
are included in determining the ultimate benefit payable under the SERP.
However, in order to qualify for the SERP benefit, a covered executive must be
at least 50 years of age. Executive officers who are not at least 50 years old
when they retire would only receive the retirement benefits set forth in the
above Pension Plan Table and would receive no SERP benefit.
12
<PAGE>
Effective December 31, 1999, the SERP will be frozen with no enhancements.
Neither Messrs. Clayton and Barrett nor Ms. Reeves-Collins are covered by the
SERP.
For the purpose of the Management Pension Plan, annual compensation includes
all taxable W-2 compensation plus deferred compensation. For the purpose of SMPP
and the SERP, annual compensation is the same as that given in the Salary and
Bonus columns of the Summary Compensation Table for the named executive
officers. The number of years of employment of such individuals for the purposes
of these Plans currently are as follows: Mr. Carr - 28, Ms. Reeves-Collins - 14
and Mr. Massaro - 30. Messrs. Clayton and Barrett are not covered by these
Plans, have no years of employment for purposes of these Plans, and will receive
no benefits under these Plans. At Mr. Bittner's death on August 31, 1997, he had
35 years of service for purposes of these Plans.
Ms. Reeves-Collins has not yet attained the age and years of service criteria
to be retirement eligible. If her employment ended as of the current date, Ms.
Reeves-Collins would receive a deferred pension based upon the amount reflected
in the Pension Plan Table. Since Messrs. Carr and Massaro have each attained the
age of 50 years and have respectively 28 and 30 years of service credit, each is
entitled to a full pension based on the amount reflected in the Pension Plan
Table. Assuming compensation at his January 31, 1998 level, if Mr. Carr were to
retire, he would additionally receive an annual SERP benefit of $35,938. Mr.
Massaro retired effective February 26, 1998, and will receive an annual SERP
benefit of $52,548. Mr. Bittner participated in all of the above plans, but is
now deceased. Under the terms of the Plans, his surviving spouse is entitled to
receive an amount equal to what his benefit would have been had he retired as of
his date of death.
Employment Contracts
The Company has entered into employment agreements with certain of its executive
officers. Effective August 16, 1995, the Company entered into three-year
employment agreements, with provisions for annual renewals, with Messrs.
Bittner, Carr and Massaro. Effective March 26, 1996, the Company also entered
into a three-year employment agreement, with a provision for annual renewals,
with Mr. Barrett. Additionally, the Company entered into a similar agreement on
October 13, 1997, with Ms. Reeves-Collins. Each of these agreements provides for
specific compensation, duties and terms and conditions of employment. Each
agreement also provides that, in the event of a change in control (as defined in
the agreement) which is followed within three (3) years by termination of
employment under certain circumstances, the employee will be entitled to all
accrued compensation, a pro rata bonus, a cash severance payment (as determined
under the agreement), the cash value of certain retirement amounts (if
applicable and as determined under the agreement) and continuation for three
years of certain health and life insurance benefits. Additionally, in the event
any of these amounts are determined to trigger an Excise Tax (as defined in the
agreement), the employee may also be entitled to a Gross-Up Payment (also as
defined in the agreement).
Effective January 1, 1998, the Company entered into an employment agreement
with Mr. Clayton. Mr. Clayton's agreement has a three-year term with annual
renewals and specifies the duties of his employment. It also provides for an
annual base compensation of $725,000, a short-term incentive as established
under the Company's Executive Compensation Program, a grant of 200,000 stock
options, and the grant of a total of 300,000 restricted shares with vesting tied
to specific performance criteria linked to an increase in the Company's stock
price and the passage of time. Of this grant, 200,000 restricted shares will
vest over three years, assuming achievement of certain specific stock price
appreciation targets. The performance criteria for the remaining 100,000
restricted shares is a specific stock price appreciation target to be achieved
over 12, 18 or 24 months. Assuming achievement of these stock price appreciation
targets, the 100,000 restricted shares will vest five years following the grant
date. Mr. Clayton's employment agreement also contains termination and change-
in-control provisions substantially similar to the agreements of the other named
executive officers. This agreement superseded a prior agreement which was
effective June 9, 1997, addressed Mr. Clayton's responsibilities as President
and anticipated that he would eventually assume the position of Chief Executive
Officer.
During 1997, Mr. Massaro indicated a desire to retire. The Company and Mr.
Massaro agreed that it was in the best interests of Frontier to ensure an
orderly transition of his duties and responsibilities. The Company wished also
to avail itself of Mr. Massaro's expertise for a period of time following his
retirement. Mr. Massaro retired from the Company on February 26, 1998. Effective
December 29, 1997, the Company and Mr. Massaro entered into a Service
Continuation Agreement which governed Mr. Massaro's compensation, duties,
employment responsibilities and post-employment consulting obligations through
his retirement date and ending February 28, 1999. In consideration for his
continued services through the end of the retention term of the Service
Continuation Agreement, Mr. Massaro received a cash transition incentive in the
amount of $100,000, a retention payment in the amount of $710,000 at retirement,
a stock transition incentive consisting of 100,000 stock options granted
effective November 17, 1997 and vesting over three years, and credit for an
additional 24 months of service for purposes of determining retirement benefits.
Following the date of his retirement, Mr. Massaro is obligated to render
continued services for a period of one year to the Company in the capacity of a
consultant in those areas in which he had involvement and expertise while an
executive officer of Frontier. Mr. Massaro will receive a consulting payment of
$355,000 plus reimbursement of necessary business-related expenses during the
consulting period. The Service Continuation Agreement also provides that Mr.
Massaro would receive title to his Company automobile, cellular telephone and
similar telecommunications equipment which the Company had made available for
his personal use, the value of banked vacation time, the cash value of certain
medical and insurance benefits, and financial planning for a period of two
years. The agreement specifies certain other executive
13
<PAGE>
perquisites which terminate upon his retirement. The agreement restricts Mr.
Massaro's ability to engage in certain activities deemed to be in competition
with Frontier Corporation for a specific period of time. In the event of a
change in control during the term of the Service Continuation Agreement, the
consulting payments due Mr. Massaro accelerate and become immediately payable.
- --------------------------------------------------------------------------------
Indebtness of Management
Effective April 1, 1996, Frontier Corporation loaned Kevin Bennis the sum of
$250,000 for a term of three years, with interest at the applicable federal rate
in effect for the month of April 1996, as an inducement for him to enter the
employ of Frontier Corporation. One-third of the principal and all of the
accrued interest was to be forgiven on each of the first three anniversaries of
the loan. Forgiveness was conditioned upon Mr. Bennis's continued employment
with the Company. Upon his leaving the employ of Frontier Corporation for any
reason before the end of the three-year period, the balance remaining and
interest thereon at the prime rate plus 1% would become immediately due and
payable.
Mr. Bennis left Frontier Corporation on October 13, 1997 and $167,000 remained
outstanding on this loan. In connection with the termination of his employment,
the Company agreed that it would forgive the loan balance at the end of two
years, contingent upon Mr. Bennis's satisfactory compliance with the terms of
his separation agreement. Until then, the loan remains payable and may be called
by the Company at any time. The other major terms of Mr. Bennis's separation
agreement are described in more detail below at "Business Transactions and
Relationships".
In March 1997, the Company made a personal loan to Mr. Bittner in the sum of
$300,000 for a term of five years, with interest at the then applicable federal
rate. Mr. Bittner was obligated to repay one-fifth of the principal and all of
the accrued interest annually on the anniversary of the loan. However, Mr.
Bittner died prior to the first anniversary of the loan. In September 1997, the
Company forgave the loan balance and all associated interest.
- --------------------------------------------------------------------------------
Business Transactions and Relationships
Alan Hasselwander and the Company entered into a consulting arrangement under
which he serves as Chair of the North American Numbering Council ("NANC"). The
NANC advises the Federal Communications Commission ("FCC") on telecommunications
industry numbering issues, including implementation of the FCC's number
portability rules. Mr. Hasselwander's consulting agreement provides that he will
perform services on a per diem basis and is reimbursed for necessary expenses.
During 1997, Mr. Hasselwander received $122,000, plus reimbursement for
expenses, under this consulting arrangement. The Company anticipates that Mr.
Hasselwander will continue to render services during 1998 pursuant to this
consulting arrangement but is, at this time, unable to anticipate the amount
which it will pay for any future services.
Dale Gregory retired from the Company effective October 13, 1997, and Kevin
Bennis resigned effective that same date. Each was an executive officer of the
Company. In connection with Mr. Gregory's retirement and Mr. Bennis's
resignation, each of them entered into an individual separation agreement with
the Company under which each received a severance payment equal to twice his own
annual base compensation, perquisite cash equivalent, and 401(k) plan
contributions. Because there was no general bonus payout for executives, no
payment for bonus was included in these severance amounts. In addition, the
Company agreed to continue for each of them certain medical and life insurance
benefits for a period of 24 months after termination. Mr. Gregory's and Mr.
Bennis's respective separation agreements restrict their ability to engage in
certain activities deemed to be in competition with Frontier Corporation for a
specific period of time. Mr. Gregory's separation agreement also provided for
completion of the previously authorized bridging of his pension eligibility so
that he would be eligible immediately to receive a full pension. As discussed in
more detail above at "Indebtedness of Management", Mr. Bennis's separation
agreement also provided for forgiveness of his outstanding loan balance.
- --------------------------------------------------------------------------------
Compensation Committee Interlocks and Insider
Participation in Compensation Decisions
The Committee on Management serves as the compensation committee. The members of
the Committee on Management at the end of the last completed fiscal year were
Mr. Cesan, Mr. Faherty and Dr. Thomas (Chair). None of these persons were,
during 1997 or previously, an officer or employee of the Company or any of its
subsidiaries.
The full Board of Directors accepted the recommendation of the Committee on
Management concerning Mr. Bittner's compensation and Mr. Clayton's compensation.
Mr. Hasselwander is a former officer of the Company and, during 1997, he
participated in those deliberations of the Company's Board of Directors in which
the Board accepted the Committee on Management's recommendations concerning
executive officer compensation. Mr. Hasselwander is not a member of the
Committee on Management. No executive officer of the Company has, during 1997 or
previously, served as a director or member of the compensation committee of any
other entity that has an executive officer who serves or has served either as a
member of the Committee on Management or as a member of the Board of Directors
of Frontier Corporation.
- --------------------------------------------------------------------------------
Indemnification of Certain Persons
The Company and its subsidiaries indemnify their Directors and officers against
certain liabilities they may incur. As authorized by New York State Law, the
Company and its subsidiaries have purchased insurance from the Chubb Group, Gulf
Insurance Company, and Reliance National, insuring the Company and its
subsidiaries against amounts they may pay as a result of indemnifying their
officers and
14
<PAGE>
Directors. These insurance policies also insure all officers and Directors of
the Company and its affiliates for additional liabilities against which the
Company and its affiliates may not provide indemnification. The insurance was
renewed on May 21, 1997 for a period of one year. During 1997, the Company paid
$510,400 for this insurance and the renewal policy costs will be negotiated in
Spring, 1998.
- --------------------------------------------------------------------------------
Proposal 2-Ratification of Public Accountant
YOUR BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" THIS PROPOSAL.
The Company's public accountant is Price Waterhouse LLP. At the Annual Meeting,
the shareowners will consider and vote upon a proposal to ratify the public
accountant for the Company's fiscal year ending December 31, 1998. The Audit
Committee of the Board of Directors has recommended that shareowners ratify the
re-election of Price Waterhouse LLP as public accountant for that year. No
member of the Audit Committee is an officer or employee of the Company. The
Board of Directors unanimously recommends that you vote FOR this proposal.
Proxies solicited by the Board of Directors will be voted FOR the foregoing
proposal unless otherwise indicated. Approval of this proposal will require the
affirmative vote of a majority of the votes cast at the Annual Meeting by the
holders of the common stock outstanding.
Representatives of Price Waterhouse LLP will be present at the Annual Meeting
to make a statement, if they wish, and to respond to appropriate questions from
shareowners.
- --------------------------------------------------------------------------------
1999 Meeting--Future Proposals of Shareowners
In order to be eligible for inclusion in the proxy materials for the Company's
1999 Annual Meeting of Common Shareowners, any shareowner proposal to take
action at such meeting must be received at the Company's principal executive
offices by November 12, 1998. Any such proposal should be addressed to 180 South
Clinton Avenue, Rochester, New York 14646, Attention: Josephine S. Trubek,
Corporate Secretary.
In addition, the Company's By-Laws establish an advance notice procedure with
regard to certain matters, including shareowner proposals not included in the
Company's proxy statement, to be brought before an annual meeting of
shareowners. In general, in order to bring a matter before the meeting, notice
must be received by the Corporate Secretary of the Company not less than 60 days
nor more than 90 days prior to the anniversary of the immediately preceding
annual meeting.
The notice must contain information as specified in the By-Laws concerning the
matters to be brought before such meeting and concerning the shareowner
proposing such matters. If the date of the annual meeting is more than 30 days
earlier or more than 60 days later than the anniversary date, notice must be
received not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the 10th day following the day on which the public
announcement of the date of such meeting is first made. However, if a shareowner
complies with the requirements to have a proposal included in the proxy
materials, he or she is deemed to have complied with this advance notice
procedure. If a shareowner who has notified the Company of his or her intention
to present a proposal at an annual meeting does not appear or send a qualified
representative to present that proposal at the meeting, the Company need not
present the proposal for a vote at the meeting. In order to provide an admission
card, we do ask that if a proposal is to be presented by a qualified
representative, the shareowner advise us of the identity of the person who will
be presenting the proposal.
- --------------------------------------------------------------------------------
Other Matters
As of the date of this Proxy Statement, the Board of Directors does not intend
to present any matter for action at the Annual Meeting other than those set
forth in the Notice of Annual Meeting. If any other matters properly come before
the meeting, the holders of the proxies will act in accordance with their best
judgment. In the event a nominee is unable to serve, the proxies will vote upon
a substituted nominee.
An admission ticket will be required to enter the Annual Meeting. Please use
the form attached to your proxy card to request your ticket. Ticket requests
after April 10, 1998 should be made by calling the Shareowner Line: 1-800-836-
0342. If you hold your shares through your broker or otherwise are not a record
holder, you may be asked to show evidence of your share position in order to
enter the Annual Meeting.
March 12, 1998
15
<PAGE>
[LOGO OF FRONTIER CORPORATION/SM/]
Frontier Corporation
Frontier Center
180 South Clinton Avenue
Rochester, New York 14646-0700
[MAP APPEARS HERE]
<PAGE>
(Cut along dotted line)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Ticket Request
If you plan to attend the Annual Meeting of Shareowners at 10:30 a.m., local
time, on Wednesday, April 29, 1998, at the Westin Southfield-Detroit Hotel, 1500
Town Center in Southfield, Michigan, use this Form to request your admission
ticket. Complete the form by typing or printing your name and address. If your
request is received by April 10, 1998, an admission ticket will be mailed to
you. All other admission tickets will be provided beginning at 9:30 a.m. at the
registration desk for the meeting. (Doors to the meeting will not open before
9:30 a.m.) The envelope provided for the return of your proxy card should also
be used to return this form. Alternatively, tickets may be requested by calling
the Shareowner Line, 1-800-836-0342. If you hold your shares through your broker
or otherwise are not a record holder, we may require you to show evidence of
your share position before you will be allowed into the Annual Meeting.
NOTE: IF YOUR SHARES ARE NOT REGISTERED IN YOUR OWN NAME, PLEASE ADVISE THE
SHAREOWNER OF RECORD (I.E., YOUR BANK, BROKER, TRUSTEE, ETC.) THAT YOU WISH TO
ATTEND THE MEETING. THE REGISTERED OWNER MUST PROVIDE YOU WITH EVIDENCE OF YOUR
STOCK OWNERSHIP SO THAT YOU MAY GAIN ADMITTANCE TO THE MEETING.
I plan to attend the meeting.
(Please print or type)
Name
- --------------------------------------------------------------------------------
Street
- --------------------------------------------------------------------------------
City
- --------------------------------------------------------------------------------
State Zip Code
- --------------------------------------------------------------------------------
DETACH HERE
PROXY
[Logo of Frontier Corporation]
I authorize each of Joseph P. Clayton and/or Josephine S. Trubek, or
substitutes selected by them, to vote all shares of Frontier Corporation which I
am entitled to vote at the Annual Meeting of Shareowners on April 29, 1998, or
at any adjournment thereof, as specified below.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION TO THE
CONTRARY IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
AND THE RATIFICATION OF THE PUBLIC ACCOUNTANT.
CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE>
[Logo of Frontier Corporation]
180 SOUTH CLINTON AVENUE
ROCHESTER, NY 14646
VOTE VIA TELEPHONE OR THE INTERNET -- IT'S QUICK, EASY AND IMMEDIATE
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card. Please
note all votes cast via the telephone or the Internet must be cast prior to 5
p.m. EDT, April 28, 1998. If you wish to change your address or notify the
company that you plan to attend the meeting, please mark the boxes below and
return your proxy by mail or call the Shareowner Line at 1-800-836-0342 to
request an admission ticket.
TELEPHONE VOTING:
. THERE IS NO CHARGE FOR THIS CALL.
. On a Touch Tone Telephone call TOLL FREE 1-888-807-7699 24 hours per day - 7
days a week.
. You will be asked to enter the Control Number which is located above your
name and address below.
________________________________________________________________________________
OPTION #1: To vote AS THE BOARD OF DIRECTORS RECOMMENDS, press 1.
________________________________________________________________________________
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL.
________________________________________________________________________________
OPTION #2: If you choose to vote ON EACH PROPOSAL SEPARATELY, press 2. You will
hear these instructions:
________________________________________________________________________________
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD YOUR VOTE FROM ALL
nominees, press 2; To vote FOR EACH NOMINEE SEPARATELY, press 3.
Please listen to the instructions to cast your votes.
Proposal 2: To vote AS THE BOARD OF DIRECTORS RECOMMENDS, press 1; to vote
AGAINST, press 2; to ABSTAIN, press 3.
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL
INTERNET VOTING:
. AS WITH ALL INTERNET ACCESS, USAGE OR SERVER FEES MUST BE PAID BY THE USER.
Visit our Internet voting site at HTTP://WWW.EQUISERVE.COM/PROXY/ and follow the
instructions on your screen. These instructions are similar to those above for
telephone voting.
________________________________________________________________________________
If you vote via telephone or the Internet, it is not necessary to return your
proxy by mail. THANK YOU FOR VOTING.
________________________________________________________________________________
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
________________________________________________________________________________
THE BOARD OF DIRECTORS RECOMMEND A VOTE "FOR" PROPOSALS 1 AND 2.
________________________________________________________________________________
1. NOMINEES FOR DIRECTORS: Patricia C. Barron, Joseph P. Clayton, Raul E. Cesan,
Brenda E. Edgerton, Jairo A. Estrada, Michael E. Faherty,
Alan C. Hasselwander, Robert Holland, Jr., Douglas H. McCorkindale,
and Dr. Leo J. Thomas
WITHHELD
FOR FROM
ALL [_] ALL [_]
NOMINEES NOMINEES
[_] ______________________________________
For all nominees except as noted above
2. Ratification of Price Waterhouse LLP as the Public Accountant.
FOR AGAINST ABSTAIN
[_] [_] [_]
________________________________________________________________________________
3. To vote in favor of any substituted director if a nominee is unable to
serve and to act in their discretion upon such other matters which may properly
come before the meeting, or which are incident to the conduct of the meeting, or
which the Board of Directors does not know, at the time of this solicitation,
will be presented at the meeting.
MARK HERE MARK HERE
FOR ADDRESS IF YOU PLAN
CHANGE AND [_] TO ATTEND [_]
NOTE AT LEFT THE MEETING
(Please sign exactly as name appears at left)
Signature:____________________________________ Date:________
Signature:____________________________________ Date:________
