<PAGE>
As filed with the Securities and Exchange Commission on February 12, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
FRONTIER CORPORATION
(Exact name of registrant as specified in its governing instrument)
New York 16-0613330
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
_______________
Martin T. McCue
Senior Vice President and General Counsel
180 South Clinton Avenue
Rochester, New York 14646-0700
(716) 777-1000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
_______________
Copies of all correspondence to:
Karen Gratch, Esq. Jeffrey L. Forman, Esq.
Frontier Corporation Jaffe, Raitt, Heuer & Weiss, P.C.
30300 Telegraph Road One Woodward Avenue
Bingham Farms, Michigan 48025-4510 Suite 2400
Detroit, Michigan 48226
Approximate date of commencement of proposed sale to the public:
After the effective date of this Registration Statement and from time to time
thereafter as determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
-----
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. X
------
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
-----
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
------
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box.
------
_______________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================
Proposed Maximum Amount of
Title of Each Class of Securities Aggregate Offering Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Debt Securities, Class A Preferred Stock, $100.00 par value, $600,000,000 $166,800.00
Cumulative Preferred Stock, $100.00 par value, Common Stock,
$1.00 par value(1), and Securities Warrants
=================================================================================================================
</TABLE>
(1) Common Stock may be issued on a primary basis or upon exercise of the
Securities Warrants.
---------------------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion
Prospectus dated February 12, 1999
Prospectus
----------
$600,000,000
Frontier Corporation
Debt Securities, Preferred Stock, Common Stock
and Securities Warrants
We intend to offer at one or more times (1) unsecured debt securities, (2)
shares of preferred stock, (3) shares of our common stock, and (4) warrants
exercisable for debt securities, preferred stock or common stock with an
aggregate public offering price of up to $600,000,000 (or its equivalent based
on the exchange rate at the time of sale) in amounts, at prices and on terms
to be determined at the time of offering. We may offer such securities
separately or together, in separate series in amounts, at prices and on terms
to be described in one or more supplements to this prospectus. We will
provide you with the specific terms of these securities in supplements to this
prospectus. You should read this prospectus and the supplement carefully
before you invest.
See "Risk Factors" on page 3 for certain factors relating to an investment in
the Securities.
__________________________________
These Securities have not been approved or disapproved by the
Securities and Exchange Commission or any state securities
commission nor has the Securities and Exchange Commission
or any state securities commission passed upon the
accuracy or adequacy of this Prospectus. Any
representation to the contrary is a
criminal offense.
__________________________________
The date of this Prospectus is February 12, 1999.
<PAGE>
About This Prospectus
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (the "SEC") utilizing a "shelf " registration
process. Under this shelf process, we may, from time to time, sell any
combination of the securities described in this Prospectus in one or more
offerings of one or more series. The aggregate principal amount of securities
which we may offer under this Prospectus is $600,000,000. Each time we sell
securities, we will provide a Prospectus Supplement that will contain specific
information about the terms of that offering. The Prospectus Supplement may also
add, update or change information contained in this Prospectus. The information
in this Prospectus is accurate as of February 12, 1999. You should read both
this Prospectus and any Prospectus Supplement together with additional
information described under the heading "Where You Can Find More Information".
We believe that we have included or incorporated by reference all information
material to investors in this Prospectus, but certain details that may be
important for specific investment purposes have not been included. To see more
detail, you should read the exhibits filed with or incorporated by reference
into the registration statement.
Where You Can Find More Information
We file annual, quarterly and special reports and other information with the
SEC. You may read and copy any document we file at the SEC's public reference
rooms in Washington D.C., New York, New York, and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
SEC's public reference rooms. Our SEC filings are also available to the public
over the Internet at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the following documents we filed with the SEC and our future filings
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we or any underwriters sell all of the securities:
1. Our Annual Report on Form 10-K for the year ended December 31,
1997;
2. Our Quarterly Reports on Form 10-Q for the quarters ended March
31, June 30, and September 30, 1998; and
3. Our Current Reports on Form 8-K dated January 29, March 2, June
17, and September 16, 1998, and January 26, 1999 (two reports were filed on this
date).
You should note that one of the two Current Reports on Form 8-K dated January
26, 1999 contains our audited consolidated financial statements for the three
years ended December 31, 1998 as well as our management's discussion and
analysis of financial condition and results of operations for the three years
ended December 31, 1998.
You may request a copy of these filings at no cost, by writing or calling us at
the following address:
Frontier Corporation
180 South Clinton Avenue
Rochester, New York 14646-0700
Attn: Investor Relations
(800) 836-0342
You should rely only on the information incorporated by reference or provided in
this prospectus and any supplement. We have not authorized anyone else to
provide you with different information.
The Company
We are a leading provider of integrated telecommunications services, including
Internet and data applications, long distance, local telephone and wireless, to
business, carrier and targeted residential customers in the United States,
Canada and the United Kingdom.
-2-
<PAGE>
Through our Integrated Services segment, we are one of the nation's largest long
distance companies. This segment provides domestic and international voice,
data products, video and audio conference communications, digital distribution
services, Internet service and other communication products primarily to small
to mid-size business customers and targeted consumer markets. This segment also
includes Competitive Local Exchange Carrier ("CLEC") services, currently
available in 32 states plus Washington D.C., providing us with the ability to
offer integrated local and long distance telephone service to over 70% of the
United States. In order to support the development of our Integrated Services
segment, we have invested in the construction of a nationwide fiber optic
network which is currently expected to be completed in 1999. Once complete, we
expect the fiber optic network to encompass approximately 20,000 route miles,
interconnecting major population centers across the country.
Through our other principal business segment, the Local Communications Services
segment, we are one of the largest local exchange providers in the United
States. This business consists of 34 incumbent local telephone companies which
as of December 31, 1998 served over one million access lines in thirteen states.
Also included in this segment are the revenues and expenses of Frontier
Communications of Rochester Inc., a competitive telecommunications company that
provides an array of services on a retail basis in the Rochester, New York
marketplace.
Prior to 1995, Local Communications Services provided the majority of our
revenue and income. We complemented our internal growth in the Integrated
Services business with a number of strategic acquisitions and a merger in 1995
that approximately doubled the size of the business. As a result of our
strategic decision to expand the Integrated Services business, revenue from the
Integrated Services segment represented approximately 72%, 70%, 73% and 69% of
consolidated revenue for 1998, 1997, 1996 and 1995, respectively.
Our principal executive offices are located at 180 South Clinton Avenue,
Rochester, New York 14646-0995, and our main telephone number is (716) 777-1000.
Risk Factors
You should consider carefully the following information, together with the other
information contained in or incorporated by reference in this Prospectus, in
considering whether to purchase the securities described in this Prospectus.
Changes in Rates of Growth of the Economy and Overall Industry
To some extent, our revenue and earnings per share growth are related to the
overall economy and to the telecommunications industry in general. Factors that
may influence our performance within the telecommunications industry include
product pricing and development, integration of services, the effects of
competition and the expansion of the business. The performance of the economy
and the telecommunications industry could cause our actual results to vary
significantly.
Competition Risk
Technological innovation and regulatory changes are accelerating the pace of
competition for telecommunications services. As a result, we face intensified
competition in all aspects of providing telecommunications services.
There are significant uncertainties surrounding the introduction of new products
and services and the capital expenditures that will be required by us to remain
in a competitive position. In addition, there are uncertainties surrounding the
impact on competition as a result of the enactment of the Telecommunications
Act.
Acquisition Integration
Our growth strategy over the last few years has involved both internal growth
and growth through acquisitions. This growth strategy involves certain
operational and financial risks. The operational risks include the possibility
that implementation of an acquisition does not provided the economies of scale
or synergies anticipated by management. Successful integration and expansion of
our network as a result of the acquisitions is dependent on management's ability
to anticipate market growth, install facilities, consolidate databases, obtain
rights of way and negotiate leases economically and efficiently. The
integration of a growing employee base and the elimination of redundant
operations and facilities has
-3-
<PAGE>
required, and will continue to require, significant management resources.
Although management's plans are to minimize the risks associated with
acquisitions, there can be no assurance that we will be able to effectively
assimilate such acquisitions.
Contingent Liabilities
We, and a number of our subsidiaries, are continuously involved in various
judicial administrative proceedings involving matters incidental to the
business. Unless otherwise stated specifically, we believe that the probable
outcome of any of these matters, or the combination of all of these matters,
will not have a material adverse effect on our consolidated results of
operations or financial position. However, there can be no assurance that the
resolution of these matters will not be contrary to management's expectations.
Use of Proceeds
Unless otherwise specified in the applicable Prospectus Supplement, we will use
the net proceeds from the issuance of the (1) unsecured debt securities ("Debt
Securities"), (2) shares of our Class A Preferred Stock, par value $100.00 per
share (the "Class A Preferred Stock"), (3) shares of our Cumulative Preferred
Stock, par value $100.00 per share (the "Cumulative Preferred Stock"; the Class
A Preferred Stock and Cumulative Preferred Stock are sometimes hereinafter
collectively referred to as the "Preferred Stock"), (4) shares of our common
stock, $1.00 par value (the "Common Stock"), and (5) warrants exercisable for
Debt Securities, Preferred Stock or Common Stock ("Securities Warrants"; the
Debt Securities, Preferred Stock, Common Stock, and Securities Warrants are
sometimes hereinafter collectively referred to as the "Securities"), with an
aggregate public offering price of up to $600,000,000 (or its equivalent based
on the exchange rate at the time of sale) for general corporate purposes.
Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred
Stock Dividends
Presented below is our ratio of earnings to fixed charges and the ratio of
earnings to combined fixed charges and preferred stock dividends for each of the
last five fiscal years. Our ratio of earnings to fixed charges is computed by
dividing earnings by fixed charges. The ratio of earnings to combined fixed
charges and preferred stock dividend requirements is computed by dividing
earnings by the sum of fixed charges and preferred stock dividends requirements.
For purposes of computing these ratios, earnings is defined as consolidated
pretax income from continuing operations before adjustment for income from
equity investees, adjusted to include
. fixed charges, and
. amortization of capitalized interest,
. less capitalized interest and preference security dividend requirements
of consolidated subsidiaries
Fixed charges are defined as the sum of
. fixed interest costs, both expensed and capitalized,
. amortization of debt issuance costs and discounts and premiums related
to indebtedness,
. the interest component of rent expense, and
. preference security dividend requirements of consolidated subsidiaries.
-4-
<PAGE>
Preferred stock dividend requirements represent the amount of pretax earnings
required to cover any preferred stock dividend requirements.
Frontier Corporation
Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividend Requirements
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
1998 1997 1996 1995 1994
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges 3.3 1.4 4.1 4.0 4.9
Ratio of earnings to combined fixed
charges and preferred stock dividend
requirements 3.3 1.4 4.0 3.9 4.8
</TABLE>
(1) Included in earnings for 1998 was a one-time pre-tax charge of $6.5 million
acquisition related charge associated with the GlobalCenter transaction and
a $2.6 million pre-tax charge reflecting the Company's adoption of
Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities"
("SOP 98-5"), offset by a combined pre-tax gain of $20.4 million associated
with the sale of our interest in the cellular licensee for Minnesota RSA
No. 10, and certain other non-strategic investments and properties. If such
charges/gains had not occurred, the ratio of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividend
requirements would have been 3.2:1.
(2) Operating results for 1997 include one-time pre-tax charges of $96.6
million related to certain network costs no longer required for long
distance traffic volumes and $86.8 million associated with a restructuring
and refocusing of the business, offset by a pre-tax gain of $18.8 million
related to the sale of our 69.5% interest in the South Alabama Cellular
Communications Partnership. If such charges/gains had not occurred, the
ratio of earnings to fixed charges and earnings to combined fixed charges
and preferred stock dividend requirements would have been 2.9:1 and 2.8:1,
respectively.
(3) Operating results for 1996 include a $67.7 million pre-tax charge resulting
from the curtailment of certain of our pension plans ($28.0 million), a
one-time charge associated with our conference calling product line ($20.8)
and the write-off of in-process product development costs ($18.9 million).
Additionally, results for 1996 include costs relating to union negotiations
at our largest telephone operating subsidiary ($2.8 million), offset by a
pre-tax gain of $5.0 million as a result of the sale of our minority
investment in a Canadian long distance company. If such charges/gains had
not occurred, the ratio of earnings to fixed charges and earnings to
combined fixed charges and preferred stock dividend requirements would have
been 4.7:1 and 4.6:1, respectively.
(4) Included in earnings for 1995 is a one-time pre-tax acquisition related
charge of $114.2 million associated with the integration of our 1995
acquisitions. This charge is offset by the non-taxable gain of $4.8 million
resulting from the sale of one of our telephone subsidiaries. If such
charges/gains had not occurred, the ratio of earnings to fixed charges and
earnings to fixed charges and preferred stock dividend requirements would
have been 5.3:1 and 5.2:1, respectively.
(5) Operating results for 1994 include the pre-tax gain relating to the sale of
Minot Telephone of $11.3 million. If this gain had not occurred, the ratio
of earnings to fixed charges and earnings to fixed charges and preferred
stock dividend requirements would have been 4.8:1 and 4.7:1, respectively.
Description of Debt Securities
The following description sets forth certain general terms and provisions of the
Debt Securities to which this Prospectus and any applicable Prospectus
Supplement may relate. The particular terms of the Debt Securities being offered
and the extent to which such general provisions may apply will be set forth in
the applicable Indenture or in one or more indentures supplemental thereto and
described in a Prospectus Supplement relating to such Debt Securities. The
Senior Indenture (as defined herein) and the Form of Subordinated Indenture (as
defined herein) have been filed as exhibits to the registration statement of
which this Prospectus is a part.
General
The Debt Securities will be our direct, unsecured obligations and may be either
senior Debt Securities ("Senior Securities") or subordinated Debt Securities
("Subordinated Securities"). The Debt Securities will be issued under one or
more indentures (the "Indentures"). Senior Securities and Subordinated
Securities will be issued pursuant to separate indentures (respectively, a
"Senior Indenture" and a "Subordinated Indenture"), in each case between a
trustee (a "Trustee") and us. The Indentures will be
-5-
<PAGE>
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made under this heading relating to the Debt Securities
and the Indentures are summaries of the anticipated provisions of the Debt
Securities, and may not contain all the information that is important to you.
For a more complete description of the legal terms of such Debt Securities, you
should carefully read the Indentures and terms of such Debt Securities. All
section references appearing herein are to sections of each Indenture unless
otherwise indicated and capitalized terms used but not defined below shall have
the respective meanings set forth in each Indenture.
The indebtedness represented by Subordinated Securities will be subordinated in
right of payment to the prior payment in full of our Senior Debt (as defined
below) as described under "--Subordination."
Except as set forth in the applicable Indenture or in one or more indentures
supplemental thereto and described in a Prospectus Supplement relating thereto,
the Debt Securities may be issued without limit as to aggregate principal
amount, in one or more series, in each case as established from time to time in
or pursuant to authority granted by a resolution of our Board of Directors or as
established in the applicable Indenture or in one or more indentures
supplemental to such Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
It is anticipated that each Indenture will provide that there may be more than
one Trustee thereunder, each with respect to one or more series of Debt
Securities. Any Trustee under an Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may be
appointed to act with respect to such series. In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by each Trustee may be taken by each such Trustee with respect to the one
or more series of Debt Securities for which it is Trustee under the applicable
Indenture.
You should refer to the Prospectus Supplement for the following information for
each particular series of Debt Securities:
(1) The title of such Debt Securities and whether such Debt Securities are
Senior Securities or Subordinated Securities;
(2) The aggregate principal amount of such Debt Securities and any limit on
such aggregate principal amount;
(3) The percentage of the principal amount at which such Debt Securities will
be issued and, if other than the principal amount thereof, the portion of
the principal amount thereof payable upon declaration of acceleration of
the maturity thereof;
(4) If convertible in whole or in part into Common Stock or Preferred Stock,
the terms on which such Debt Securities are convertible, including the
initial conversion price or rate (or method for determining the same), the
portion that is convertible and the conversion period, and any applicable
limitations on the ownership or transferability of the Common Stock or
Preferred Stock receivable on conversion;
(5) The date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(6) The rate or rates (which may be fixed or variable), or the method by which
such rate or rates shall be determined, at which such Debt Securities will
bear interest, if any;
(7) The date or dates, or the method for determining such date or dates, from
which any such interest will accrue, the dates on which any such interest
will be payable, the regular record dates for such interest payment dates,
or the method by which such dates shall be determined, the persons to whom
such interest shall be payable, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve 30-day months;
(8) The place or places, if any, other than or in addition to The City of New
York, where the principal (and premium, if any) and interest, if any, on
such Debt Securities will be payable, where such Debt Securities may be
surrendered for conversion or registration of transfer or exchange and
where notices or demands to or upon us in respect of such Debt Securities
and the applicable Indenture may be served;
-6-
<PAGE>
(9) The period or periods within which, the price or prices at which and the
other terms and conditions upon which such Debt Securities may be redeemed,
in whole or in part, at our option, if we are to have such an option;
(10) The obligation, if any, of us to redeem, repay or purchase such Debt
Securities pursuant to any sinking fund or analogous provision or at the
option of a holder thereof, and the period or periods within which or the
date and dates on which, the price or prices at which and the other terms
and conditions upon which such Debt Securities will be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation;
(11) If other than U.S. dollars, the currency or currencies in which such Debt
Securities are denominated and payable, which may be a foreign currency or
units of two or more foreign currencies or a composite currency or
currencies, and the terms and conditions relating thereto;
(12) If the amount of payments of principal of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with reference
to a index, formula or other method (which index, formula or method may,
but need not be, based on a currency, currencies, currency unit or units or
composite currency or currencies), the manner in which such amounts shall
be determined;
(13) Any additions to, modifications of or deletions from the terms of such Debt
Securities with respect to Events of Default or covenants set forth in the
applicable Indenture;
(14) Whether such Debt Securities will be issued in certificate or book-entry
form;
(15) Whether such Debt Securities will be in registered or bearer form and, if
in registered form, the denominations thereof if other than $1,000 and any
integral multiple thereof and, if in bearer form, the denominations thereof
and terms and conditions relating thereto;
(16) The applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the applicable Indenture;
(17) Whether and under what circumstances we will pay any additional amounts on
such Debt Securities in respect of any tax, assessment or governmental
charge and, if so, whether we will have the option to redeem such Debt
Securities in lieu of mailing such payment; and
(18) Any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Material federal income tax, accounting
and other considerations applicable to Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
Except as set forth in the applicable Indenture or in one or more indentures
supplemental thereto, the applicable Indenture will not contain any provisions
that would limit our ability to incur indebtedness or that would afford holders
of Debt Securities protection in the event of a highly leveraged or similar
transaction involving us or in the event of a change of control. Reference is
made to the applicable Prospectus Supplement for information with respect to any
deletions from, modifications of or additions to the Events of Default or our
covenants that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
Denomination, Interest, Registration and Transfer
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee, the
address of which will be stated in the applicable Prospectus Supplement;
provided that, at our option, payment of interest may be made by check mailed to
the address of the person entitled thereto as it appears in the applicable
register for such Debt Securities or by wire transfer of funds to such person at
an account maintained within the United States (Sections 301, 305, 306, 307 and
1002).
Any interest not punctually paid or duly provided for on any Interest Payment
Date with respect to a Debt Security ("Defaulted Interest") will forthwith cease
to be payable to the holder of a Debt Security
-7-
<PAGE>
(the "Holder") on the applicable regular record date and may either be paid to
the person in whose name such Debt Security is registered at the close of
business on a special record date (the "Special Record Date") for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to the Holder of such Debt Security not less than ten days prior to such
Special Record Date, or may be paid at any time in any other lawful manner, all
as more completely described in the Indenture (Section 307).
Subject to certain limitations imposed upon Debt Securities issued in book-entry
form, the Debt Securities of any series will be exchangeable for other Debt
Securities of the same series and of a like aggregate principal amount and tenor
of different authorized denominations upon surrender of such Debt Securities at
the corporate trust office of the applicable Trustee referred to above. In
addition, subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer or exchange thereof at the corporate
trust office of the applicable Trustee. Every Debt Security surrendered for
conversion, registration of transfer or exchange must be duly endorsed or
accompanied by a written instrument of transfer. No service charge will be made
for any registration of transfer or exchange of any Debt Securities, but we may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus Supplement
refers to any transfer agent (in addition to the applicable Trustee) initially
designated by us with respect to any series of Debt Securities, we may at any
time rescind the designation of any such transfer agent or approve a change in
the location through which any such transfer agent acts, except that we will be
required to maintain a transfer agent in each place of payment for such series.
We may at any time designate additional transfer agents with respect to any
series of Debt Securities (Section 1002).
Neither we nor any Trustee shall be required to:
. issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at
the close of business on the day of mailing of the relevant notice of
redemption;
. register the transfer of or exchange any Debt Security, or portion
thereof, called for redemption, except the unredeemed portion of any Debt
Security being redeemed in part; or
. issue, register the transfer of or exchange any Debt Security that has
been surrendered for repayment at the option of the Holder, except the
portion, if any, of such Debt Security not to be so repaid (Section 305).
Merger, Consolidation or Sale
We will be permitted to consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity
provided that:
(a) either we shall be the continuing entity, or the successor entity (if other
than us) formed by or resulting from any such consolidation or merger or
which shall have received the transfer of such assets shall expressly
assume payment of the principal of (and premium, if any) and interest on
all of the Debt Securities and the due and punctual performance and
observance of all of the covenants and conditions contained in each
Indenture;
(b) immediately after giving effect to such transaction and treating any
indebtedness that becomes an obligation of us or any Subsidiary as a result
thereof as having been incurred by us or such Subsidiary at the time of
such transaction, no Event of Default under the Indentures, and no event
which, after notice or the lapse of time, or both, would become such an
Event of Default, shall have occurred and be continuing; and
(c) an officer's certificate and legal opinion covering such conditions shall
be delivered to each Trustee (Sections 801 and 803).
Certain Covenants
Existence. Except as described above under "Merger, Consolidation or Sale", we
will be required to do or cause to be done all things necessary to preserve and
keep in full force and effect our existence, rights (charter and statutory) and
franchises; provided, however, that we shall not be required to preserve any
right or franchise if we determine that the preservation thereof is no longer
desirable in the conduct of our business and that the loss thereof is not
disadvantageous in any material respect to the Holders of the Debt Securities.
Maintenance of Properties. We will be required to cause all of our material
properties used or useful in the conduct of our business or the business of any
Subsidiary to be maintained and kept in good
-8-
<PAGE>
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in our judgment may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times (Section 1007).
Insurance. We will be required to, and will be required to cause each of our
Subsidiaries to, keep all of our and its insurable properties insured against
loss or damage at least equal to their then full insurable value with insurers
of recognized responsibility and, if described in the applicable Prospectus
Supplement, having a specified rating from a recognized insurance rating service
(Section 1008).
Payment of Taxes and Other Claims. We will be required to pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, (1) all
taxes, assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon our income, profits or property or of any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon our property or that of any Subsidiary; provided,
however, that we shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings (Section 1009).
Provision of Financial Information. Whether or not we are subject to Section 13
or 15(d) of the Exchange Act, we will be required, to the extent permitted under
the Exchange Act, to file with the Commission the annual reports, quarterly
reports and other documents which we would have been required to file with the
Commission pursuant to such Sections 13 or 15(d) if we were so subject (the
"Financial Information"), such documents to be filed with the Commission on or
prior to the respective dates (the "Required Filing Dates") by which we would
have been required so to file such documents if we were so subject. We also
will be required in any event (x) within 15 days of each Required Filing Date
(1) to transmit by mail to all Holders of Debt Securities, as their names and
addresses appear in the Security Register, without cost to such Holders, copies
of the Financial Information and (2) to file with the Trustee copies of the
Financial Information, and (y) if filing such documents by us with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, to
supply copies of such documents to any prospective Holder (Section 1010).
Additional Covenants and/or Modifications to the Covenants Described Above
Any additional covenants by us and/or modifications to the covenants described
above with respect to any Debt Securities or series thereof, including any
covenants relating to limitations on incurrence of indebtedness or other
financial covenants, will be set forth in the applicable Indenture or an
indenture supplemental thereto and described in the Prospectus Supplement
relating thereto.
Events of Default, Notice and Waiver
Each Indenture will provide that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder:
(1) default for 30 days in the payment of any installment of interest on any
Debt Security of such series;
(2) default in the payment of principal of (or premium, if any, on) any Debt
Security of such series at its maturity;
(3) default in making any sinking fund payment as required for any Debt
Security of such series;
(4) default in the performance or breach of any other covenant or warranty of
ours contained in the applicable Indenture (other than a covenant added to
the Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), continued for 60 days after written
notice as provided in the applicable Indenture;
(5) default in the payment of an aggregate principal amount exceeding
$10,000,000 of any of our indebtedness or any mortgage, indenture or other
instrument under which such indebtedness is issued or by which such
indebtedness is secured, such default having occurred after the expiration
of any applicable grace period and having resulted in the acceleration of
the maturity of such indebtedness, but only if such indebtedness is not
discharged or such acceleration is not rescinded or annulled;
-9-
<PAGE>
(6) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee for us or any Significant
Subsidiary or either its or our property; and
(7) any other Event of Default provided with respect to a particular series of
Debt Securities (Section 501).
If an Event of Default under any Indenture with respect to Debt Securities of
any series at the time outstanding occurs and is continuing, then in every such
case the applicable Trustee or the Holders of not less than 25% of the principal
amount of the Outstanding Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to us (and to the applicable Trustee if given by the Holders). However,
at any time after such a declaration of acceleration with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under any
Indenture, as the case may be) has been made, but before a judgment or decree
for payment of the money due has been obtained by the applicable Trustee, the
Holders of not less than a majority in principal amount of Outstanding Debt
Securities of such series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) may rescind and annul such declaration
and its consequences if (a) we shall have deposited with the applicable Trustee
all required payments of the principal of (and premium, if any) and interest on
the Debt Securities of such series (or of all Debt Securities then Outstanding
under the applicable Indenture, as the case may be), plus certain fees,
expenses, disbursements and advances of the applicable Trustee and (b) all
events of default, other than the non-payment of accelerated principal (or
specified portion thereof), with respect to Debt Securities of such series (or
of all Debt Securities then Outstanding under the applicable Indenture, as the
case may be) have been cured or waived as provided in such Indenture (Section
502). Each Indenture also will provide that the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of any series
(or of all Debt Securities then Outstanding under the applicable Indenture, as
the case may be) may waive any past default with respect to such series and its
consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or (y) in
respect of a covenant or provision contained in the applicable Indenture that
cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security affected thereby (Section 513).
Each Trustee will be required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture unless such default
shall have been cured or waived; provided, however, that such Trustee may
withhold notice to the Holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal of
(or premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if specified responsible officers of such Trustee consider such
withholding to be in the interest of such Holders (Section 601).
Each Indenture will provide that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to such Indenture
or for any remedy thereunder, except in the cases of failure of the applicable
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it (Section
507). This provision will not prevent, however, any Holder of Debt Securities
from instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof (Section 508).
Subject to provisions in each Indenture relating to its duties in case of
default, no Trustee will be under any obligation to exercise any of its rights
or powers under an Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under such Indenture, unless such
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity (Section 602). The Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of any series (or of all Debt
Securities then Outstanding under an Indenture, as the case may be) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the applicable Trustee, or of exercising any trust or
power conferred upon such Trustee. However, a Trustee may refuse to follow any
direction which is in conflict with any law or the applicable Indenture, which
may subject such Trustee to personal liability or which may be unduly
prejudicial to the Holders of Debt Securities of such series not joining therein
(Section 512).
Within 120 days after the close of each fiscal year, we will be required to
deliver to each Trustee a certificate, signed by one of several specified
officers, stating whether or not such officer has knowledge of any default under
the applicable Indenture and, if so, specifying each such default and the nature
and status thereof (Section 1011).
-10-
<PAGE>
Modification of the Indentures
Modifications and amendments of an Indenture will be permitted to be made only
with the consent of the Holders of not less than a majority in principal amount
of all Outstanding Debt Securities issued under such Indenture which are
affected by such modification or amendment; provided, however, that no such
modification or amendment, without the consent of the Holder of each such Debt
Security affected thereby, may,
(a) change the stated maturity of the principal of, or any installment of
interest (or premium, if any) on, any such Debt Security;
(b) reduce the principal amount of, or the rate or amount of interest on, or
any premium payable on redemption of, any such Debt Security, or reduce the
amount of principal of an Original Issue Discount Security that would be
due and payable upon declaration of acceleration of the maturity thereof or
would be provable in bankruptcy, or adversely affect any right of repayment
of the Holder of any such Debt Security;
(c) change the place of payment, or the coin or currency, for payment of
principal or premium, if any, or interest on any such Debt Security;
(d) impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security;
(e) reduce the above-stated percentage of Outstanding Debt Securities of any
series necessary to modify or amend the applicable Indenture, to waive
compliance with certain provisions thereof or certain defaults and
consequences thereunder or to reduce the quorum or voting requirements set
forth in the applicable Indenture; or
(f) modify any of the foregoing provisions or any of the provisions relating to
the waiver of certain past defaults or certain covenants, except to
increase the required percentage to effect such action or to provide that
certain other provisions may not be modified or waived without the consent
of the Holder of such Debt Security (Section 902).
The Holders of not less than a majority in principal amount of Outstanding Debt
Securities of each series affected thereby will have the right to waive our
compliance with certain covenants in such Indenture (Section 1013).
Modifications and amendments of an Indenture will be permitted to be made by us
and the respective Trustee thereunder without the consent of any Holder of Debt
Securities for any of the following purposes:
(1) to evidence the succession of another person to us as obligor under such
Indenture;
(2) to add to our covenants for the benefit of the Holders of all or any series
of Debt Securities or to surrender any right or power conferred upon us in
the Indenture;
(3) to add Events of Default for the benefit of the Holders of all or any
series of Debt Securities;
(4) to add or change any provisions of an Indenture to facilitate the issuance
of, or to liberalize certain terms of, Debt Securities in bearer form, or
to permit or facilitate the issuance of Debt Securities in uncertificated
form, provided that such action shall not adversely affect the interests of
the Holders of the Debt Securities of any series in any material respect;
(5) to change or eliminate any provisions of an Indenture, provided that any
such change or elimination shall become effective only when there are no
Debt Securities Outstanding of any series created prior thereto which are
entitled to the benefit of such provision;
(6) to secure the Debt Securities;
(7) to establish the form or terms of Debt Securities of any series, including
the provisions and procedures, if applicable, for the conversion of such
Debt Securities into Common Stock or Preferred Stock;
(8) to provide for the acceptance of appointment by a successor Trustee or
facilitate the administration of the trusts under an Indenture by more than
one Trustee;
-11-
<PAGE>
(9) to cure any ambiguity, defect or inconsistency in an Indenture, provided
that such action shall not adversely affect the interests of Holders of
Debt Securities of any series issued under such Indenture in any material
respect; or
(10) to supplement any of the provisions of an Indenture to the extent necessary
to permit or facilitate defeasance and discharge of any series of such Debt
Securities, provided that such action shall not adversely affect the
interests of the Holders of the Debt Securities of any series in any
material respect (Section 901).
Each Indenture will provide that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities:
(a) the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof;
(b) the principal amount of any Debt Security denominated in a foreign currency
that shall be deemed Outstanding shall be the U.S. dollar equivalent,
determined on the issue date for such Debt Security, of the principal
amount (or, in the case of Original Issue Discount Security, the U.S.
dollar equivalent on the issue date of such Debt Security of the amount
determined as provided in (a) above);
(c) the principal amount of an indexed security that shall be deemed
Outstanding shall be the principal face amount of such indexed security
pursuant to the applicable Indenture; and
(d) Debt Securities owned by us or any other obligor upon the Debt Securities
or any of our affiliates or of such other obligor shall be disregarded.
Each Indenture will contain provisions for convening meetings of the Holders of
Debt securities of a series (Section 1501). A meeting will be permitted to be
called at any time by the applicable Trustee, and also, upon request, by us or
the Holders of at least 10% in principal amount of the Outstanding Debt
Securities of such series, in any such case upon notice given as provided in the
Indenture. Except for any consent that must be given by the Holder of each Debt
Security affected by certain modifications and amendments of an Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present may be adopted by the affirmative vote of the Holders of a
majority in the principal amount of the Outstanding Debt Securities of that
series; provided, however, that, except as referred to above, any resolution
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the Holders of a
specified percentage, which is less than a majority, in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting or at which a quorum is present by the affirmative vote of the Holders
of such specified percentage in principal amount of the Outstanding Debt
Securities of that series. Any resolution passed or decision taken at any
meeting of Holders of Debt Securities of any series duly held in accordance with
an Indenture will be binding on all Holders of Debt Securities of that series.
The quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be persons holding or representing a majority in principal amount
of the Outstanding Debt Securities of a series; provided, however, that if any
action is to be taken at such meeting with respect to a consent or waiver which
may be given by the Holders of not less than a specified percentage in principal
amount of the Outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, each Indenture will provide that if
any action is to be taken at a meeting of Holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the Holders of a specified percentage in principal
amount of all Outstanding Debt Securities affected thereby, or the Holders of
such series and one or more additional series: (1) there shall be no minimum
quorum requirement for such meeting, and (2) the principal amount of the
Outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
Subordination
Upon any distribution to our creditors in a liquidation, dissolution or
reorganization, the payment of the principal of and interest on any Subordinated
Securities will be subordinated to the extent provided in the applicable
Indenture in right of payment to the prior payment in full of all Senior Debt
(Sections 1601 and 1602 of the Subordinated Indenture), but our obligation to
make payment of the principal and
-12-
<PAGE>
interest on such Subordinated Securities will not otherwise be affected (Section
1608 of the Subordinated Indenture). No payment of principal or interest will be
permitted to be made on Subordinated Securities at any time if a default on
Senior Debt exists that permits the Holders of such Senior Debt to accelerate
its maturity and the default is the subject of judicial proceedings or we
receive notice of the default (Section 1602 of the Subordinated Indenture).
After all Senior Debt is paid in full and until the Subordinated Securities are
paid in full, Holders will be subrogated to the right of Holders of Senior Debt
to the extent that distributions otherwise payable to Holders have been applied
to the payment of Senior Debt (Section 1607 of the Subordinated Indenture). By
reason of such subordination, in the event of a distribution of assets upon
insolvency, certain of our general creditors may recover more, ratably, than
Holders of Subordinated Securities.
Senior Debt will be defined in the Subordinated Indenture as the principal of
and interest on, or substantially similar payments to be made by us in respect
of, the following; whether outstanding at the date of execution of the
applicable Indenture or thereafter incurred, created or assumed:
(1) our indebtedness for money borrowed or represented by purchase money
obligations;
(2) our indebtedness evidenced by notes, debentures, or bonds or other
securities issued under the provisions of an indenture, fiscal agency
agreement or other agreement;
(3) our obligations as lessee under leases of property either made as part of
any sale and leaseback transaction to which we are a party or otherwise;
(4) indebtedness of partnerships and joint ventures which is included in our
consolidated financial statements; and
(5) indebtedness, obligations and liabilities of others in respect of which we
are liable contingently or otherwise to pay or advance money or property or
as guarantor, endorser or otherwise, in each case other than
(a) any such indebtedness, obligation or liability referred to in clauses (1)
through (5) above as to which, in the instrument creating or evidencing the
same pursuant to which the same is outstanding, it is provided that such
indebtedness, obligation or liability is not superior in right of payment
to the Subordinated Securities or ranks pari passu with the Subordinated
Securities;
(b) any such indebtedness, obligation or liability which is subordinated to our
indebtedness to substantially the same extent as or to a greater extent
than the Subordinated Securities are subordinated; and
(c) the Subordinated Securities.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will contain the approximate amount
of Senior Debt outstanding as of the end of our most recent fiscal quarter.
Discharge, Defeasance and Covenant Defeasance
We may be permitted under the applicable Indenture to discharge certain
obligations to Holders of any series of Debt Securities issued thereunder that
have not already been delivered to the applicable Trustee for cancellation and
that either have become due and payable or will become due and payable within
one year (or scheduled for redemption within one year) by irrevocably depositing
with the applicable Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness on
such Debt Securities in respect of principal (and premium, if any) and interest
to the date of such deposit (if such Debt Securities have become due and
payable) or to the stated maturity or redemption date, as the case may be.
Each Indenture will provide that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of such Indenture, we may elect either (a) to defease and be discharged from
any and all obligations with respect to such Debt Securities (except for the
obligation to pay additional amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities, and the obligations to register the transfer or exchange
of such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such Debt
Securities and to hold moneys for payment in trust) ("defeasance") (Section
1402) or (b) to be released from its obligations with respect to such Debt
Securities under certain specified sections of Article Ten of such Indenture as
specified in the applicable Prospectus Supplement and any omission to comply
with such obligations shall not constitute an Event of Default with respect to
such Debt Securities ("covenant defeasance")
-13-
<PAGE>
(Section 1403), in either case upon our irrevocable deposit with the applicable
Trustee, in trust, of an amount, in such currency or currencies, currency unit
or units or composite currency or currencies in which such Debt Securities are
payable at stated maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient without reinvestment to pay the principal of (and premium, if
any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other things, we
have delivered to the applicable Trustee an opinion of counsel (as specified in
the applicable Indenture) to the effect that the Holders of such Debt Securities
will not recognize income, gain or loss for federal income tax purposes as a
result of such defeasance or covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred, and such opinion of counsel, in the case of defeasance, will be
required to refer to and be based upon a ruling of the Internal Revenue Service
or a change in applicable U.S. federal income tax law occurring after the date
of the Indenture (Section 1404).
"Government Obligations" means securities which are (1) direct obligations of
the United States of America or the government which issued the foreign currency
in which the Debt Securities of a particular series are payable, for the payment
of which its full faith and credit is pledged or (2) obligations of a person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America or such government which issued the foreign currency in
which the Debt Securities of such series are payable, the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation of the
United States of America or such government, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the Holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the Holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101 of each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after we
have deposited funds and/or Government Obligations to effect defeasance or
covenant defeasance with respect to Debt Securities of any series, (a) the
Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security will be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of:
(a) a currency, currency unit or composite currency both by the government of
the country which issued such currency and for the settlement of
transactions by a central bank or other public institutions of or within
the international banking community;
(b) the ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities;
or
(c) any currency unit or composite currency other than the ECU for the purposes
for which it was established.
Unless otherwise provided in the applicable Prospectus Supplement, all payments
of principal of (and premium, if any) and interest on any Debt Security that is
payable in a foreign currency that ceases to be used by its government of
issuance shall be made in U.S. dollars.
In the event we effect covenant defeasance with respect to any Debt Securities
and such Debt Securities are declared due and payable because of the occurrence
of any Event of Default other than the Event of Default described in clause (iv)
under "Events of Default, Notice and Waiver" with respect to certain specified
sections of Article Ten of each Indenture (which sections would no longer be
applicable to such Debt Securities as a result of such covenant defeasance) or
described in clause (vii) under "Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such currency, currency unit or composite currency in which such
Debt Securities are payable, and Government Obligations on deposit with the
applicable Trustee, will be sufficient to pay amounts due on such Debt
Securities at the time of their stated maturity but may not be
-14-
<PAGE>
sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such Default. However, we would remain liable to
make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
Conversion Rights
The terms and conditions, if any, upon which the Debt Securities are convertible
into Common Stock or Preferred Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include whether such
Debt Securities are convertible into Common Stock or Preferred Stock, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the Holders or us,
the events requiring an adjustment of the conversion price and provisions
affecting conversion in the event of the redemption of such Debt Securities and
any restrictions on conversion.
Redemption of Securities
The Indenture provides that the Debt Securities may be redeemed at any time at
our option, in whole or in part, at the Redemption Price, except as may
otherwise be provided in connection with any Debt Securities or series thereof.
From and after notice has been given as provided in the Indenture, if funds for
the redemption of any Debt Securities called for redemption shall have been made
available on such redemption date, such Debt Securities will cease to bear
interest on the date fixed for such redemption specified in such notice, and the
only right of the Holders of the Debt Securities will be to receive payment of
the Redemption Price.
Notice of any optional redemption of any Debt Securities will be given to
Holders at their addresses, as shown in the Security Register, not more than 60
nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Debt Securities held by such Holder to be redeemed.
If we elect to redeem Debt Securities, we will notify the Trustee at least 45
days prior to the redemption date (or such shorter period as satisfactory to the
Trustee) of the aggregate principal amount of Debt Securities to be redeemed and
the redemption date. If less than all the Debt Securities are to be redeemed,
the Trustee shall select the Debt Securities to be redeemed pro rata, by lot or
in such manner as it shall deem fair and appropriate.
Global Securities
The Debt Securities of a series may be issued in whole or in part in the form of
one or more global securities (the "Global Securities") that will be deposited
with, or on behalf of, a depository identified in the applicable Prospectus
Supplement relating to such series. Global Securities may be issued in either
registered or bearer form and in either temporary or permanent form. The
specific terms of the depository arrangement with respect to a series of Debt
Securities will be described in the applicable Prospectus Supplement relating to
such series.
Capital Stock Structure
We have the authority to issue:
. 300,000,000 shares of Common Stock, of which 171,635,518 shares were
issued and outstanding as of the close of business on December 31, 1998;
. 850,000 shares of Cumulative Preferred Stock, issuable in series, of
which a total of 185,009 shares, constituting four series, were issued
and outstanding as of the close of business on December 31, 1998; and
. 4,000,000 shares of Class A Preferred Stock, none of which were
outstanding as of December 31, 1998 and which when issued, will rank
junior to the Cumulative Preferred Stock as to dividends or
distributions, and upon our liquidation, dissolution and winding up.
-15-
<PAGE>
Description of Common Stock
The following description of the Common Stock sets forth certain general terms
and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable upon conversion of our Debt Securities or Preferred Stock or upon the
exercise of the Securities Warrants issued by us. The statements below
describing the Common Stock summarize the material terms of the Common Stock and
may not contain all the information that is important to you. For a more
complete description of the legal terms of the Common Stock, you should
carefully read our Restated Certificate of Incorporation, as amended (the
"Charter"), and Bylaws. Please see "Where You Can Find More Information".
Dividend Rights
Subject to the terms of any contractual restriction on the declaration or
payment of dividends, dividends may be declared and paid on the Common Stock out
of legally available surplus. However, no dividends may be paid on the Common
Stock until accrued and unpaid dividends on the outstanding series of Cumulative
Preferred Stock have been paid or declared and funds set aside for their
payment.
Subsidiary Dividend Restriction
Our ability to pay dividends is substantially dependent upon the earnings and
available cash flow of our subsidiaries and the availability of such earnings to
us by way of dividends, distributions, loans and other advances. In January,
1999, we began our fifth year of operations under the "Open Market Plan". The
Open Market Plan prohibits the payment of dividends by our subsidiary, Frontier
Telephone of Rochester, Inc. ("FTR"), to us if (1) FTR's senior debt is
downgraded to "BBB" by Standard & Poor's ("S&P"), or the equivalent rating by
other rating agencies, or is placed on credit watch for such a downgrade, or (2)
a service quality penalty is imposed under the Open Market Plan. Dividend
payments to us also require FTR's directors to certify that such dividends will
not impair FTR's service quality or its ability to finance its short and long-
term capital needs on reasonable terms while maintaining an S&P debt rating
target of "A".
FTR made a $56 million dividend payment to us in 1996 with respect to its 1995
operations. However, in 1996, FTR failed to achieve the service quality levels
required by the Open Market Plan. On December 19, 1996, pursuant to the Open
Market Plan, FTR requested the New York State Public Service Commission
("NYSPSC") staff to exclude certain months from the calculation used to measure
service quality, due to operating conditions considered by management to be
abnormal and beyond FTR's control. In April 1997, FTR received notice from the
NYSPSC that its request for a waiver of certain conditions in the Open Market
Plan related to service quality results was denied. The NYSPSC's ruling has
resulted in a temporary restriction on the flow of cash dividends from FTR to us
and a refund to FTR's customers of $.9 million. Reserves sufficient to cover
the refund were established in 1996. On October 22, 1997, the NYSPSC adopted an
order requiring FTR to issue refunds of approximately $2.60 per customer. These
refunds have been completed.
The temporary restriction of dividend payments to us will remain in place until
the NYSPSC is satisfied that FTR's 1997 and 1998 service levels demonstrate that
FTR has rectified the service deficiency. Weather and other events have
adversely impacted service levels in recent months. During August 1998, the
NYSPSC determined that FTR would be required to make refunds totaling
approximately $1.0 million for its failure to meet service quality targets for
periods prior to 1998. The NYSPSC also announced that it would prospectively
increase the sum subject to refund by FTR and promote further improvements in
service quality. Cash restricted for dividend payments by FTR as of December
31, 1998 was approximately $53.0 million.
Voting Rights
The holders of Common Stock have exclusive voting rights of one vote for each
share held, subject to the voting rights of the outstanding Cumulative Preferred
Stock described below and any subsequent voting rights that may be established
for any other Preferred Stock by our Board of Directors. The holders of the
Common Stock are not entitled to cumulative voting in the election of directors.
When four or more quarterly dividends on the Cumulative Preferred Stock are in
arrears, and until such arrearages at full dividend rates have been paid or
declared and set apart for payment, the holders of the Cumulative Preferred
Stock as a class have the right to elect a majority of the Board of Directors.
In such event, the holders of the Common Stock have the right to elect only the
remaining directors.
Liquidation Rights
On our liquidation, the holders of the Cumulative Preferred Stock will be
entitled to their full par value per share plus accumulated dividends. In
addition, the holders of any other Preferred Stock issued after the date of this
Prospectus will be entitled to a liquidation preference equal to at least the
par value of
-16-
<PAGE>
such stock. After satisfaction of outstanding liabilities and the preferential
liquidation rights of the Preferred Stock, the holders of Common Stock are
entitled to share ratably in the distribution of all remaining assets.
Preemptive Rights
Holders of the Common Stock have no preemptive rights to purchase any stock
issued by us, any securities convertible into such stock, or any rights or
options to acquire such stock.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is BankBoston, N.A., 150
Royall Street, Canton, Massachusetts 02021.
The Rights Agreement
On April 9, 1995, our Board of Directors declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of Common Stock.
The dividend was payable on April 24, 1995 to the shareholders of record on that
date. Each Right entitles the registered holder to purchase from us one one-
hundredth of a share of our Series A Junior Participating Class A Preferred
Stock, par value of $100.00 per share (the "Rights Preferred Stock"), at a price
of $80.00 per one-hundredth of a share of Rights Preferred Stock, subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement dated as of April 9,1995, as the same may be amended from time to time
(the "Rights Agreement"), between The First National Bank of Boston, as Rights
Agent, and us.
The Rights are not exercisable until the earlier to occur of (1) ten days
following the first date of a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired beneficial
ownership of 20% or more of the outstanding shares of Common Stock or such
earlier date as a majority of the Board of Directors shall have become aware of
the existence of an Acquiring Person, or (2) ten business days (or such later
date as may be determined by action of the Board of Directors prior to such time
as any person or group of affiliated persons becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a tender
order or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of the outstanding shares of
Common Stock. The term "Acquiring Person" excludes us and our subsidiaries, our
employee benefit plans and our subsidiaries and trustees and other entities
holding securities for such plans and contains certain other persons. The
Rights will expire on April 24, 2005, unless such date is extended or unless the
Rights are earlier redeemed or exchanged by us, in each case as described below.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right at the then
current exercise price of the Right, that number of shares of Common Stock
having a market value of two times the exercise price of the Right (subject to
certain anti-dilution adjustments).
In the event that, after a person or group has become an Acquiring Person, we
are acquired in a merger or other business combination transaction or 50% or
more of our consolidated assets or earning power are sold, proper provision will
be made so that each holder of a Right (other than Rights beneficially owned by
an Acquiring Person which will have become void) will thereafter have the right
to receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the person with whom has
engaged in the foregoing transaction (or its parent), which number of shares at
the time of such transaction will have a market value of two times the exercise
price of the Right (subject to certain anti-dilution adjustments).
At any time after any person or group becomes an Acquiring Person and prior to
the acquisition by such person or group of 50% or more of the outstanding shares
of Common Stock, our Board of Directors may exchange the Rights (other than
Rights owned by such person or group which will have become void), in whole or
in part, at an exchange ratio of one share of Common Stock, or one one-hundredth
of a share of Rights Preferred Stock (or of a share of a class or series of our
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to certain anti-dilution adjustments).
At any time prior to the time an Acquiring Person becomes such, our Board of
Directors may redeem the Rights in whole, but not in part, at a price of $.01
per Right, subject to adjustment.
For so long as the Rights are then redeemable, we may, except with respect to
the redemption price, amend the Rights in any manner. After the Rights are no
longer redeemable, we may, except with respect to the redemption price, amend
the Rights in any manner that does not adversely affect the interest of holders
of the Rights.
This summary description of the Rights summarizes the material terms of the
Rights and may not contain all the information that is important to you. For a
more complete description of the legal terms of the
-17-
<PAGE>
Rights, you should carefully read the Rights Agreement. Please see "Where You
Can Find More Information".
Description of Preferred Stock
The following description of the terms of the Preferred Stock sets forth certain
general terms and provisions of the Preferred Stock to which any Prospectus
Supplement may relate. Certain other terms of any series of the Preferred Stock
offered by any Prospectus Supplement will be described in such Prospectus
Supplement. The description of certain provisions of the Preferred Stock set
forth below and in any Prospectus Supplement will summarize the material terms
of the Preferred Stock and may not contain all the information that is important
to you. For a more complete description of the legal terms of the Preferred
Stock, you should carefully read the Charter and any amendment to the Charter
relating to a series of the Preferred Stock which will be filed with the
Commission and incorporated by reference as an exhibit to the to the
Registration Statement of which this Prospectus is a part at or prior to the
time of the issuance of such series of the Preferred Stock. Please see "Where
You Can Find More Information".
General
We are authorized to issue 4,000,000 shares of Class A Preferred Stock, of which
no shares were outstanding as of the close of business on December 31, 1998, and
850,000 shares of Cumulative Preferred Stock, of which 185,009 shares were
outstanding as of the close of business on December 31, 1998. We have
established five separate series of Cumulative Preferred Stock, which includes
215,000 shares in the aggregate, and a series of 3,000,000 shares of Class A
Preferred Stock in connection with the Rights Agreement.
Under the Charter, our Board of Directors (without further shareowner action)
may from time to time establish and issue one or more series of Preferred Stock
with such designations, powers, preferences or rights of the shares of such
series and the qualifications, limitations or restrictions thereon.
The Preferred Stock shall have the dividend, liquidation, redemption and voting
rights set forth below unless otherwise provided in a Prospectus Supplement
relating to a particular series of the Preferred Stock. Reference is made to
the Prospectus Supplement relating to the particular series of the Preferred
Stock offered thereby for specific terms, including:
(1) the designation and the number of shares offered;
(2) the amount of liquidation preference per share;
(3) the initial public offering price at which such Preferred Stock will be
issued;
(4) the dividend rate (or method of calculation), the dates on which dividends
shall be payable and the dates from which dividends shall commence to
accumulate, if any;
(5) any redemption or sinking fund provisions;
(6) any conversion rights; and
(7) any additional voting, dividend, liquidation, redemption, sinking fund and
other rights, preferences, privileges, limitations and restrictions.
The Preferred Stock will, when issued for lawful consideration, be fully paid
and nonassessable and will have no preemptive rights.
Rank
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon our liquidation,
dissolution or winding up, rank:
(a) senior to all classes or series of Common Stock and to all equity
securities ranking junior to such Preferred Stock;
(b) on a parity with all equity securities issued by us the terms of which
specifically provide that such equity securities rank on a parity with the
Preferred Stock; and
(c) junior to all equity securities issued by us the terms of which
specifically provide that such equity securities rank senior to the
Preferred Stock.
-18-
<PAGE>
As used in the Articles for these purposes, the term "equity securities" does
not include convertible debt securities. The Series A Preferred Stock is junior
to the Cumulative Preferred Stock and any Preferred Stock established out of
Series A Preferred Stock shall be junior as to the Cumulative Preferred Stock.
The rights of the holders of each series of the Preferred Stock will be
subordinate to those of our general creditors.
Dividends
Holders of shares of the Preferred Stock of each series shall be entitled to
receive, when, as and if declared by our Board of Directors, out of our assets
legally available for payment, cash dividends at such rates and on such dates as
will be set forth in the applicable Prospectus Supplement. Such rate may be
fixed or variable or both. Each such dividend shall be payable to holders of
record as they appear on our stock transfer books on such record dates as shall
be fixed by our Board of Directors, as specified in the Prospectus Supplement
relating to such series of Preferred Stock.
Dividends on any series of the Preferred Stock may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If our Board of Directors fails to declare a
dividend payable on a dividend payment date on any series of the Preferred Stock
for which dividends are noncumulative, then the holders of such series of the
Preferred Stock will have no right to receive a dividend in respect of the
dividend period relating to such dividend payment date, and we will have no
obligation to pay the dividend accrued for such period, whether or not dividends
on such series are declared payable on any future dividend payment date.
So long as the shares of any series of the Preferred Stock shall be outstanding,
we may not declare or pay any dividends on any shares of our Common Stock or any
of our other stock ranking as to dividends or distributions of assets junior to
such series of Preferred Stock (the Common Stock and any such other stock being
herein referred to as "Junior Stock"), whether in cash or property or in
obligations or our stock, other than Junior Stock which is neither convertible
into, nor exchangeable or exercisable for, any of our securities other than
Junior Stock, unless full dividends (including if such Preferred Stock is
cumulative, dividends for prior dividend periods) shall have been paid or
declared and set apart for payment on all outstanding shares of the Preferred
Stock of such series and all other classes and series of our Preferred Stock
(other than Junior Stock).
Any dividend payment made on shares of a series of Preferred Stock shall first
be credited against the earliest accrued but unpaid dividend due with respect to
shares of such series which remains payable.
Redemption
A series of Preferred Stock may be redeemable, in whole or from time to time in
part, at our option, and may be subject to mandatory redemption pursuant to a
sinking fund or otherwise, in each case upon terms, at the times and at the
redemption prices set forth in the Prospectus Supplement relating to such
series. Shares of the Preferred Stock redeemed by us will be restored to the
status of authorized but unissued shares of Preferred Stock.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by us in each year commencing after a
date to be specified, at a redemption price per share to be specified together
with an amount equal to all accrued and unpaid dividends thereon (which shall
not, if such Preferred Stock does not have a cumulative dividend, include any
accumulation in respect of unpaid dividends for prior dividend periods) to the
date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of our capital stock, the terms of such Preferred Stock
may provide that, if no such capital stock shall have been issued or to the
extent the net proceeds from any issuance are insufficient to pay in full the
aggregate redemption price then due, such Preferred Stock shall automatically
and mandatorily be converted into shares of our applicable capital stock
pursuant to conversion provisions specified in the applicable Prospectus
Supplement.
So long as any dividends on shares of any series of the Preferred Stock or any
other series of our preferred stock ranking on a parity as to dividends and
distribution of assets with such series of the Preferred Stock are in arrears,
no shares of any such series of the Preferred Stock or such other series of our
Preferred Stock will be redeemed (whether by mandatory or optional redemption)
unless all such shares are simultaneously redeemed, and we will not purchase or
otherwise acquire any such shares.
In the event that fewer than all of the outstanding shares of a series of the
Preferred Stock are to be redeemed, whether by mandatory or optional redemption,
the number of shares to be redeemed will be determined by lot or pro rata
(subject to rounding to avoid fractional shares) as may be determined by us or
by any other method as may be determined by us in our sole discretion to be
equitable. From and after the redemption date (unless default shall be made by
us in providing for the payment of the redemption price plus accumulated and
unpaid dividends, if any), dividends shall cease to accumulate on the shares
-19-
<PAGE>
of the Preferred Stock called for redemption and all rights of the holders
thereof (except the right to receive the redemption price plus accumulated and
unpaid dividends, if any) shall cease.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of our
affairs, then, before any distribution or payment shall be made to the holders
of any Junior Stock, the holders of each series of Preferred Stock shall be
entitled to receive out of our assets legally available for distribution to
shareowners, liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable Prospectus Supplement), plus
an amount equal to all dividends accrued and unpaid thereon (which shall not
include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend). After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Stock will have no right or claim to any of
our remaining assets. In the event that upon any such voluntary or involuntary
liquidation, dissolution or winding up, our available assets are insufficient to
pay the amount of the liquidating distributions on all outstanding shares of
Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of our capital stock ranking on a parity with the Preferred
Stock in the distribution of assets, then the holders of the Preferred Stock and
all other such classes or series of capital stock shall share ratably in any
such distribution of assets in proportion to the full liquidating distributions
to which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
shares of Preferred Stock, our remaining assets shall be distributed among the
holders of Junior Stock, according to their respective rights and preferences
and in each case according to their respective number of shares. For such
purposes, our consolidation or merger with or into any other corporation, or the
sale, lease or conveyance of all or substantially all of our property or
business, shall not be deemed to constitute our liquidation, dissolution or
winding up.
Voting Rights
Except as indicated below or in a Prospectus Supplement relating to a particular
series of the Preferred Stock, or except as required by applicable law, holders
of the Preferred Stock will not be entitled to vote for any purpose.
As described in "Description of Common Stock - Voting Rights", when four or more
quarterly dividends on the Cumulative Preferred Stock are in arrears, and until
such arrearages at full dividend rates have been paid or declared and set apart
for payment, the holders of the Cumulative Preferred Stock as a class have the
right to elect a majority of the Board of Directors.
In addition, the affirmative vote of various proportions of the Cumulative
Preferred Stock is required to:
(1) increase the authorized amount of the Cumulative Preferred Stock;
(2) create shares having preferential rights equal or superior to the
Cumulative Preferred Stock;
(3) issue any shares of Cumulative Preferred Stock or any shares having
preferential rights equal or superior to the Cumulative Preferred Stock
without compliance with certain requirements as to earnings; and
(4) create, alter or abolish any voting rights or preferential rights or
redemption provisions affecting the Cumulative Preferred Stock adversely.
Conversion Rights
The terms and conditions, if any, upon which shares of any series of Preferred
Stock are convertible into Common Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
shares of Common Stock into which the Preferred Stock is convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or us, the events requiring an adjustment of the conversion
price and provisions affecting conversion.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Preferred Stock will be set forth in
the applicable Prospectus Supplement.
-20-
<PAGE>
Description of Securities Warrants
We may issue Securities Warrants for the purchase of Debt Securities, Preferred
Stock or Common Stock. Securities Warrants may be issued independently or
together with any other Securities offered by any Prospectus Supplement and may
be attached to or separate from such Securities. Each series of Securities
Warrants will be issued under a separate warrant agreement (each, a "Warrant
Agreement") to be entered into between us and a warrant agent specified in the
applicable Prospectus Supplement (the "Warrant Agent"). The Warrant Agent will
act solely as our agent in connection with the Securities Warrants of such
series and will not assume any obligation or relationship of agency or trust for
or with any holders or beneficial owners of Securities Warrants. The following
summaries of certain provisions of the Securities Warrant Agreement and the
Securities Warrants do not purport to be complete as they summarize the material
terms of the Securities Warrants and may not contain all the information that is
important to you. For a more complete description of the legal terms of the
Securities Warrants, you should carefully read the provisions of the Securities
Warrant Agreement and the Securities Warrant certificates relating to each
series of Securities Warrants which will be filed with the Commission and
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus is a part at or prior to the time of the issuance of such series
of Securities Warrants. Please see "Where You Can Find More Information".
If Securities Warrants are offered, the applicable Prospectus Supplement will
describe the terms of such Securities Warrants, including, in the case of
Securities Warrants for the purchase of Debt Securities, the following where
applicable:
(a) the offering price;
(b) the denominations and terms of the series of Debt Securities purchasable
upon exercise of such Securities Warrants;
(c) the designation and terms of any series of Debt Securities with which such
Securities Warrants are being offered and the number of such Securities
Warrants being offered with such Debt Securities;
(d) the date, if any, on and after which such Securities Warrants and the
related series of Debt Securities will be transferable separately;
(e) the principal amount of the series of Debt Securities purchasable upon
exercise of each such Securities Warrant and the price at which such
principal amount of Debt Securities of such series may be purchased upon
such exercise;
(f) the date on which the right to exercise such Securities Warrants shall
commence and the date on which such right shall expire (the "Expiration
Date");
(g) whether the Securities Warrants will be issued in registered or bearer
form;
(h) any special United States federal income tax consequences;
(i) the terms, if any, on which we may accelerate the date by which the
Securities Warrants must be exercised; and
(j) any other material terms of such Securities Warrants.
In the case of Securities Warrants for the purchase of Preferred Stock or Common
Stock, the applicable Prospectus Supplement will describe the terms of such
Securities Warrants, including the following where applicable:
. the offering price;
. the aggregate number of shares purchasable upon exercise of such
Securities Warrants, the exercise price, and in the case of Securities
Warrants for Preferred Stock, the designation, aggregate number and terms
of the series of Preferred Stock purchasable upon exercise of such
Securities Warrants;
. the designation and terms of any series of Preferred Stock with which such
Securities Warrants are being offered and the number of such Securities
Warrants being offered with such Preferred Stock;
. the date, if any, on and after which such Securities Warrants and the
related series of Preferred Stock or Common Stock will be transferable
separately;
-21-
<PAGE>
. the date on which the right to exercise such Securities Warrants shall
commence and the Expiration Date;
. any special United States federal income tax consequences; and
. any other material terms of such Securities Warrants.
Securities Warrant certificates may be exchanged for new Securities Warrant
certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Securities Warrant agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Securities
Warrant to purchase Debt Securities, holders of such Securities Warrants will
not have any of the rights of holders of the Debt Securities purchasable upon
such exercise, including the right to receive payments of principal, premium, if
any, or interest, if any, on such Debt Securities or to enforce covenants in the
applicable indenture. Prior to the exercise of any Securities Warrants to
purchase Preferred Stock or Common Stock, holders of such Securities Warrants
will not have any rights of holders of such Preferred Stock or Common Stock,
including the right to receive payments of dividends, if any, on such Preferred
Stock or Common Stock, or to exercise any applicable right to vote.
Exercise of Securities Warrants
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or number of shares of Preferred Stock or
Common Stock, as the case may be, at such exercise price as shall in each case
be set forth in, or calculable from, the Prospectus Supplement relating to the
offered Securities Warrants. After the close of business on the Expiration Date
(or such later date to which such Expiration Date may be extended by us),
unexercised Securities Warrants will become void.
Securities Warrants may be exercised by delivering to the Securities Warrant
Agent payment as provided in the applicable Prospectus Supplement of the amount
required to purchase the Debt Securities, Preferred Stock or Common Stock, as
the case may be, purchasable upon such exercise together with certain
information set forth on the reverse side of the Securities Warrant certificate.
Securities Warrants will be deemed to have been exercised upon receipt of
payment of the exercise price, subject to the receipt within five (5) business
days, of the Securities Warrant certificate evidencing such Securities Warrants.
Upon receipt of such payment and the Securities Warrant certificate properly
completed and duly executed at the corporate trust office of the Securities
Warrant agent or any other office indicated in the applicable Prospectus
Supplement, we will, as soon as practicable, issue and deliver the Debt
Securities, Preferred Stock or Common Stock, as the case may be, purchasable
upon such exercise. If fewer than all of the Securities Warrants represented by
such Securities Warrant certificate are exercised, a new Securities Warrant
certificate will be issued for the remaining amount of Securities Warrants.
Amendments and Supplements to Warrant Agreement
The Warrant Agreements may be amended or supplemented without the consent of the
holders of the Securities Warrants issued thereunder to effect changes that are
not inconsistent with the provisions of the Securities Warrants and that do not
adversely affect the interests of the holders of the Securities Warrants.
Common Stock Warrant Adjustments
Unless otherwise indicated in the applicable Prospectus Supplement, the exercise
price of, and the number of shares of Common Stock covered by, a Common Stock
Warrant are subject to adjustment in certain events, including (1) payment of a
dividend on the Common Stock payable in capital stock and stock splits,
combinations or reclassification of the Common Stock; (2) issuance to all
holders of Common Stock of rights or warrants to subscribe for or purchase
shares of Common Stock at less than their current market price (as defined in
the Warrant Agreement for such series of Securities Warrants); and (3) certain
distributions of evidences of indebtedness or assets (including securities but
excluding cash dividends or distributions paid out of consolidated earnings or
retained earnings or dividends payable other than in Common Stock) or of
subscription rights and warrants (excluding those referred to above).
No adjustment in the exercise price of, and the number of shares of Common Stock
covered by, a Common Stock Warrant will be made for regular quarterly or other
periodic or recurring cash dividends or distributions or for cash dividends or
distributions to the extent paid from consolidated earnings or retained
earnings. No adjustment will be required unless such adjustment would require a
change of at least 1% in the exercise price then in effect. Except as stated
above, the exercise price of, and the number of shares of Common Stock covered
by, a Common Stock Warrant will not be adjusted for the issuance of Common Stock
or any securities convertible into or exchangeable for Common Stock, or carrying
the right or option to purchase or otherwise acquire the foregoing, in exchange
for cash, other property or services.
-22-
<PAGE>
In the event of any
(1) consolidation or merger of us with or into any entity (other than a
consolidation or a merger that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common
Stock);
(2) sale, transfer, lease or conveyance of all or substantially all of our
assets; or
(3) reclassification, capital reorganization or change of the Common Stock
(other than solely a change in par value or from par value to no par
value),
then any holder of a Common Stock Warrant will be entitled, on or after the
occurrence of any such event, to receive on exercise of such Common Stock
Warrant the kind and amount of shares of stock or other securities, cash or
other property (or any combination thereof) that the holder would have received
had such holder exercised such holder's Common Stock Warrant immediately prior
to the occurrence of such event. If the consideration to be received upon
exercise of the Common Stock Warrant following any such event consists of common
stock of the surviving entity, then from and after the occurrence of such event,
the exercise price of such Common Stock Warrant will be subject to the same
anti-dilution and other adjustments described in the second preceding paragraph,
applied as if such common stock were Common Stock.
Plan of Distribution
We may sell the Securities to one or more underwriters for public offering and
sale by them or may sell the Securities to investors directly or through agents.
Direct sales to investors may be accomplished through subscription rights
distributed to our shareowners. In connection with the distribution of
subscription rights to shareowners, if all of the underlying Securities are not
subscribed for, we may sell such unsubscribed Securities directly to third
parties or may engage the services of an underwriter to sell such unsubscribed
Securities to third parties. Any underwriter or agent involved in the offer and
sale of the Securities will be named in the applicable Prospectus Supplement.
The distribution of the Securities may be effected from time to time in one or
more transactions at a fixed price or prices, or at prices related to the
prevailing market prices at the time of sale or at negotiated prices (any of
which may represent a discount from the prevailing market prices). We also may,
from time to time, authorize underwriters acting as our agents to offer and sell
the Securities upon the terms and conditions as are set forth in the applicable
Prospectus Supplement. In connection with the sale of Securities, underwriters
may be deemed to have received compensation from us in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
Securities for whom they may act as agent. Underwriters may sell Securities to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agent.
Any underwriting compensation paid by us to underwriters or agents in connection
with the offering of Securities, and any discounts, concessions or commissions
allowed by underwriters to participating dealers, will be set forth in the
applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements entered into with us, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, we will authorize
dealers acting as our agents to solicit offers by certain institutions to
purchase Securities from us at the public offering price set forth in such
Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date or dates stated in such
Prospectus Supplement. Each Contract will be for an amount not less than, and
the aggregate principal amount of Securities sold pursuant to Contracts shall be
not less nor more than, the respective amounts stated in the applicable
Prospectus Supplement. Institutions with whom Contracts, when authorized, may
be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to our approval. Contracts will
not be subject to any conditions except (1) the purchase by an institution of
the Securities covered by its Contracts shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which such
institution is subject; and (2) if the Securities are being sold to
underwriters, we shall have sold to such underwriters the total principal amount
of the Securities less the principal amount thereof covered by the Contracts.
Certain of the underwriters and their affiliates may be customers of, engage in
transactions with and perform services for us and our Subsidiaries in the
ordinary course of business.
-23-
<PAGE>
Legal Matters
The legality of the Debt Securities, the Preferred Stock, the Common Stock and
the Securities Warrants offered hereby will be passed upon for us by Martin T.
McCue, a Senior Vice President and our General Counsel.
Experts
The consolidated financial statements incorporated in this Prospectus by
reference to our Current Report on Form 8-K dated January 26, 1999 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants. The consolidated financial statements incorporated in
this Prospectus by reference to our Current Report on Form 8-K dated June 17,
1998 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, except as it relates to ALC Communications
Corporation, and insofar as it relates to ALC Communications Corporation, so
incorporated in reliance on the report of Ernst & Young LLP, independent
accountants, whose report therein is incorporated by reference to our Current
Report on Form 8-K dated June 17, 1998. The consolidated financial statements
and consolidated financial statement schedule incorporated in this Prospectus by
reference to our Annual Report on Form 10-K for the year ended December 31, 1997
have been so incorporated in reliance on the reports of PricewaterhouseCoopers
LLP, except as they relate to ALC Communications Corporation, and insofar as
they relate to ALC Communications Corporation, so incorporated in reliance on
the report of Ernst & Young LLP, independent accountants, whose reports therein
are incorporated by reference to our Annual Report on Form 10-K for the year
ended December 31, 1997 (the financial statements and financial statement
schedule contained in the Annual Report on Form 10-K for the year ended December
31, 1997 have not been restated to reflect the pooling of interests acquisition
of GlobalCenter, Inc.) Such respective financial statements have been so
incorporated in reliance on the reports of such independent accountants given on
the authority of such respective reports of said firms as experts in accounting
and auditing.
Statement Regarding Forward-Looking Information
From time to time, information provided by us, including written and oral
statements made by our representatives, may contain forward-looking information
as defined in the Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical facts, which address activities,
events or developments that we expect or anticipate will or may occur in the
future, including such things as expansion and growth of our business, future
capital expenditures and our business strategy, are forward-looking statements.
In reviewing such information, it should be kept in mind that actual results may
differ materially from those projected or suggested in such forward-looking
information. This forward-looking information is based on various factors and
was derived utilizing numerous assumptions. Many of these factors have
previously been identified in filings or statements made by or on our behalf.
Important assumptions and other important factors that could cause actual
results to differ materially from those set forth in the forward-looking
information include: international, national and local general economic and
market conditions; demographic changes; the size and growth of the overall
telecommunications market; our ability to sustain, manage or forecast our
growth; the size, timing and mix of purchases of our products; new product and
service development and introduction; changes in consumer preferences; existing
governmental regulations; adverse publicity; dependence on distributors;
liability and other claims asserted against us; competition; the loss of
significant customers or suppliers; fluctuations and difficulty in forecasting
operating results; changes in business strategy or development plans; business
disruptions; general risks associated with doing business outside of the United
States, including, without limitation, import duties, tariffs, quotas and
political instability; our ability to attract and retain qualified personnel;
our ability to protect trademarks, patents and other intellectual property; our
use of proceeds from the offering; and other factors referenced or incorporated
by reference in this Prospectus or any Prospectus Supplement that may be
attached to this Prospectus. Given such uncertainties, prospective investors
are cautioned not to place undue reliance on such forward-looking statements.
We disclaim any obligation to update any such factors or to publicly announce
the results of any revisions to any of the forward-looking statements contained
or incorporated by reference herein to reflect future events or developments.
-24-
<PAGE>
<TABLE>
<S> <C>
================================================== ===================================================
No dealer, salesperson or other individual has
been authorized to give any information or to
make any representations not contained or
incorporated by reference in this Prospectus
in connection with any offering to be made by
the Prospectus. If given or made, such
information or representations must not be
relied upon as having been authorized by us.
This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to
buy, the Securities, in any jurisdiction
where, or to any person to whom, it is
unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor
any offer or sale made hereunder shall, under
any circumstance, create an implication that
there has been no change in the facts set Frontier Corporation
forth in this Prospectus or in our affairs
since the date hereof.
Table of Contents $600,000,000
Prospectus ______________
Page Prospectus
----
About this Prospectus............................2 ______________
Where You Can Find More Information..............2
The Company......................................2
Risk Factors.....................................3
Use of Proceeds..................................4
Ratios of Earnings to Fixed Charges
and Combined Fixed Charges and
Preferred Stock Dividends........................4
Description of Debt Securities...................5
Capital Stock Structure..........................15
Description of Common Stock......................16
Description of Preferred Stock...................18
Description of Securities Warrants...............21
Plan of Distribution.............................23
Legal Matters....................................24
Experts..........................................24
Statement Regarding Forward-Looking
Information.....................................24
================================================= ================================================
</TABLE>
February 12, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred
in connection with the issuance and distribution of the securities being
registered.
<TABLE>
<CAPTION>
<S> <C>
Registration Fee................... $166,800
Fees of Rating Agencies............ 75,000
Printing and Duplicating Expenses.. 70,000
Legal Fees and Expenses............ 100,000
Accounting Fees and Expenses....... 50,000
NASD Fees.......................... 20,000
Blue Sky Fees and expenses......... 50,000
Miscellaneous...................... 100,000
--------
Total.............................. $631,800
</TABLE>
Item 15. Indemnification of Directors and Officers
Frontier Corporation's bylaws authorize Frontier Corporation
("Frontier") to obligate itself to indemnify its present and former directors
and officers and to pay or reimburse expenses for such individuals in advance of
the final disposition of a proceeding to the maximum extent permitted from time
to time by the New York Business Corporation Law (the "NYBCL"). The NYBCL
permits a corporation to indemnify its present and former directors and officers
to whatever extent shall be authorized by a corporation's certificate of
incorporation or a bylaw or vote adopted by the shareholders.
The NYBCL does not permit indemnification with respect to any matter
as to which the director or officer has been adjudicated not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the corporation. In addition, the NYBCL provides that no indemnification of
directors in shareholder derivative suits may be made in respect of (1) a
threatened action, or a pending action which is settled or otherwise disposed
of, or (2) any claim, issue or matter as to which the director or officer has
been adjudged to be liable to the corporation, unless only to the extent that
the court in which the was brought or, if no action is brought, any court of
competent jurisdiction, determines upon application that, in view of the
circumstances of the case, the director or officer is fairly and reasonably
entitled to indemnity for such portion of the settlement amount and expenses as
the court deems proper. The statutory provisions for indemnification and
advancement of expenses are not exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled independently
of the applicable statutory provision.
The NYBCL permits a corporation to limit or eliminate a director's
personal liability to the corporation or the holders of its capital stock for
breach of duty. Frontier's Charter contains a provision providing for
elimination of the liability of its directors to the maximum extent permitted by
New York law. This limitation is generally unavailable for acts or omissions by
a director which were:
. in bad faith;
. involved intentional misconduct or a knowing violation of law; or
. involved a financial profit or other advantage to which such
director was not legally entitled.
The NYBCL also prohibits limitations on director liability for acts or omissions
which resulted in a violation of a statute prohibiting certain dividend
declarations, certain payments to shareholders after dissolution and particular
types of loans.
II-1
<PAGE>
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
------ -----------
<C> <S>
4.1 Indenture, dated as of May 21, 1997, between Frontier and Chase Manhattan
Bank, NA, as Trustee (Senior Debt Indenture) (Incorporated by referenced to
Exhibit 4.1 of Frontier's Current Report on Form 8-K dated May 23, 1997)
4.2 Form of Subordinated Debt Indenture (Incorporated by reference to Exhibit
4.2 of Frontier's Registration Statement on Form S-3 (Registration No.
33-64307))
4.3 Restated Certificate of Incorporation dated January 24, 1995 (Incorporated
by reference to Exhibit 3.1 of Frontier's Annual Report on Form 10-K for
the year ended December 31, 1995)
4.4 Amendment to Restated Certificate of Incorporation dated April 9, 1995
(Incorporated by reference to Exhibit 3.2 of Frontier's Annual Report on
Form 10-K for the year ended December 31, 1995)
4.5 Rights Agreement, dated as of April 9, 1995, between Frontier and The First
National Bank of Boston, as Rights Agent (Incorporated by referenced to
Exhibit 1 of Frontier's Current Report on Form 8-K dated April 9, 1995)
4.6 Form of Certificate of Amendment to Articles of Incorporation for Preferred
Stock (Incorporated by reference to Exhibit 4.5 of Frontier's Registration
Statement on Form S-3 (Registration No. 33-64307))
4.7 Form of Debt Security (Incorporated by reference to Exhibit 4.6 of
Frontier's Registration Statement on Form S-3 (Registration No. 33-64307))
4.8 Form of Securities Warranty Agreement (Incorporated by reference to Exhibit
4.7 of Frontier's Registration Statement on Form S-3 (Registration No.
33-64307))
*5.1 Opinion of Martin T. McCue, Senior Vice President and General Counsel of
Frontier, as to legality of securities
*10.1 Employment Agreement, dated May 22, 1998 between Frontier and Rolla Huff, current
Executive Vice President and Chief Financial Officer
*12.1 Calculation of Ratios of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividends
*23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
*23.2 Consent of Ernst & Young LLP, independent accountants
*23.3 Consent of Martin T. McCue (included in Exhibit 5.1)
*24.1 Power of Attorney
*24.2 Resolution of Frontier's Executive Committee authorizing signature of
registration statement pursuant to Power of Attorney
25.1 Statement of Eligibility of Trustee on Form T-1 (Incorporated by reference
to Exhibit 25.1 of Frontier's Registration Statement on Form S-3
(Registration No. 33-64307))
</TABLE>
*Filed herewith
II-2
<PAGE>
ITEM 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table set forth in this registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the Securities offered herein, and the
offering of such Securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the Securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the Securities offered herein, and the offering of such Securities
at that time shall be deemed to be the initial bona fide offering thereof; and
insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed a part of this Registration Statement as of the time it was
declared effect.
The undersigned Registrant hereby undertakes, in connection with
securities to be offered pursuant to warrants, to supplement the prospectus,
after the expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms differing from those set
forth on the cover page of the prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.
II-3
<PAGE>
The undersigned Registrant hereby undertakes to file an application
for purposes of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Rochester, New York on February 11, 1999
FRONTIER CORPORATION,
a New York business corporation
By: /s/ Joseph P. Clayton
-----------------------
Joseph P. Clayton, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Joseph P. Clayton President, Chief Executive February 11, 1999
- ------------------------------------ Officer, and Director
Joseph P. Clayton
/s/ Rolla P. Huff Executive Vice President and Chief February 11, 1999
- ------------------------------------ Financial Officer (Principal
Rolla P. Huff Accounting Officer)
Director February , 1999
- ------------------------------------
Patricia C. Barron
- ------------------------------------ Director February , 1999
Raul E. Cesan
Director February , 1999
- ------------------------------------
Brenda E. Edgerton
Jairo A. Estrada* Director February 11, 1999
- ------------------------------------
Jairo A. Estrada
Michael E. Flaherty* Director February 11, 1999
- ------------------------------------
Michael E. Flaherty
Alan C. Hasselwander* Director February 11, 1999
- ------------------------------------
Alan C. Hasselwander
Director February , 1999
- ------------------------------------
Eric Hippeau
/s/ Robert Holland, Jr. Director February 11, 1999
- ------------------------------------
Robert Holland, Jr.
Douglas H. McCorkindale* Director February 11, 1999
- ------------------------------------
Douglas H. McCorkindale
Director February , 1999
- ------------------------------------
James F. McDonald
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
Dr. Leo J. Thomas* Director February 11, 1999
- ------------------------------------
Dr. Leo J. Thomas
</TABLE>
*By: /s/ Josephine S. Trubek
-------------------------------
Josephine S. Trubek
(Attorney-in-fact)
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
4.1 Indenture, dated as of May 21, 1997, between Frontier and Chase
Manhattan Bank, NA, as Trustee (Senior Debt Indenture) (Incorporated
by referenced to Exhibit 4.1 of Frontier's Current Report on Form 8-K
dated May 23, 1997)
4.2 Form of Subordinated Debt Indenture (Incorporated by reference to
Exhibit 4.2 of Frontier's Registration Statement on Form S-3
(Registration No. 33-64307))
4.3 Restated Certificate of Incorporation dated January 24, 1995
(Incorporated by reference to Exhibit 3.1 of Frontier's Annual Report
on Form 10-K for the year ended December 31, 1995)
4.4 Amendment to Restated Certificate of Incorporation dated April 9,
1995 (Incorporated by reference to Exhibit 3.2 of Frontier's Annual
Report on Form 10-K for the year ended December 31, 1995)
4.5 Rights Agreement, dated as of April 9, 1995, between Frontier and The
First National Bank of Boston, as Rights Agent (Incorporated by
referenced to Exhibit 1 of Frontier's Current Report on Form 8-K
dated April 9, 1995)
4.6 Form of Certificate of Amendment to Articles of Incorporation for
Preferred Stock (Incorporated by reference to Exhibit 4.5 of
Frontier's Registration Statement on Form S-3 (Registration No.
33-64307))
4.7 Form of Debt Security (Incorporated by reference to Exhibit 4.6 of
Frontier's Registration Statement on Form S-3 (Registration No.
33-64307))
4.8 Form of Securities Warranty Agreement (Incorporated by reference to
Exhibit 4.7 of Frontier's Registration Statement on Form S-3
(Registration No. 33-64307))
*5.1 Opinion of Martin T. McCue, Senior Vice President and General Counsel
of Frontier, as to legality of securities
*10.1 Employment Agreement, dated May 22, 1998 between Frontier and Rolla Huff, current
Executive Vice President and Chief Financial Officer
*12.1 Calculation of Ratios of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividends
*23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
*23.2 Consent of Ernst & Young LLP, independent accountants
*23.3 Consent of Martin T. McCue (included in Exhibit 5.1)
*24.1 Power of Attorney
*24.2 Resolution of Frontier's Executive Committee authorizing signature of
registration statement pursuant to Power of Attorney
25.1 Statement of Eligibility of Trustee on Form T-1 (Incorporated by
reference to Exhibit 25.1 of Frontier's Registration Statement on
Form S-3 (Registration No. 33-64307))
</TABLE>
*Filed herewith
II-7
<PAGE>
February 11, 1999
Board of Directors
Frontier Corporation
180 South Clinton Avenue
Rochester, New York 14646
Ladies and Gentlemen:
I am the Senior Vice President and General Counsel of Frontier Corporation,
a New York business corporation (the "Company"), and am delivering this opinion
letter in connection with its registration statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission
relating to the proposed public offering of up to $600,000,000 in aggregate
amount of one or more series of (i) unsecured debt securities (the "Debt
Securities"), (ii) Class A Preferred Stock, $100.00 par value (the "Class A
Preferred Stock"), (iii) Cumulative Preferred Stock, $100.00 par value (the
"Cumulative Preferred Stock"; the Class A Preferred Stock and Cumulative
Preferred Stock are hereinafter collectively preferred to as the "Preferred
Shares"); (iv) common stock, $1.00 par value (the "Common Shares"), or (v)
warrants to purchase Common Shares or Preferred Shares (the "Securities
Warrants" and, together with the Debt Securities, Preferred Shares and Common
Shares, the "Securities"), all of which Securities may be offered and sold by
the Company from time to time as set forth in the prospectus which forms a part
of the Registration Statement (the "Prospectus"), and as to be set forth in one
or more supplements to the Prospectus (each, a "Prospectus Supplement").
I assume that the issuance, sale, amount and terms of the Securities to be
offered from time to time will be duly authorized and determined by proper
action of the Board of Directors of the Company (each, a "Board Action") in
accordance with the Company's Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), and applicable New York law. I further
assume that (i) any senior Debt Securities will be issued pursuant to that
certain Indenture, dated May 21, 1997, between the Company and The Chase
Manhattan Bank, as trustee, (the "Senior Debt Indenture"), (iii) any
subordinated Debt Securities will be issued pursuant to a "Subordinated Debt
Indenture", the form of which is filed as Exhibit 4.2 to the Registration
Statement, and (iii) any Securities Warrants will be issued under one or more
warrant agreements (each, a "Warrant Agreement"), each to be between the Company
and a financial institution identified therein as a warrant agent (each, a
"Warrant Agent").
For purposes of this opinion letter, I have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. The Certificate of Incorporation, as certified by the Secretary of the
Company on the date hereof as then being complete, accurate and in
effect.
3. The Bylaws of the Company, as certified by the Secretary of the
Company on the date hereof as then being complete, accurate and in
effect.
<PAGE>
Frontier Corporation Board of Directors
February 11, 1999
Page 2
4. The Senior Indenture.
5. The form of Indenture between the Company and the bank to be named
therein, filed as Exhibit 4.2 to the Registration Statement (the
"Subordinated Debt Indenture"; the Subordinated Debt Indenture and
Senior Debt Indenture are hereinafter sometimes collectively referred
to as the "Indentures").
6. Minutes of Board of Directors, Executive Committee, and Shareholder
meetings of the Company.
I have not, except as specifically identified above, made any independent
review or investigation of factual or other matters, including the organization,
existence, good standing, assets, business or affairs of the Company. In my
examination of the aforesaid documents, I have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity, accuracy
and completeness of all documents submitted to me, and the conformity with the
original documents of all documents submitted to me as certified, telecopied,
photostatic, or reproduced copies. This opinion letter is given, and all
statements herein are made, in the context of the foregoing.
This opinion letter is based as to matters of law solely on the New York
Business Corporation Law and New York contract law. I express no opinion herein
as to any other laws, statutes, regulations, or ordinances.
Based upon, subject to and limited by the foregoing, I am of the opinion that,
as of the date hereof:
1. When the Registration Statement has become effective under the Securities
Act of 1933 (the "Act") and when the Debt Securities have been (a) duly
established by an Indenture or any supplemental indenture thereto, (b) duly
authorized and established by applicable Board Action and duly
authenticated by the Trustee, and (c) duly executed and delivered on behalf
of the Company against payment therefor in accordance with the terms of
such Board Action, any applicable underwriting agreement, an Indenture and
any applicable supplemental indenture, and as contemplated by the
Registration Statement and/or the applicable Prospectus Supplement, the
Debt Securities will constitute binding obligations of the Company,
enforceable in accordance with the terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights (including, without limitation, the effect of statutory
and other law regarding fraudulent conveyances, fraudulent transfers and
preferential transfers) and as may be limited by the exercise of judicial
discretion and the application of principles of equity, including, without
limitation, requirements of good faith, fair dealing, conscionability and
materiality (regardless of whether the Debt Securities are considered in a
proceeding in equity or at law).
2. When the Registration Statement has become effective under the Act and when
a series of the Preferred Shares has been duly authorized and established
by applicable Board Action, in accordance with the terms of the Certificate
of Incorporation and applicable law, and, upon issuance and delivery of
certificates for such Preferred Shares against payment therefor in
accordance with the terms of such Board Action and any applicable
underwriting agreement, and as contemplated by the Registration
<PAGE>
Frontier Corporation Board of Directors
February 11, 1999
Page 3
Statement and/or the applicable Prospectus Supplement, the shares
represented by such certificates will be validly issued, fully paid and
non-assessable.
3. When the Registration Statement has become effective under the Act, upon
due authorization by Board Action of an issuance of Common Shares, and upon
issuance and delivery of certificates for Common Shares against payment
therefor in accordance with the terms of such Board Action and any
applicable underwriting agreement, and as contemplated by the Registration
Statement and/or the applicable Prospectus Supplement, the shares
represented by such certificates will be validly issued, fully paid and
non-assessable.
4. When the Registration Statement has become effective under the Act and when
the Securities Warrants have been (a) duly established by the related
Warrant Agreement, (b) duly authorized and established by applicable Board
Action and duly authenticated by the Warrant Agent, and (c) duly executed
and delivered on behalf of the Company against payment therefor in
accordance with the terms of such Board Action, any applicable underwriting
agreement and the applicable Warrant Agreement and as contemplated by the
Registration Statement and/or the applicable Prospectus Supplement, the
Securities Warrants will constitute binding obligations of the Company,
enforceable in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights (including, without limitation, the effect of statutory
and other law regarding fraudulent conveyances, fraudulent transfers and
preferential transfers) and as may be limited by the exercise of judicial
discretion and the application of principles of equity, including, without
limitation, requirements of good faith, fair dealing, conscionability and
materiality (regardless of whether the Securities Warrants are considered
in a proceeding in equity or at law).
To the extent that the obligations of the Company under an Indenture may be
dependent upon such matters, I assume for purposes of this opinion that the
Trustee is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture; that the Indenture has
been duly authorized, executed and delivered by the Trustee and constitutes the
legally valid and binding obligation of the Trustee enforceable against the
Trustee in accordance with its terms; that the Trustee is in compliance, with
respect to acting as a trustee under the Indenture, with all applicable laws and
regulations; and that the Trustee has the requisite organizational and legal
power and authority to perform its obligations under the Indenture.
To the extent that the obligations of the Company under any Warrant Agreement
may be dependent upon such matters, I assume for purposes of this opinion that
the applicable Warrant Agent is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Warrant
Agent is duly qualified to engage in the activities contemplated by the Warrant
Agreement; that the Warrant Agreement has been duly authorized, executed and
delivered by the Warrant Agent and constitutes the legally valid and binding
obligation of the Warrant Agent enforceable against the Warrant Agent in
accordance with its terms; that the Warrant Agent is in compliance, with respect
to acting as a Warrant Agent under the Warrant Agreement, with all applicable
laws and regulations; and that the Warrant Agent has the requisite
organizational and legal power and authority to perform its obligations under
the Warrant Agreement.
<PAGE>
Frontier Corporation Board of Directors
February 11, 1999
Page 4
The opinions expressed in Paragraphs (1) and (4) above shall be understood to
mean only that if there is a default in performance of an obligation, (i) if a
failure to pay or other damage can be shown and (ii) if the defaulting party can
be brought into a court which will hear the case and apply the governing law,
then, subject to the availability of defenses and to the exceptions set forth in
Paragraphs (1) and (4), the court will provide a money damage (or perhaps
injunctive or specific performance) remedy.
I assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of the Registration
Statement on the date of this opinion letter and should not be quoted in whole
or in part or otherwise be referred to, nor filed with or furnished to any
governmental agency or other person or entity, without the prior written consent
of the undersigned.
I hereby consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the prospectus constituting a part of the Registration Statement.
Sincerely yours,
/s/ Martin T. McCue
Martin T. McCue
Senior Vice President and General Counsel
<PAGE>
EXHIBIT 10.1
May 22, 1998
Mr. Rolla Huff
5604 Tanner Trail
Plano, Texas 75093
Dear Mr. Huff:
I am writing this letter in the hope that we will soon be able to welcome you to
Frontier Corporation. The Board of Directors (the "Board") of Frontier
Corporation, on behalf of Frontier and its subsidiaries and affiliates
(together, the "Company") has determined that it is in the best interests of the
Company and its shareowners to retain your services for the future and in case
of a "Change of Control", as defined later in this letter agreement
("Agreement"). It is therefore the intent of this Agreement to assure your
complete dedication to the Company by providing you with compensation and
benefits arrangements while you fulfill your duties during the pendency of a
Change of Control, should such an event occur, which provide you with a measure
of security commensurate with your importance to the Company, and to assure
itself of continuity in its relationship with customers and employees.
Therefore, upon your signature on a counterpart of this Agreement, the following
terms and conditions shall become effective as stated below. However, this
Agreement does not supersede any stock option agreements or restricted stock
grant agreements between the Company and you, all of which shall remain in full
force and effect.
1. Employment.
----------
1.1 Term. The Company shall employ you in an executive position as
----
Chief Financial Officer at the Executive Vice President level, or in such
comparable management capacity as the Company may from time to time designate.
This Agreement shall become effective as of June 1, 1998 and shall have an
initial term ("Term") of three (3) years, ending May 31, 2001. This Agreement
shall continue from year to year thereafter, unless earlier terminated or
extended in accordance with its terms. You acknowledge that, except as set forth
in this Agreement, your employment is "at will".
If, during the Term, a "person" (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
commences any action that, if consummated, would result in a Change of Control
of the Company or if any person publicly announces an intention or proposal to
commence any such action, you agree that you will not leave the Company's employ
(other than as a result of death or Disability), you will render the services
contemplated in this Agreement for the reasonable duration of the Company's
defense against such action and until such action has been abandoned or
terminated or a Change in Control has
<PAGE>
occurred, and you will actively promote the Company's interest during such
period.
Any termination of your employment during the Term for reasons other than
your death shall be evidenced by a written notice ("Notice of Termination"),
which shall specify the provision of this Agreement relied upon for such
termination and describe with reasonable detail the facts and circumstances
claimed by the sender of such Notice of Termination to provide the basis for
termination. Any such Notice of Termination shall also specify the effective
date of termination (the "Termination Date"). If you die during the Term, the
Termination Date shall be the date of your death, except as otherwise provided
herein.
1.2 Present and Future Duties. Your role in the Company shall be that
-------------------------
of its chief financial officer, with responsibility for the financial
management, reporting, compliance and related activities, both internal and
external, of the corporation and its subsidiaries and its affiliates . You may
also have certain other corporate staff functions reporting to you, including
that of the controller, internal audit staff, investor relations and such other
areas as the board or the chief executive officer of the Company may from time
to time determine. You shall perform all duties required of or incidental to
your position with the Company, or as may be assigned to you, and which are
reasonably consistent with your role and other responsibilities. You agree to
use your best efforts in the business of the Company and to devote your full
time attention and energy to the business of the Company. You agree not to
work, either on a part-time or independent contracting or consulting basis, with
or without compensation, for any other business or enterprise during the Term
without the Company's prior consent. Such consent shall not be unreasonably
withheld in the case of service on the boards of directors of other corporations
and community organizations.
Assuming you have successfully performed the duties of your position,
it is anticipated that, on or before December 31, 1999, you will be considered
by the Company's Board and its Chief Executive Officer for the post of the
Company's President and Chief Operating Officer. The Board may elect to offer
or not to offer this position to you, and if it does so, it may select an
effective date not later than June 1, 2000, based on its evaluation of your
performance, your developmental needs, and its assessment of what will be most
beneficial to shareowners. If the Company fails to extend to you an offer to
become the Company's President and Chief Operating Officer by December 31, 1999,
or if the position of President and Chief Operating Officer is offered to and
accepted by another person on or before such date, you may elect, at any time
before close of business on January 27, 2000, to terminate this agreement and
resign, subject, however, to the continuation of all obligations under Sections
2 and 3, below, which shall continue according to their terms, and to the
continuation of all obligations under Sections 4 and 5 below, which shall
continue according to their terms, but which shall thereafter have a Restricted
Period of twelve (12) months. If you terminate the relationship and it is not
done to
2
<PAGE>
avoid termination by the Company for Cause, the termination shall be deemed as a
Voluntary Termination under Section 7.3. You will receive, in full satisfaction
of this Agreement and any other promises or claims of promises, a severance
payment of one (1) year's base salary at the rate effective as of the date of
such termination, or at the 1999 rate if termination occurs after December 31,
1999, plus any applicable bonus, at Standard payout (60% of the then-prevailing
base salary) and calculated in the same manner as set out in Section 7.1.5. In
addition, any options awarded to you and that may not yet have vested shall be
deemed to have vested as of the calendar day immediately prior to the last day
upon which you work. If you terminate the relationship as outlined above, your
ability to exercise any outstanding options shall be defined in accordance with
the terms and conditions of the applicable plan in effect at that time. Further,
the Company will waive or otherwise deem satisfied any timing condition that
applies to you with respect to any restricted stock awarded to you, and the
Company and you agree that if the Company has met the performance criteria for
one or more of the applicable tranches, the Company shall, in its sole
discretion, either release the shares or pay to you the value of such restricted
stock in cash, in full and final settlement of all restricted stock obligations
to you.
1.3 Base Compensation. The Company shall pay you as base compensation
-----------------
at an annual salary rate of $375,000, in installments in accordance with the
Company's policies from time to time in effect. Thereafter, your annual salary
may be further adjusted by the Company consistent with the Company's results and
your performance during the prior year. However, unless the annual salaries of
all senior executives of the Company are reduced across-the-board, your annual
salary in any year shall not be less than your annual salary during the prior
year.
1.4 Incentive Compensation. You shall receive a guaranteed bonus of
----------------------
$300,000 for 1998, which shall be paid on or around February 15, 1999, but no
later than February 28, 1999.
The Company shall establish and review with you for 1999 and thereafter the
performance goals ("Performance Goals") for the Company and for you
individually, and a methodology for calculating the amount of incentive
compensation to be paid upon achievement of such Performance Goals, which, for
1999 will have a minimum target for threshold performance at 30% of your base
salary, for standard performance at 60% of your base salary, and for premier
performance at 105% of your base salary. Your eligibility for a corporate bonus
will be calculated on the same basis as other similarly situated executives.
Your incentive will be based on the success of the Company as reflected in
increased shareowner value, with such metrics to be mutually agreed upon by you
with the Chief Executive Officer of the Company, and with the subsequent
concurrence of the Board. Incentive compensation shall be payable to you at
such time or times as are established under the Company's policies (including
the Company's Executive Compensation Program) in effect from time to time.
3
<PAGE>
1.5 Benefits; Perquisites. You shall be entitled to receive the
---------------------
benefits and perquisites provided by the Company under its Executive
Compensation program in effect from time to time for executives at the executive
vice president level. However, the Company also agrees with you that the
following benefits shall be available to you while you are employed by the
Company: (a) you will be entitled to choose to become a member of two clubs in
the Rochester area; (b) you will be provided with such reasonable
telecommunications services and telecommunications reimbursements as are
required in connection with your work for the Company; (c) you will be provided
with an automobile appropriate to your position under the Company's existing
executive automobile policy; (d) you will receive such accounting, tax and
financial counseling services with respect to your finances as are made
available to others at the executive vice president level; and (e) the Company
will reimburse the reasonable costs of an annual physical examination as it does
for other executives. In addition, the Company agrees that, in connection with
your relocation to the Rochester, New York area, it will: (a) offer to you the
Company's "platinum" moving plan; (b) make certain cost reimbursements and
payment of price differentials related to relocation to the Rochester area
described below in Section 7.3.1; and (c) pay a mortgage differential, if
necessary, as addressed below in Section 7.3.1.
1.6 Expenses. You shall be reimbursed for any reasonable expenses
--------
prudently incurred in connection with your employment during the Term, upon
presentation to the Company of an itemized account and receipts of such expenses
as required by the Company's policies from time to time in effect.
2. Developments and Intellectual Property. You acknowledge that all
--------------------------------------
developments, including but not limited to trade secrets (including strategies,
business plans and customer lists), discoveries, improvements, ideas and
writings which either directly or indirectly relate to or may be useful in the
business of the Company (the "Developments") which you, either alone or in
conjunction with any other person or persons, shall conceive, make, develop,
acquire or acquire knowledge of during the Term are the sole and exclusive
property of the Company. You will cooperate with the Company's reasonable
requests to obtain or maintain rights or protections under United States or
foreign law with respect to all Developments. The Company will reimburse you
for all reasonable expenses incurred by you in order to comply with this
provision of this Agreement, regardless of when such expenses may be incurred.
3. Confidential Information. You acknowledge that by reason of your
------------------------
employment by the Company, especially as a senior executive thereof, you will in
the future have access to information of the Company that the Company deems to
be confidential and/or proprietary, including but not limited to, information
about the Company's target markets and customer segments, strategies, plans,
products and services, methods of operation, employees, financial forecasts and
results, sales, profits, expenses, customer lists and the relationships between
the Company or a subsidiary and its customers, suppliers and others who have
business dealings with it. You
4
<PAGE>
covenant and agree that during the Term and thereafter, without time or
geographic limitation, you will not disclose any such information to any person
without the prior written authorization of the Chief Executive Officer of the
Company or the Board.
If your employment ends for any reason other than your death, you agree to
return promptly to Company all such information and any other tangible product
or document which has been produced or received by, or otherwise submitted to
you during your employment, and no copies shall be retained by you or made
available to any other person or entity. This provision includes but is not
limited to information printed or stored on paper, magnetic tape, floppy disks,
hard drives or other computer storage media.
4. Non-Competition.
---------------
4.1 Covenant. You and the Company acknowledge that you have a special,
--------
unique and extraordinary expertise in telecommunications and in finance, and
that in your employment with the Company, you will have continuing access to
information about the Company's target markets, strategies, plans, product or
service offerings, methods of operation, financial and operating expectations
and results, customer base, sales, marketing and pricing strategies, most valued
employees, and customer and supplier relationships. In consideration of the
benefits provided to you under this Agreement, which you acknowledge are
independent consideration, you covenant and agree that during the Restricted
Period (as defined below), you will not, directly or indirectly, without the
Company's prior consent, own, manage, operate, finance, join, control or
participate in the ownership or control of, or be associated as an officer,
director, executive, partner or principal, agent, representative, consultant or
otherwise with, or use or permit your name to be used in connection with, any
enterprise that directly or indirectly competes (as defined below) with any
telecommunications business of the Company in a Restricted Area (as defined
below). You acknowledge that so long as you are able to use your skills for
enterprises that do not directly or indirectly compete with the business of the
Company, you will not be unreasonably limited in your ability to work.
4.2 Definitions.
-----------
4.2.1 "Competes" means the production, marketing, promotion,
distribution or selling of any product, capability, functionality or
service of any person or entity other than the Company which resembles or
competes with a product or service produced, marketed, promoted,
distributed or sold by the Company (or to your knowledge was under
development by the Company) during the period of your employment by the
Company (whether under this Agreement or otherwise).
4.2.2 "Restricted Area" means:
(a) The Standard Metropolitan Statistical Area (or an equivalent
Census Office classification for an equal or larger populated area) in
which any Company business
5
<PAGE>
office or sales office, or Company place of employment is located,
which office or place has more than ten (10) full-time employees, or
where more than 5% of the Company's customers or gross revenues, in a
line of business where you had responsibilities during your
employment, are derived; or
(b) Any state of the United States, any province of Canada or any
foreign country from which the Company or any of its subsidiaries or
affiliates derives more than $50 million in revenue.
4.2.3 "Restricted Period" means:
(a) The period of your employment by the Company (whether under
this Agreement or otherwise), if your employment is terminated because
of your death or Disability;
(b) The period of your employment by the Company (whether under
this Agreement or otherwise) and 24 months thereafter, if your
employment is terminated by the Company for Cause or without Cause
(and not by the Company following Change of Control);
(c) The period of your employment by the Company (whether under
this Agreement or otherwise) and, if this Agreement is still in effect
at the Termination Date, the number of months remaining in the Term at
the Termination Date or 12 months, whichever is longer (but in no
event more than 24 months), if you terminate your employment
voluntarily (and not for Good Reason); or
(d) The period of your employment by the Company under this
Agreement, if your employment is terminated by you for Good Reason or
by the Company on any basis following Change of Control.
4.2.4 Exception. This Section shall not be construed to prohibit
---------
the ownership by you of not more than 2.5% of any class of securities of
any corporation which competes with the Company and which has a class of
securities registered pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
4.3 Savings Clause. You and the Company specifically agree that this
--------------
covenant not to compete and its specific limitations constitute a reasonable
covenant under the circumstances and is supported by the consideration stated
above, and further agree that if, in the opinion of any court of competent
jurisdiction, any of the provisions of this Section 4 are ever determined by a
court to exceed the time, geographic scope or other limitations permitted by
applicable law in any jurisdiction, then such excessive provisions shall be
deemed reduced, in such jurisdiction only, to the maximum time, geographic scope
or other limitation permitted in such jurisdiction, and you agree to the
enforcement of the remainder of the covenant as so amended.
5. Non-Solicitation. You also covenant and agree that during the Restricted
----------------
Period set out in Section 4.2.3, and without regard to the
6
<PAGE>
activity or activities in which you are engaging, whether it is within or
without the telecommunications industry, you will not, directly or through
employees, agents, recruiters, independent contractors or others: (a) offer,
promise, provide or guarantee employment, work for compensation, business
opportunity or other means of financial gain, or solicit, invite an inquiry on
employment or other compensatory relationship, respond to such inquiry with a
promise or grant of an employment or other compensatory relationship, or
otherwise seek to influence any person to leave the Company or to undertake
activities that would be adverse to the Company's interests, where such person
is employed by the Company or is in an independent contractor relationship in
which a majority of their time is spent on Company-related activities, or is a
supplier of services to the Company who would thereafter become unavailable to
provide such services to the Company, or who has been in such an employment or
independent contractor relationship within the 12 months prior to your
contact(s); or (b) solicit from, convert, attempt to convert, divert business
from, or attempt to divert business from any of the Company's customers,
customer accounts or locations, whether such activity is intended to benefit you
or any other person or entity, and whether or not such activity is successful.
6. Equitable Relief. You specifically acknowledge that the restrictions
----------------
contained in each of Sections 2, 3, 4 and 5 of this Agreement are, in view of
the nature of the business of the Company, and your position with it, reasonable
and necessary to protect the legitimate interests of the Company, and that any
violation of the provisions of those Sections will result in irreparable injury
to the Company for which there would be no adequate remedy at law. You also
acknowledge that the Company shall be entitled to preliminary and permanent
injunctive relief, without the necessity of proving actual damages, and to an
equitable accounting of all earnings, profits and other benefits arising from
such violation. These rights shall be cumulative and in addition to any other
rights or remedies to which the Company may be entitled. You agree to submit to
the jurisdiction of any New York State court located in Monroe County or the
United States District Court for the Western District of New York or of the
state court or the federal court located in or presiding over the county in
which the Company has its corporate headquarters at the applicable time in any
action, suit or proceeding brought by the Company to enforce its rights under
Sections 2, 3, 4 and/or 5 of this Agreement, and that any separate claim you
have shall not constitute a defense to the enforcement of the covenants and
agreements in those paragraphs.
7. Company's Obligations upon Termination. The sole obligations of the
--------------------------------------
Company upon the termination of your employment are as set forth in this Section
7. Any and all amounts to be paid to you in connection with your termination
shall be paid in a lump sum promptly after the Termination Date, but not more
than thirty (30) days thereafter.
7
<PAGE>
7.1 Termination upon Disability or Death. If your employment with the
------------------------------------
Company ends by reason of your death or Disability (as defined later in this
Agreement), the Company shall pay you all amounts earned or accrued through the
Termination Date but not paid as of the Termination Date, including:
7.1.1 Base compensation;
7.1.2 Reimbursement for reasonable and necessary expenses incurred by
you on behalf of the Company during the Term;
7.1.3 Pay for earned but unused vacation and floating holidays;
7.1.4 All compensation you previously deferred (if any) to the extent
not yet paid; and
7.1.5 An amount equal to your "Pro Rata Bonus". Your Pro Rata Bonus
shall be determined by multiplying the "Bonus Amount" (as defined below) by
a fraction, the numerator of which is the number of days in the fiscal year
through the Termination Date and the denominator of which is 365. The term
"Bonus Amount" means for each period for which a bonus is payable to
employees under the short term incentive compensation program then in
effect and for which you have not yet been paid: (i) a bonus at the level
actually achieved by the Company for the fiscal year if you worked for the
Company for the full fiscal year; and (ii)(a) a bonus established under the
applicable plan using the level actually achieved for such prorated portion
of the fiscal year in which the Termination Date occurs as relates to your
actual employment, using such measurements as are used generally by the
Company for monitoring employee bonus qualification; or (b) if you leave at
a time in which the performance of the Company is not measured generally by
the Company for employee bonus purposes, but the Company has met its bonus
goals for the most recent period for which bonus measurements were taken
and the goals met, then the bonus at standard level for the number of full
months of the fiscal year that you worked for the Company.
The amounts described in Sections 7.1.1 through 7.1.4, inclusive, are
called elsewhere in this Agreement, collectively, the "Accrued Compensation".
Except as otherwise provided in this Section 7.1, your entitlement to any
other compensation or benefits shall be determined in accordance with the
Company's employee benefit plans and other applicable programs and practices,
including any long term compensation benefits, then in effect.
7.2 Termination Without Cause. If the Company terminates your
-------------------------
employment without Cause (as defined later in this Agreement and
8
<PAGE>
not in anticipation of a Change of Control), the Company shall pay you:
7.2.1 All Accrued Compensation;
7.2.2 A Pro Rata Bonus (as defined in Section 7.1.5 above); and
7.2.3 Severance ("Severance") equal to: (a) twice the sum of (i) the
annual base compensation you would have received for the entire fiscal year
in which the Termination Date occurs plus (ii) the Bonus Amount plus (iii)
$18,000, being the agreed cash equivalent of the annual value of the
perquisites provided to you under the Company's Executive Compensation
Program, plus (iv) the Company contributions which would have been made on
your behalf to the 401(k) retirement savings plan maintained by the Company
(b) reduced by the present value of such amounts identified in subpart (a)
as are "parachute payments" within the meaning of Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code") in the event of a
change of control of the Company, determined in accordance with Section
280G(d)(4) of the Code. The foregoing shall be in lieu of any other
amount of severance relating to salary or bonus continuation to be received
by you upon termination of your employment under any severance plan, policy
or arrangement of the Company.
In addition, the Company shall continue to provide to you and your family at the
Company's expense, for 24 months following the Termination Date, the life
insurance, medical, dental, vision and hospitalization benefits provided to you
and your family immediately prior to the Termination Date, and will pay to you
the cash value of certain in-the-money options (or facilitate their exercise
without financial penalty to you), and of restricted stock that has vested in
the relevant tranch and for which the Company has met its performance criteria .
Except as otherwise provided in this Section 7.2, your entitlement to any
other compensation or benefits shall be determined in accordance with the
Company's employee benefit plans and other applicable programs and practices
then in effect.
7.3 Termination for Cause or Voluntary Termination. If your employment
----------------------------------------------
is terminated for Cause (as defined later in this Agreement and not in
anticipation of a Change of Control), or if you voluntarily terminate your
employment other than for Good Reason, the Company shall pay you all Accrued
Compensation. Except as otherwise provided in this Section 7.3, your
entitlement to any other compensation or benefits shall be determined in
accordance with the Company's employee benefit plans and other applicable
programs and practices then in effect.
7.3.1 You and Company acknowledge that at the inception of this
Agreement, the Company has agreed to pay the reasonable costs of travel and
temporary living expenses in connection with
9
<PAGE>
this Agreement. You agree that, except in connection with a Change of
Control, within such reasonable time period as you and Company agree, not
to exceed 180 days, you will move your residence to such place as the
Company has its headquarters location, under the Company's relocation
program. The Company will reimburse you for any difference between the sale
price of your home received after a good faith effort to sell it, and the
sum of the price at which you purchased that home and the cost of major
improvements which you made to that home within the past twelve months
which costs have not otherwise been paid or credited to you. In addition,
the Company will reimburse to you each month the cost of any mortgage
differential that you must accept after reasonably seeking a mortgage rate
comparable to that which currently applies to your home. You agree that, if
you should decline to make such move, or should fail to comply with
Company's request or directive, such refusal or failure shall be a basis
for Company to terminate your employment for Cause, at its election, and it
may decline to pay any sums identified above, and may reclaim any amounts
paid. This subsection 7.3.1 shall cease to apply upon a Change of Control.
7.4 Termination for Good Reason or by Company Following Change of
-------------------------------------------------------------
Control. If you terminate your employment for Good Reason or the Company
terminates your employment in anticipation of or following a Change of Control,
the Company shall pay you:
7.4.1 All Accrued Compensation;
7.4.2 A Pro Rata Bonus; and
7.4.3 Severance equal to: (a) three times the sum of (i) the annual
base compensation you would have received for the entire fiscal year in
which the Termination Date occurs plus (ii) the Bonus Amount plus (iii)
$18,000 (being the agreed cash equivalent of the annual value of the
perquisites provided to you under the Company's Executive Compensation
Program), plus (iv) the Company contributions which would have been made on
your behalf to the 401(k) retirement savings plan maintained by the Company
(b) reduced by the present value of such amounts identified in subsection
(a) as are "parachute payments" within the meaning of Section 280G(b)(2) of
the Code in the event of a change of control of the Company, determined in
accordance with Section 280G(d)(4) of the Code. The foregoing severance
shall be in lieu of any other amount of severance relating to salary or
bonus continuation to be received by you upon termination of your
employment under any severance plan, policy or arrangement of the Company.
In addition, the Company shall continue to provide to you and your family
at the Company's expense, for 36 months following the Termination Date, the life
insurance, medical, dental, vision and hospitalization benefits provided to you
and your family immediately prior to the Termination Date, and will pay to you
the cash value of certain in-the-money options (or facilitate their exercise
without financial penalty to you), and of restricted stock that has vested in
10
<PAGE>
the relevant tranch and for which the Company has met its performance criteria .
The Company shall reimburse you for all reasonable legal fees and expenses
which you may incur following a Change of Control as a result of the Company's
attempts to contest the validity or enforceability of this Agreement or your
attempts to obtain or enforce any right or benefit provided to you under this
Agreement, provided any actions you have taken are determined to have been
undertaken in good faith and upon a reasonable basis.
Except as otherwise provided in this Section 7.4, your entitlement to any
other compensation or benefits shall be determined in accordance with the
Company's employee benefit plans and other applicable programs and practices,
including any long term compensation benefits, then in effect.
8. Gross-Up Payment. Notwithstanding anything else in this Agreement, if it
----------------
is found that any or all of the payments made to you, including but not limited
to payments made by the Company, or under any plan or arrangement maintained by
the Company, to you or for your benefit (other than any additional payments
required under this Section 8) (the "Payments") or any income you receive in the
form of restricted stock of the Company or options of the Company, would be
subject to the excise tax imposed by Section 4999 of the Code or you incur any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, collectively the "Excise Tax"), then you
are entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that, after you pay all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, you will retain an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. The procedures for
the calculation and contesting of any claim that such Excise Tax is due are set
forth in the Addendum.
9. No Obligation to Mitigate Damages. You are not required to mitigate
---------------------------------
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, and the amounts to be paid to you under
Section 7 of this Agreement shall not be reduced by any compensation you may
earn from other sources. However, if, during any period that you would
otherwise be entitled to receive any payments or benefits under this Agreement,
you breach your obligations under Section 2, 3, 4 and/or 5 of this Agreement,
the Company may immediately terminate any and all payments and the provision of
benefits (to the extent permitted by law and the terms of the benefit plans
maintained by the Company from time to time) hereunder.
10. Successor to Company. The Company will require any successor or assignee
--------------------
to all or substantially all of the business and/or assets of the Company,
whether by merger, sale of assets or otherwise, by agreement in form and
substance reasonably satisfactory to you, to
11
<PAGE>
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company would be required to
perform them if such succession or assignment had not taken place. Such
agreement of assumption must be express, absolute and unconditional. If the
Company fails to obtain such an agreement within three business days prior to
the effective date of such succession or assignment, you shall be entitled to
terminate your employment under this Agreement for Good Reason.
11. Survival. Notwithstanding the expiration or termination of this
--------
Agreement, except as otherwise specifically provided herein, your obligations
under Sections 2, 3, 4 and/or 5 of this Agreement and the obligations of the
Company under this Agreement shall survive and remain in full force and effect.
This Agreement shall inure to the benefit of, and be enforceable by, your
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you die while any amounts are
still payable to you, all such amounts, unless otherwise provided in this
Agreement, shall be paid in accordance with the terms of this Agreement to your
devisee(s), legatee(s) or other designee(s) or, if there is no such designee(s),
to your estate.
12. Definitions. Whenever used in this Agreement, the following terms shall
-----------
have the meanings below:
12.1 "Cause" means:
12.1.1 You have willfully and continually failed to substantially
perform your duties (other than due to an incapacity resulting from
physical or mental illness or due to any actual or anticipated failure
after you have given a Notice of Termination for Good Reason) after a
written demand for substantial performance is delivered to you by the Chief
Executive Officer or the Board which specifically identifies the manner in
which it is believed that you have not substantially performed your duties;
or
12.1.2 You have willfully engaged in conduct which is demonstrably
and materially injurious to the Company (monetarily or otherwise),
including but not limited to a breach of fiduciary duty; or
12.1.3 You have willfully engaged in conduct which is illegal or in
violation of a material provision of the Company's Code of Ethics; or
12.1.4 You have been convicted of a felony or a crime involving moral
turpitude; or
12.1.5 You have violated the provisions of Section 2 and/or Section 3
and/or Section 4 and/or Section 5 of this Agreement
12
<PAGE>
and, in any of the events described in Sections 12.1.1 through 12.1.5 above, the
- ---
Board adopts a resolution or its minutes reflect a finding that in the good
faith opinion of the Board you were culpable for the conduct set forth in any of
Sections 12.1.1 through 12.1.5 and specifying the particulars thereof in detail.
For the purposes of this Agreement, no act or failure to act on your part shall
be considered willful unless done, or omitted to be done, by you not in good
faith and without reasonable belief that your action or omission was in the best
interests of the Company. Any such resolution of the Board must receive the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for the purpose of considering
the issue, and you must receive reasonable notice of the meeting and have an
opportunity, with your counsel, to present your case to the Board.
12.2 "Change of Control" means:
12.2.1 The consummation of a consolidation or merger of the Company
in which the Company is not the continuing or surviving corporation or
pursuant to which the shares of the Company's common, voting equity are to
be converted into cash, securities or other property. For the purposes of
this Agreement, a consolidation or merger with a corporation which was a
wholly-owned direct or indirect subsidiary of the Company immediately
before the consolidation or merger is not a Change of Control; or
12.2.2 The sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the Company's assets; or
12.2.3 The approval by the Company's shareowners of any plan or
proposal for the liquidation or dissolution of the Company; or
12.2.4 Any person, as that term is used in Section 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other fiduciary
holding securities of the Company under an employee benefit plan of the
Company, a direct or indirect wholly-owned subsidiary of the Company or any
other company owned, directly or indirectly, by the shareowners of the
Company in substantially the same proportions as their ownership of the
Company's common, voting equity), is or becomes the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of 30% or more of the Company's then outstanding common, voting
equity; or
12.2.5 During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board, including for this
purpose any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in this Section 12.2.5) whose election or nomination for election
by the Company's shareowners was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning
of the period or whose election or nomination for election was previously
so approved (the "Incumbent Board"), cease for any reason to constitute a
majority of the Board.
12.3 "Disability" means:
12.3.1 Your absence from your duties with the Company on a full-time
basis for 180 consecutive business days as a result of incapacity due to
mental or physical illness; or
13
<PAGE>
12.3.2 A physical or mental condition which prevents you from
satisfactorily performing your duties with the Company and such incapacity
or condition is determined to be total and permanent by a physician
selected by the Company or its insurers and reasonably acceptable to you
and/or your legal representative.
12.4 "Good Reason" means:
12.4.1 Without your express written consent, after a Change of
Control, a significant reduction in title and authority, or the assignment
to you of duties with the Company or with a person, as that term is used in
Section 13(d) and 14(d) of the Exchange Act, in control of the Company
materially diminished from the duties assigned to you immediately prior to
a Change of Control; or
12.4.2 Without your express written consent, after a Change of
Control, any reduction by the Company or any person, as that term is used
in Section 13(d) and 14(d) of the Exchange Act, in control of the Company
in your annual base compensation or annual bonus at Standard (or
equivalent) rating from the amounts of such compensation and/or bonus in
effect immediately before and during the fiscal year in which the Change of
Control occurred (except that this Section 12.4.2 shall not apply to
across-the-board salary or bonus reductions similarly affecting all
executives of the Company and all executives of any person in control of
the Company); or
12.4.3 Without your express written consent, after a Change of
Control, the failure by the Company or any person, as that term is used in
Section 13(d) and 14(d) of the Exchange Act, in control of the Company to
increase your annual base compensation or annual bonus at Standard (or
equivalent) rating at the times and in comparable amounts as they are
increased for similarly situated senior executive officers of the Company
and of any person, as that term is used in Section 13(d) and 14(d) of the
Exchange Act, in control of the Company; or
12.4.4 Without your express written consent, after a Change of
Control, the failure by the Company or by any person, as that term is used
in Section 13(d) and 14(d) of the Exchange Act, in control of the Company
to continue in effect any benefit or incentive plan or arrangement (except
any benefit plan or
14
<PAGE>
arrangement which expires by its own terms then in effect upon the
occurrence of a Change of Control) in which you are participating at the
time of the Change of Control, unless a replacement plan or arrangement
with at least substantially similar terms is provided to you; or
12.4.5 Without your express written consent, after a Change of
Control, the taking of any action by the Company or by any person, as that
term is used in Section 13(d) and 14(d) of the Exchange Act, in control of
the Company which would adversely affect your participation in or
materially reduce your benefits under any benefit plan or arrangement or
deprive you of any other material benefit (including any miscellaneous
benefit which is not represented and protected by a written plan document
or trust) enjoyed by you at the time of a Change of Control; or
12.4.6 You terminate your employment (other than because of your
death or Disability) by giving the Company a Notice of Termination with a
Termination Date not later than the first anniversary of the Change of
Control; or
12.4.7 Any failure by the Company to comply with any of its material
obligations under this Agreement, after you have given notice of such
failure to the Company and the Company has not cured such failure promptly
after its receipt of such notice.
13. Notice. All notices and other communications required or permitted under
------
this Agreement shall be in writing and shall be deemed given when mailed by
certified mail, return receipt requested, or by nationally recognized overnight
courier, receipt requested, when addressed to you at your official business
address when employed by the Company and at your home address as reflected in
the Company's records from time to time and when addressed to the Company at its
corporate headquarters, to the attention of the Board, with a required copy to
the Company's general counsel.
14. Amendment and Assignment. This Agreement cannot be changed, modified or
------------------------
terminated except in a writing. You may not assign your duties with the Company
to any other person. The Company may assign its obligations under this
Agreement to one of its principal subsidiaries for administrative purposes.
15. Severability. If any provision of this Agreement or the application of
------------
this Agreement to anyone or under any circumstances is determined by a court to
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect any other provisions or applications of this
Agreement which can be effective without the invalid or unenforceable provision
or application, and such invalidity or unenforceability shall not invalidate or
render unenforceable such provision in any other jurisdiction.
15
<PAGE>
16. Remedies Cumulative; No Waiver. No remedy conferred on you or on the
------------------------------
Company by this Agreement is intended to be exclusive of any other remedy, and
each and every remedy shall be cumulative and shall be in addition to any other
remedy given under this Agreement or now or later existing at law or in equity.
No delay or omission by you or by the Company in exercising any right, remedy or
power under this Agreement or existing at law or inequity shall be construed as
a waiver of such right, remedy or power, and any such right, remedy or power may
be exercised by you or the Company from time to time and as often as is
expedient or necessary.
17. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, without regard to any
applicable conflicts of laws.
18. Counterparts. This Agreement may be signed by you and on behalf of the
------------
Company in one or more counterparts, each of which shall be one original but all
of which together will constitute one and the same instrument.
If this Agreement correctly sets forth our agreement on its subject matter,
please sign and return to me the enclosed copy of this Agreement. Please keep
the other copy for your records.
Sincerely,
FRONTIER CORPORATION
By: /s/ Joseph P. Clayton
-----------------------------
Joseph P. Clayton
Chief Executive Officer
Agreed to this 22nd day of May, 1998:
/s/ Rolla Huff
- ---------------------------------------
Rolla Huff
16
<PAGE>
ADDENDUM TO LETTER AGREEMENT DATED AS OF MAY 22, 1998
The following provisions shall apply to the calculation and procedures
relating to the Gross-Up Payment in accordance with Section 8 of the Agreement.
1. The Company's independent auditors in the fiscal year in which the
Change of Control occurs (the "Accounting Firm") shall determine whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be used in making such determination. The Accounting Firm shall
provide detailed supporting calculations, together with a written opinion with
respect to the accuracy of such calculations, to you and the Company within 15
business days of the receipt of a written request from either you or the
Company. If the Accounting Firm is serving (or has served within the three
years preceding the Change in Control) as accountant or auditor for the person
in control of the Company following the Change of Control or any affiliate
thereof, you may appoint another nationally recognized accounting firm to make
the determinations required in connection with the Gross-Up Payment and the
substitute accounting firm shall then be referred to as the Accounting Firm).
The Company shall pay you any Gross-Up Payment, determined in accordance with
this Addendum, within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that you will not be liable
for any Excise Tax, it shall furnish you with a written opinion that your
failure to report the Excise Tax on the applicable federal income tax return
would not result in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon you and the Company.
2. If there is uncertainty about how Section 4999 is to be applied when
the Accounting Firm makes its initial determination, and as a result the Gross-
Up Payment made to you by the Company is determined (after following the
procedures set forth in this Addendum) to be less than it should have been made
(an "Underpayment"), and you are thereafter required to pay any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment and any such
Underpayment shall be promptly paid by the Company to you or for your benefit.
3. You shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the Company to pay you the
Gross-Up Payment. Your notice shall be given as soon as practicable but no
later than ten business days after you have been informed in writing of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. You shall not pay such claim prior to
the expiration of the 30 day period following the date on which you gave such
notice to the Company (or any shorter period, if the taxes claimed are due
sooner). If the Company notifies you in writing prior to the expiration of such
period that it desires to contest such claim, you shall: (a) give the Company
any information reasonably requested by it relating to such claim, (b) take such
action in connection with contesting such claim as the Company shall
17
<PAGE>
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (c) cooperate with the Company in good faith
in order effectively to contest such claim, and (d) permit the Company to
participate in any proceedings relating to such claim.
4. The Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
connection with the claim and may, at its sole option, either direct you to pay
the tax claimed and sue for a refund or contest the claim in any permissible
manner, and you agree to prosecute the contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts as the Company shall determine.
5. Any extension by the Company of the statute of limitations relating to
payment of taxes for the taxable year for which such contested amount is claimed
to be due shall be limited solely to such contested amount. The Company's
control of the contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable under this Agreement and you shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
6. If the Company directs you to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to you, on an interest-free
basis, and shall indemnify and hold you harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance.
7. If you receive a refund of any amount advanced to you by the Company,
you will promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto). If the
Company advanced to you any amounts and a determination is made that you will
not be entitled to any refund with respect to such claim and the Company does
not notify you in writing of its intent to contest such denial of refund prior
to the expiration of 30 days after such determination, then such advance shall
be forgiven and you will not be required to be repay it. The amount of such
advance shall offset the amount of the Gross-Up Payment required to be paid.
8. The Company shall pay all fees and expenses of the Accounting Firm.
The Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold you harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with respect thereto) imposed as
a result of such representation and payment of costs and expenses.
18
<PAGE>
May 22, 1998
Mr. Rolla Huff
5604 Tanner Trail
Plano, Texas 75093
Dear Mr. Huff:
The purpose of this letter is to assure you that upon execution of the agreement
("Agreement") by which you will become an employee of Frontier Corporation
("Frontier") and an officer of Frontier, Frontier shall extend to you an
agreement for options for 200,000 shares of common stock in Frontier, to be
effective at the closing price of Frontier on the date the agreement is
executed, and which shall be divided into three equal tranches, which shall vest
annually on the first, second and third anniversary of the grant, respectively,
pursuant to the applicable plan.
Frontier shall also make a grant of 100,000 restricted shares of common stock of
Frontier to you, which shall be offered under one of the Company's existing
plans and which will include the following characteristics: they will vest in
amounts of no more than one third in either of the first or second years, with
the remainder that becomes vested in any of the first three years payable by the
end of the third year, with defined one, two and three year timing gates, and
performance criteria that anticipate stock price growth of 15% each year.
Finally, Frontier shall provide to you, during the normal cycle of option grants
that is planned for early in 1999, no less than 100,000 additional options for
shares of common stock of Frontier at a price that reflects the price of
Frontier shares on the date that the award becomes effective.
Pursuant to the Agreement, in the event that your employment is terminated
without Cause, or your employment is terminated for Good Reason or after a
Change of Control, then in either case, any options awarded to you and that may
not yet have vested shall be deemed to have vested as of the calendar day
immediately prior to the last day upon which you work. The Company and you
agree that, in full and final settlement of any claims you may have with respect
to your outstanding options, whether or not vested, the Company will pay to you
for each option the difference between the Company's share price at the end of
the day upon which you last work and the price at which you may elect to
exercise each option, if the share price is in excess of the option price (or
facilitate their exercise without financial penalty to you), but will pay you
nothing in the event that the share price is lower than the option price. Any
amount due you
19
<PAGE>
shall be paid within thirty (30) days or such additional time as is required to
resolve any other financial obligation that you may have to the Company.
Also, pursuant to the Agreement, in the event that your employment is terminated
without Cause, or your employment is terminated for Good Reason or after a
Change of Control, then in either case, the Company will waive or otherwise deem
satisfied any timing condition that applies to you with respect to the
restricted stock awarded to you, and the Company and you agree that if the
Company has met the performance criteria for one or more tranches, the Company
shall pay to you the value of such restricted stock in cash, in full and final
settlement of all restricted stock obligations to you. No amount shall be
payable if the performance criteria have not been met as of the date your
employment is terminated.
Very truly yours,
/s/ Janet F. Sansone
Janet F. Sansone
20
<PAGE>
EXHIBIT 12.1
Frontier Corporation
Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividend Requirements
(Dollars in thousand, except ratios)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earnings
Pre-tax income from continuing operations 307,103 75,989 340,761 246,255 296,332
less: Income from equity investees (16,711) (12,019) (9,011) (3,676) (3,185)
plus: Fixed charges:
Interest expense, amortization of debt
discount and issuance expense 55,318 48,239 43,312 54,492 51,532
Capitalized interest expense 18,152 13,393 6,197 307 --
One third of rental expense relating to
operating leases 44,633 52,167 54,900 25,967 22,900
Preference security dividend requirements
of consolidated subsidiaries 26 36 292 308 275
------- ------- ------- ------- -------
Total fixed charges: 118,129 113,835 104,701 81,074 74,707
plus: Amortization of capitalized interest
Integrated Services 743 238 11 -- --
Local Communications Services (1) 269 179 86 13 --
------- ------- ------- ------- -------
Total Amortization of capitalized
interest 1,012 417 97 13 --
less: Capitalized interest expense (18,152) (13,393) (6,197) (307) --
less: Preference security dividend requirements
of consolidated subsidiaries (26) (36) (292) (308) (275)
------- ------- ------- ------- -------
Total earnings 391,356 164,793 430,059 323,051 367,579
======= ======= ======= ======= =======
Total fixed charges 118,129 113,835 104,701 81,074 74,707
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 3.3 1.4 4.1 4.0 4.9
======= ======= ======= ======= =======
Preferred dividend 1,005 1,019 1,182 1,191 1,187
Ratio of pretax income
to net income Pretax 307,103 75,989 340,761 246,255 296,332
b/f extraordinary items Post tax 177,543 31,801 198,205 145,129 187,254
------- ------- ------- ------- -------
extraordinary items 1.73 2.39 1.72 1.70 1.58
Preferred stock dividend requirements 1,739 2,435 2,033 2,025 1,875
------- ------- ------- ------- -------
Total fixed charges and preferred
stock dividend requirements 119,868 116,270 106,734 83,099 76,583
======= ======= ======= ======= =======
Ratio of earnings to combined
fixed charges and preferred
stock dividend requirements 3.3 1.4 4.0 3.9 4.8
======= ======= ======= ======= =======
</TABLE>
(1) Amortization of capitalized interest for Local Communications Services
assumes a one-half year convention and an average service life of 12 years.
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Frontier
Corporation of our report dated January 25, 1999, which appears on page 20 of
the Frontier Corporation Current Report on Form 8-K dated January 26, 1999. We
also consent to the incorporation by reference in the Prospectus constituting
part of this Registration Statement on Form S-3 of Frontier Corporation of our
report dated January 26, 1998, which appears on page 25 of the 1997 Annual
Report to Shareowners of Frontier Corporation, which is incorporated by
reference in its Annual Report on Form 10-K for the year ended December 31,
1997. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page 30 of such Annual Report on
Form 10-K (the financial statements and financial statement schedule contained
in the Annual Report on Form 10-K for the year ended December 31, 1997 have not
been restated to reflect the pooling of interests acquisition of GlobalCenter,
Inc.). We also consent to the incorporation by reference of our report, dated
January 26, 1998, except as to the pooling of interests with GlobalCenter, Inc.
which is as of February 27, 1998, which appears on page 19 of the Current Report
on Form 8-K of Frontier Corporation dated June 17, 1998. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Rochester, New York
February 11, 1999
<PAGE>
[LOGO OF ERNST & YOUNG LLP]
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 of Frontier Corporation and to the
incorporation by reference of our report dated January 17, 1996, with respect to
the consolidated financial statements and schedule of ALC Communications
Corporation incorporated by reference in the Annual Report on Form 10-K of
Frontier Corporation for the year ended December 31, 1997 and the Current Report
on Form 8-K of Frontier Corporation dated June 17, 1998 each filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Detroit, Michigan
February 10, 1999
<PAGE>
POWER OF ATTORNEY
Each of the undersigned directors and/or officers of Frontier Corporation, a
New York business corporation (the "Company"), hereby constitutes and appoints
Joseph P. Clayton, Rolla P. Huff and Josephine S. Trubek, and each of them with
full power to act without the others, true and lawful attorneys and agents, to
do any and all acts and things and to execute any and all instruments which any
of said attorneys and agents may deem necessary or advisable to enable the
Company to comply with the Securities Act of 1933, as amended, and with any
regulations, rules or requirements of the Securities and Exchange Commission
("Commission") thereunder in connection with the Registration Statement filed
under said Act relating to a public offering of shares of Common Stock, shares
of Preferred Stock, debt securities and warrants exercisable for shares of
Common Stock or Preferred Stock, and any and all amendments or supplements to
the foregoing, including specifically, but without limiting the generality of
the foregoing, full power and authority to sign the names of the undersigned to
any Registration Statement on Form S-3 or other applicable form filed with the
Commission under said Act in such connection, and any amendment or amendments
thereto, the undersigned hereby ratifying and confirming all that said attorneys
and agents, or any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this instrument have signed and delivered these presence
as of this 2nd day of August, 1998.
- ----------------------------------- --------------------------------
Patricia C. Barron Raul E. Cesan
/s/ Joseph P. Clayton
- ----------------------------------- --------------------------------
Joseph P. Clayton Brenda E. Edgerton
/s/ Jairo A. Estrada /s/ Michael E. Faherty
- ----------------------------------- --------------------------------
Jairo A. Estrada Michael E. Faherty
/s/ Alan C. Hasselwander
- ----------------------------------- --------------------------------
Alan C. Hasselwander Robert Holland, Jr.
/s/ Douglas H. McCorkindale /s/ Leo J. Thomas
- ----------------------------------- --------------------------------
Douglas H. McCorkindale Leo J. Thomas
<PAGE>
FURTHER RESOLVED: That each officer and director of this Corporation who may be
required or permitted to execute the New Registration Statement or any amendment
thereto be and he/she hereby is authorized to execute a power of attorney
appointing Joseph P. Clayton, Rolla P. Huff and/or Josephine S. Trubek, and each
of them severally, his/her true and lawful attorneys or attorney to execute in
his/her name, place and stead in any such capacity the New Registration
Statement and any and all amendments and supplements thereto, and to file the
same with the Commission, each of said attorneys to have power to act with or
without the others and to have full power and authority to do and perform in the
name on behalf of each of the said officers and directors every act whatsoever
necessary or advisable to be done as fully as, and to do the same extent that,
each officer or director might or could do in person.
