-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WAjfjkCEB68IvnvoAkfuimxdJijCZ3KY2RCgJUcEDpIafrkiGrU99J2BQp6Yqy4H TL/yQ8ZO2Id9nZjqjhN7KQ== 0000084567-99-000005.txt : 19990514 0000084567-99-000005.hdr.sgml : 19990514 ACCESSION NUMBER: 0000084567-99-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRONTIER CORP /NY/ CENTRAL INDEX KEY: 0000084567 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 160613330 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04166 FILM NUMBER: 99620064 BUSINESS ADDRESS: STREET 1: ROCHESTER TEL CENTER STREET 2: 180 S CLINTON AVE CITY: ROCHESTER STATE: NY ZIP: 14646-0995 BUSINESS PHONE: 7167771000 FORMER COMPANY: FORMER CONFORMED NAME: ROCHESTER TELEPHONE CORP DATE OF NAME CHANGE: 19920703 10-Q 1 FRONTIER CORPORATION 10Q 1Q 1999 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ______ Commission file number 1-4166 FRONTIER CORPORATION (Exact name of registrant as specified in its charter) New York 16-0613330 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 180 South Clinton Avenue, Rochester, NY 14646-0700 (Address of principal executive offices) (Zip Code) (716) 777-1000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. $1.00 Par Value Common Stock 173,178,215 shares as of April 30, 1999 FRONTIER CORPORATION Form 10-Q Index Page Number Part I. FINANCIAL INFORMATION Item 1. Financial Statements Business Segment Information for the three months ended March 31, 1999 and 1998 3 Consolidated Statements of Income for the three months ended March 31, 1999 and 1998 4 Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998 5 Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and 1998 6 Notes to Consolidated Financial Statements 7-11 Item 2. Management's Discussion of Results of Operations and Analysis of Financial Condition 12-22 Part II. OTHER INFORMATION Item 1. Legal Proceedings 22-23 Item 4. Submission of Matters to a Vote of Security Holders 24 Item 5. Other Information 24-25 Item 6. Exhibits and Reports on Form 8-K 25 Signature 26 Index to Exhibits 27-28 FRONTIER CORPORATION Business Segment Information (Unaudited)
3 Months Ended March 31, In thousands of dollars 1999 1998 - --------------------------------------------------------- Integrated Services Revenue Commercial $ 249,468 $ 242,239 Consumer 50,365 68,657 Carrier 190,803 138,650 - -------------------------------------------------------- Total Revenue $ 490,636 $ 449,546 Cost of Access 311,959 286,787 - -------------------------------------------------------- Gross Margin 178,677 162,759 Selling, General and 117,104 120,631 Administrative Expense Depreciation and Amortization 32,307 25,935 Operating Income: Operating Income Before Other Charges 29,266 16,193 Other Charges - (6,528) - -------------------------------------------------------- Total Operating Income $ 29,266 $ 9,665 Capital Expenditures $ 189,095 $ 55,285 Total Assets $ 1,905,951 $ 1,393,897 ======================================================== Local Communications Services Revenue $ 179,236 $ 173,098 Costs and Expenses 84,046 81,162 Depreciation and Amortization 29,674 28,344 - -------------------------------------------------------- Operating Income $ 65,516 $ 63,592 Capital Expenditures $ 37,535 $ 22,969 Total Assets $ 1,039,236 $ 946,520 ======================================================== Corporate Operations and Other Revenue $ 4,960 $ 9,354 Costs and Expenses 11,478 13,636 Depreciation and Amortization 563 961 - -------------------------------------------------------- Operating Income: Operating Loss Before Other Charges (7,081) (5,243) Other Charges (7,520) - - -------------------------------------------------------- Total Operating Loss $ (14,601) $ (5,243) Capital Expenditures $ 4,065 $ 7,251 Total Assets $ 303,278 $ 244,409 ======================================================== Consolidated Revenue $ 674,832 $ 631,998 Costs and Expenses 524,587 502,216 Depreciation and Amortization 62,544 55,240 Operating Income: Operating Income Before Other Charges $ 87,701 $ 74,542 Other Charges (7,520) (6,528) - -------------------------------------------------------- Total Operating Income $ 80,181 $ 68,014 Capital Expenditures $ 230,695 $ 85,505 Total Assets $ 3,248,465 $ 2,584,826 ======================================================== See accompanying Notes to Consolidated Financial Statements.
FRONTIER CORPORATION Consolidated Statements of Income (Unaudited)
In thousands of dollars, 3 Months Ended March 31, except per share data 1999 1998 - -------------------------------------------------------- Revenue Integrated Services $490,636 $449,546 Local Communications 179,236 173,098 Corporate Operations and Other 4,960 9,354 - -------------------------------------------------------- Total Revenue 674,832 631,998 Costs and Expenses Operating expenses 511,131 485,734 Depreciation and amortization 62,544 55,240 Taxes other than income taxes 13,456 16,482 Other Charges 7,520 6,528 - -------------------------------------------------------- Total Costs and Expenses 594,651 563,984 - -------------------------------------------------------- Operating Income 80,181 68,014 Interest expense 15,219 13,431 Other income: Equity earnings from unconsolidated wireless interests 4,241 2,458 Interest income 1,652 1,198 Other income 8 892 - -------------------------------------------------------- Income Before Taxes 70,863 59,131 Income tax expense 30,961 25,217 - -------------------------------------------------------- Consolidated Net Income 39,902 33,914 Dividends on preferred stock 251 251 - -------------------------------------------------------- Basic Income Applicable to Common Stock $ 39,651 $ 33,663 Diluted earnings adjustment 90 90 - -------------------------------------------------------- Diluted Income Applicable to Common Stock $ 39,741 $ 33,753 ======================================================== Basic Earnings Per Common Share $ 0.23 $ 0.20 Average Shares Outstanding 171,548 170,071 ======================================================== Diluted Earnings Per Common Share $ 0.23 $ 0.20 Average Shares Outstanding 175,437 172,804 ======================================================== See accompanying Notes to Consolidated Financial Statements.
FRONTIER CORPORATION Consolidated Balance Sheets
In thousands of dollars, March 31, December 31, except share data (Unaudited) 1999 1998 - -------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 97,286 $ 85,143 Accounts receivable, (less allowance for uncollectibles of $45,787 and $37,956, respectively) 437,802 422,724 Materials and supplies 9,772 9,924 Deferred income taxes 13,080 13,320 Prepayments and other 32,009 35,563 - -------------------------------------------------------- Total Current Assets 589,949 566,674 Property, plant and equipment, net 1,833,276 1,677,559 Goodwill and customer base, net 475,493 484,015 Deferred and other assets 349,747 330,495 Total Assets $3,248,465 $3,058,743 ========================================================= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 467,220 $ 449,041 Dividends payable 8,894 38,508 Debt due within one year 9,245 9,466 Taxes accrued 41,767 26,128 Other liabilities 52,915 44,554 - --------------------------------------------------------- Total Current Liabilities 580,041 567,697 Long-term debt 1,463,612 1,350,821 Deferred income taxes 48,500 40,046 Deferred employee benefits obligation 84,879 81,925 - --------------------------------------------------------- Total Liabilities 2,177,032 2,040,489 - --------------------------------------------------------- Shareholders' Equity Preferred stock 18,286 18,770 Common stock, par value $1.00, authorized 300,000,000 shares; 172,573,576 shares and 171,635,518 shares issued in 1999 and 1998, respectively 172,574 171,636 Capital in excess of par value 615,340 578,946 Retained earnings 305,875 274,870 Accumulated other comprehensive income: Minimum pension liability adjustment and other (4,148) (4,249) - ---------------------------------------------------------- 1,107,927 1,039,973 Less - Treasury stock, 10,849 shares in 1999 and 1998, at cost 231 231 Unearned compensation - restricted stock plan 36,263 21,488 - --------------------------------------------------------- Total Shareholders' Equity 1,071,433 1,018,254 - --------------------------------------------------------- Total Liabilities and Shareholders' Equity $3,248,465 $3,058,743 ========================================================= See accompanying Notes to Consolidated Financial Statements.
FRONTIER CORPORATION Consolidated Statements of Cash Flows (Unaudited)
3 Months Ended March 31, In thousands of dollars 1999 1998 - ------------------------------------------------------------------------- Operating Activities Net Income $ 39,902 $ 33,914 Adjustments to reconcile net income to net cash provided by operating activities: Other charges 7,520 6,528 Depreciation and amortization 62,544 55,240 Equity earnings from unconsolidated wireless interests (4,241) (2,458) Other, net 2,074 447 Changes in operating assets and liabilities, exclusive of impacts of dispositions and acquisitions: Increase in accounts receivable (15,078) (30,819) (Decrease) increase in materials and supplies 152 (1,482) Decrease in prepayments and other current assets 3,554 5,035 Increase in deferred and other assets (4,625) (8,434) Increase in accounts payable 15,889 10,617 Increase in taxes accrued and other current liabilities 25,013 12,399 Increase in deferred income taxes 8,694 25,397 Increase (decrease) in deferred employee benefits obligation 2,954 (191) - ------------------------------------------------------------------------ Total Adjustments 104,450 72,279 - ------------------------------------------------------------------------ Net Cash Provided by Operating Activities 144,352 106,193 - ------------------------------------------------------------------------ Investing Activities Expenditures for property, plant and equipment (310,839) (20,209) Deposit for capital projects (19,710) (64,036) Other investing activities - (798) - ------------------------------------------------------------------------ Net Cash Used in Investing Activities (330,549) (85,043) - ------------------------------------------------------------------------ Financing Activities Proceeds from issuance of long-term debt 225,093 55,656 Repayments of debt (2,099) (8,051) Dividends paid (38,511) (36,746) Issuance of common stock 14,358 1,003 Other financing activities (501) (12) Net Cash Provided by Financing Activities 198,340 11,850 - ------------------------------------------------------------------------ Net Increase in Cash and Cash Equivalents 12,143 33,000 Cash and Cash Equivalents at Beginning of Period 85,143 26,302 - ------------------------------------------------------------------------ Cash and Cash Equivalents at End of Period $ 97,286 $ 59,302 ======================================================================== See accompanying Notes to Consolidated Financial Statements.
FRONTIER CORPORATION Notes to Consolidated Financial Statements (Unaudited) Note 1: Consolidation The consolidated financial statements of Frontier Corporation (the "Company" or "Frontier") included herein, are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial reporting and Securities and Exchange Commission regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (of a normal and recurring nature) which are necessary to present fairly the financial position, results of operations and cash flows for the interim periods. These financial statements should be read in conjunction with the Annual Report of the Company on Form 10-K for the year ended December 31, 1998 and the reports on Form 8-K filed with the Securities and Exchange Commission as follows: SEC Filing Date Matter - ------------------------------------------------------------ 6/17/98 Pooling of Interests Merger with GlobalCenter Inc. 1/26/99 Dividend Restructuring 1/26/99 Filing of Management's Discussion and Analysis, Consolidated Financial Statements and Notes for 1998, 1997 and 1996 3/19/99 Merger Agreement with Global Crossing Ltd. The consolidated financial information includes the accounts of Frontier Corporation and its majority-owned subsidiaries after elimination of all significant intercompany transactions. Investments in entities in which the Company does not have a controlling interest are accounted for using the equity method. Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform with current year presentation. Note 2: Merger with Global Crossing On March 17, 1999, the Company announced a definitive merger agreement to be acquired by Global Crossing Ltd. ("Global Crossing"), the owner and operator of the world's first independent global fiber-optic network. The transaction is valued at $11.2 billion based on the March 16, 1999 closing price of Global Crossing shares. The combination of the two companies will create a global Internet Protocol-based fiber-optic network able to provide customers with global voice, web hosting, private line, ATM and Internet services. Based on already announced networks, the combination will have 71,000 route miles, over 1 million fiber miles, and offer ultra-high bandwidth to 159 cities in 20 countries. Under the terms of the transaction, which has been unanimously approved by the Boards of Directors of both companies, Frontier shareholders will receive Global Crossing common shares valued at $62 per Frontier share, as long as Global Crossing shares trade within a range of $34.56 to $56.78 per share (the "collar") during a price period prior to closing. Outside the collar, Frontier shareholders will receive a fixed number of Global Crossing shares, 1.0919 shares at the top end of the collar and 1.7939 at the bottom of the collar. In connection with the transaction, Frontier has granted Global Crossing an option to acquire up to 19.9% of its outstanding shares at $62 per share as well as a break-up fee if the merger is terminated for certain reasons. Based on market prices as of March 16, 1999, the merged company will be approximately two-thirds owned by current Global Crossing shareholders and one-third owned by current Frontier shareholders. The transaction is expected to qualify as a tax-free reorganization to the Frontier shareholders and is anticipated to be accounted for as a purchase. This transaction is subject to approval by shareholders of both companies, the Federal Communications Commission, state and other regulatory authorities. It is expected that the transaction will be completed in the third quarter of 1999. Note 3: Acquisitions On February 27, 1998, the Company acquired GlobalCenter, Inc. ("Frontier GlobalCenter, Inc." or "GlobalCenter"), a leading provider in digital distribution, Internet and data services headquartered in Sunnyvale, California. Under the terms of the merger agreement, the Company acquired all of the outstanding shares of GlobalCenter. The total shares issued by the Company to effect the merger were 6.4 million. At the time of the merger, GlobalCenter had approximately 1.1 million stock options and warrants outstanding as converted into Frontier equivalents. This transaction was accounted for using the pooling of interests method of accounting and, accordingly, historical information has been restated to include GlobalCenter. Note 4: Other Charges In the first quarter of 1999, the Company recorded a $7.5 million charge, or $.04 per diluted share, for costs related to the merger with Global Crossing. These charges primarily included investment banker fees, legal fees and other direct costs. In the first quarter of 1998, the Company recorded a pre- tax charge of $6.5 million associated with the acquisition of GlobalCenter which included investment banker, legal and other direct costs. Note 5: Earnings Per Share The Company follows the provisions of Financial Accounting Standards Board Statement ("FAS") No. 128, "Earnings Per Share" ("EPS"). Basic EPS are based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS are based on the weighted average number of shares of common stock and common stock equivalents (options, warrants and convertible debentures) outstanding during the period, computed in accordance with the treasury stock method. The following is a reconciliation of the denominator used in the computation of diluted earnings per share: 3 Months Ended March 31, In thousands 1999 1998 - ---------------------------------------------------------------- Weighted Average Shares Outstanding - Basic $171,548 $170,071 Stock Options and Warrants 3,386 2,230 Convertible Debentures 503 503 - ---------------------------------------------------------------- Weighted Average Shares Outstanding - Diluted $175,437 $172,804 ================================================================ Note 6: Comprehensive Income The Company adopted the provisions of FAS No. 130, "Reporting Comprehensive Income" as of January 1, 1998. This statement establishes standards for reporting and display of comprehensive income and its components. This statement requires reporting, by major components and as a single total, the change in net assets during the period from nonshareholder sources. Adoption of this standard did not materially impact the Company's consolidated financial position, results of operations or cash flow. The reconciliation of net income to comprehensive net income is as follows: 3 Months Ended March 31, In thousands of dollars 1999 1998 - ------------------------------------------------------------- Net income $39,902 $33,914 Foreign currency translation adjustment (101) 445 - ------------------------------------------------------------- Total comprehensive income $39,801 $34,359 ============================================================= At March 31, 1999 and December 31, 1998, "Accumulated other comprehensive income," as reflected in the Consolidated Balance Sheets is comprised of the following: March 31, December 31, 1999 1998 ----------------------- Foreign currency translation adjustment $ 487 $ 588 Minimum pension liability 3,661 3,661 ----------------------- Accumulated other comprehensive income $4,148 $4,249 ======================= Note 7: Dividend Restructuring On January 25, 1999, the Company's Board of Directors approved a dividend restructuring plan which reduces the annualized common stock dividend from $0.89 to $0.20 per share. This change in dividend policy will be effective with the payment of the common stock cash dividend declared on March 22, 1999 and payable on May 3, 1999 to shareholders of record as of April 15, 1999. The reduction had no effect on the common stock dividend paid February 1, 1999 to shareholders of record on January 15, 1999, nor on any outstanding issues of the Company's preferred stock. This dividend restructuring was approved in order to place the Company's dividend payments more in line with growth- oriented integrated telecommunication services companies, to allow the Company to invest more heavily in its growth businesses. Note 8: New Accounting Pronouncements Effective January 1, 1999, the Company adopted the American Institute of Public Accountants Statement of Position ("SOP") 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". Adoption of this statement did not have a material impact on the financial position or results of operations of the Company for the quarter ended March 31, 1999. On June 17, 1998, the Financial Accounting Standards board issued FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" effective for fiscal years beginning after June 15, 1999. This statement standardizes the accounting for derivatives and hedging activities and requires that all derivatives be recognized in the statement of financial position as either assets or liabilities at fair value. Changes in the fair value of derivatives that do not meet the hedge accounting criteria are to be reported in earnings. Adoption of this standard is not expected to have a material effect on the Company's financial position, results of operations or cash flows. Note 9: Cash Flows For purposes of the Statements of Cash Flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Actual interest paid was $23.6 million and $12.9 million for the quarters ended March 31, 1999 and 1998, respectively. Income taxes paid totaled $4.9 million and $11.5 million for the quarters ended March 31, 1999 and 1998, respectively. Interest costs associated with the construction of capital assets, including the Optronics network, are capitalized. Total amounts capitalized for the first three months of 1999 and 1998 totaled $7.7 million and $3.7 million, respectively. Note 10: Commitments and Contingencies In connection with the Company's capital program, certain commitments have been made for the purchase of materials and equipment. Total capital expenditures for 1999 are currently projected to be approximately $900 million. At March 31, 1999 and December 31, 1998, respectively, $125.5 million and $114.0 million of deposits for the Company's Optronics network build are included in the "Deferred and other assets" caption in the Consolidated Balance Sheets. Note 11: Subsequent Events On April 15, 1999, the Company sold Frontier Network Systems Corp. ("FNSC") for $12.4 million, including cash of $7.9 million and a long-term note for $4.5 million. FNSC markets and installs telecommunications systems and equipment. The Company does not anticipate that the after tax gain on the sale will be material to the financial statements. Effective April 29, 1999, the Company obtained a $250 million, 364 day credit facility with interest based on LIBOR. Effective April 29, 1999, the Company approved the redemption of all outstanding shares of Cumulative Preferred Stock, 4.60% Series, 5.00% Series, 5.00% Second Series, and 5.65% Series as of July 1, 1999 pursuant to the original terms. Item 2 - Management's Discussion of Results of Operations and Analysis of Financial Condition For the Three Months Ended March 31, 1999 and 1998 The matters discussed throughout this Form 10-Q, except for historical financial results contained herein, may be forward-looking in nature or "forward-looking statements." Actual results may differ materially from the forecasts or projections presented. Forward-looking statements are identified by such words as "expects," "anticipates," "believes," "intends," "plans" and variations of such words and similar expressions. The Company believes that its primary risk factors include, but are not limited to: changes in the overall economy, the nature and pace of technological change, the number and size of competitors in the Company's market, changes in law and regulatory policy and the mix of products and services offered in the Company's markets. Any forward-looking statements in this March 31, 1999 Form 10-Q should be evaluated in light of these important risk factors. For additional disclosure regarding risk factors refer to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 and the reports on Form 8-K filed with the Securities and Exchange Commission as follows: SEC Filing Date Matter - ------------------------------------------------------------ 6/17/98 Pooling of Interests Merger with GlobalCenter Inc. 1/26/99 Dividend Restructuring 1/26/99 Filing of Management's Discussion and Analysis, Consolidated Financial Statements and Notes for 1998, 1997 and 1996 3/19/99 Merger Agreement with Global Crossing Ltd. DESCRIPTION OF BUSINESS Frontier Corporation (the "Company" or "Frontier") provides integrated telecommunications services including Internet, IP and data applications, long distance, local telephone and enhanced services to business, carrier, web- centric and targeted residential customers nationwide and in certain international countries. RESULTS OF OPERATIONS Consolidated revenues for the first quarter of 1999 were $674.8 million, representing an increase of $42.8 million or 6.8% over the first quarter of 1998. Consolidated operating income was $80.2 million and $68.0 million for the quarters ended March 31, 1999 and 1998, respectively, representing a 17.9% increase on a year over year basis. Excluding $7.5 million in nonrecurring items, operating income was $87.7 million for the quarter ended March 31, 1999 and $74.5 million for the quarter ended March 31, 1998, representing a 17.7% increase. Operating results continue to be positively impacted by revenue growth in Data, Carrier Services and Competitive Local Exchange Carrier ("CLEC") services. Data revenue grew $24.0 million, or 131.5% over the first quarter of 1998, driven by a 268% increase in frame relay, a 231% increase in dedicated Internet and a 129% increase in content distribution revenue on a year over year basis. Carrier Services revenues grew $52.2 million or 37.6% over the first quarter of 1998. The growth in Carrier Services reflects a growing base of new customers. Normalized for other charges, costs and expenses grew $29.7 million or 5.3% over the same prior year quarter compared to consolidated revenue growth of 6.8%. Expenses were driven primarily by higher cost of access in the Integrated Services segment due to growth in Carrier Services volumes. These increases are offset by improvements in selling, general and administrative expenses as a percent of revenue as a result of the Company's efforts to effectively manage expenses. In the first quarter of 1999, the Company recorded a $7.5 million charge, or $.04 per diluted share, for costs related to the merger with Global Crossing. These charges primarily included investment banker fees, legal fees and other direct costs. During the first quarter of 1998, the Company recorded an after-tax charge of $5.8 million (net of taxes of $0.7 million) associated with the acquisition of GlobalCenter Inc. ("GlobalCenter") a leading provider of digital distribution, Internet and data services. These charges included investment banker fees, legal fees and other direct costs. Diluted earnings per share were $0.23 and $0.20 for the quarters ended March 31, 1999 and 1998, respectively, representing a 15.0% increase. Excluding nonrecurring charges, diluted earnings per share for the quarter ended March 31, 1999 were $0.27, as compared to $0.23 for the first quarter of 1998. Consolidated net income for the same period was $47.4 million compared to $39.7 million in 1998, normalized for nonrecurring items. Integrated Services Through its Integrated Services segment, the Company is one of the nation's largest long distance companies. The Integrated Services segment provides domestic and international voice, data products, video and audio communications, digital distribution services, Internet service and other communications products to primarily small to mid-size business customers, carrier customers, web- centric customers and targeted consumer markets. Results for this segment also include CLEC services, currently available in 32 states plus Washington D.C., providing Frontier the ability to offer integrated local and long distance telephone service to approximately 70% of the United States. Integrated Services revenue totaled $490.6 million in the first quarter of 1999, an increase of $41.1 million or 9.1% as compared to the first quarter of 1998. The increase in revenue is attributed to a growing base of carrier customers, CLEC services and data revenue. Revenue increases are being offset by the de-emphasis of selected consumer programs and continuing competition in the consumer sector. Consistent with industry trends, the Company is experiencing declines in revenue per minute for voice products. Data Services revenue reached $42.3 million in the first quarter of 1999, an increase of $24.0 million, or 131.5% over the first quarter of 1998. Data Services growth is driven by a 268% increase in frame relay, a 231% increase in dedicated Internet and a 129% increase in content distribution revenue on a year over year basis. During the quarter ended March 31, 1999, Carrier Services revenue grew $52.2 million to $190.8 million, representing a 37.6% increase over the same prior year period. These increases are driven by both an increase in the customer base as well as higher levels of switched and dedicated traffic. As the Optronics network is completed, the Company anticipates further fiber capacity sales, swaps and exchanges. Frontier provides local service as a CLEC on both a resale and facility basis with a focus on providing integrated local, long distance and data services. Initially, most coverage was provided via resale of the incumbent local exchange carriers. Within that footprint, CLEC service was initially provided from Frontier's own switches in New York, Boston and Minneapolis. As of March 31, 1999, Frontier has expanded its coverage to 32 states plus Washington, D. C. for local resale and to 22 top business markets for other facilities-based local service, cumulatively reaching 70% of the U. S. business population. Facilities-based service is being offered in cities that are on the Company's Optronics network, which will provide Frontier with the opportunity to expand its offerings of combined local and long distance services into additional markets and leverage the Optronics network. CLEC revenue growth was 82% and CLEC line growth was 52% over the first quarter of 1998. Cost of access represented 63.6% of total Integrated Services revenue for the first quarter of 1999 as compared to 63.8% for the same period in 1998. The lower cost of access percentage is primarily driven by increased utilization of the Optronics network, offset by growth in generally lower margin Carrier Services revenue. Delays in the completion of a small number of segments have moved the expected completion date of all portions of the original Optronics network into the first half of 1999. Cost benefits are expected to be realized as the SONET rings are closed, traffic is migrated and redundant leased costs are eliminated. The Company has further enhanced its Optronics network by expanding its geographic coverage. Through swap agreements with Enron and WTCI, Frontier will add approximately 4,000 route miles in the western United States. These agreements will also provide the Company with additional SONET rings, further enhancing the reliability and performance of the network. In addition, in July 1998, Frontier entered into an agreement with Williams Communications to construct an extension into the southeast United States. In aggregate, the Company's Optronics network will have 20,000 route miles. As of March 31, 1999, approximately 65% of the total Optronics network is carrying traffic. Construction of the Optronics network and continuing integration efforts are expected to reduce future network costs as well as provide new revenue opportunities for the Company. SG&A expense represented 23.9% of the total Integrated Services' revenue for the first quarter of 1999 as compared to 26.8% for the same period in 1998. The lower SG&A percentage is driven primarily by cost controls and a change in revenue mix away from the consumer business to the Carrier Services business. The consumer business historically has higher SG&A expense as a percentage of revenue than the Carrier Services business. Depreciation and amortization expense increased $6.4 million or 24.6% on a year over year basis driven primarily by depreciation of the Optronics network and an overall increase in capital expenditures. Operating income for the first quarter of 1999 was $29.3 million, an increase of 202.8% over the first quarter of 1998. Operating margin as a percent of revenue for the three months ended March 31 1999, increased from 2.1% in the first quarter of 1998 to 6.0% in the first quarter of 1999. Excluding nonrecurring items, operating income increased 80.7% and operating income as a percent of revenue increased from 3.6% to 6.0% during the first quarter of 1999 compared to the first quarter of 1998. The increase in operating margin is attributed to higher revenue and migration to the lower cost Optronics network. Local Communications Services The Company's Local Communications Services operation is one of the largest local exchange service providers in the United States. Local Communications Services includes the Company's local telephone operations, consisting of 34 telephone operating subsidiaries in 13 states. Also included in this segment are the revenues and expenses of Frontier Communications of Rochester Inc., a competitive telecommunications company formed January 1, 1995 that provides an array of services on a retail basis in the Rochester, New York marketplace. Consequently, the Local Communications Services segment includes both wholesale and retail local service provided in the Rochester, New York market. Revenues for Local Communications Services were $179.2 million in the three month period ended March 31, 1999, an increase of $6.1 million or 3.5% over the comparable period in 1998. Access lines increased 3.4% over the prior year to 1,033,000 and access minutes of use increased 3.9% over the same prior year period. Minutes of use increased 3.2% over the comparable 1998 period. Revenue growth during the first quarter of 1999 is also influenced by an increased demand for Internet services and dedicated traffic growth. Costs and expenses in the first quarter of 1999 for Local Communications Services were $113.7 million, an increase of $4.2 million or 3.8% over the first quarter of 1998. The increase in costs and expenses is attributable to service quality improvements during the quarter, increased depreciation expense, and an increase in customer service costs due to access line growth. Operating income was $65.5 million for the quarter ended March 31, 1999, representing an increase of $1.9 million or 3.0% over the comparable quarter in the prior year. Operating margins for the quarter ended March 31, 1999 were relatively consistent with the prior year. Corporate Operations and Other Corporate Operations is comprised of expenses traditionally associated with a holding company, including executive and board of directors' expenses, corporate finance and treasury, investor relations, corporate planning, legal services and business development. The Other category includes FNSC, which was sold on April 15, 1999. FNSC markets and installs telecommunications systems and equipment. This segment also includes wireless operations of Minnesota RSA No. 10 which was sold on April 30, 1998. The change in results for this segment are influenced by the sale of the Company's wireless operations and diminished revenue from FNSC prior to its sale in April 1999. Other Income Statement Items Interest Expense Interest expense was $15.2 million for the quarter ending March 31, 1999, representing an increase of $1.8 million or 13.3% over the prior year quarter. The overall increase in interest expense is the result of higher levels of debt outstanding and is partially offset by an increase in capitalized interest of $4.0 million over 1998. The increase in capitalized interest and levels of debt outstanding is primarily attributable to the Company's capital program driven by the Optronics network and an overall increase in capital expenditures. Equity Earnings from Unconsolidated Wireless Interests The Company's minority interests in wireless operations and its 50% interest in the Frontier Cellular joint venture with Bell Atlantic are reported using the equity method of accounting, which results in the Company's proportionate share of earnings being reflected in a single line item below operating income. Equity earnings from the Company's unconsolidated wireless interests, including Frontier Cellular, the 50/50 joint venture of Frontier and Bell Atlantic currently managed by Frontier, were $4.2 million in the first quarter, a 72.5% increase over the $2.5 million reported in the year-ago quarter. Customers increased to more than 403,000, or 21 percent more than the year-ago quarter. The increase in equity earnings is attributable to continued operating efficiencies as well as an increase in the number of customers. Income Taxes The effective income tax rate (normalized for nonrecurring items) was 39.5% for the quarters ended March 31, 1999 and 1998. Effective income tax rates as reported are impacted by certain nonrecurring items for the quarters ended March 31, 1999 and 1998. During 1999 and 1998, the effective rates were primarily impacted by transaction costs associated with the Global Crossing merger and the GlobalCenter acquisition. FINANCIAL CONDITION Review of Cash Flow Activity Earnings before interest, taxes, depreciation and amortization ("EBITDA") is a common measurement of a company's ability to generate cash flow from operations. EBITDA should be used as a supplement to, and not in place of, cash flow from operating activities. The Company's EBITDA before nonrecurring charges was $150.2 million, or 15.8% higher than the year-ago amount of $129.8 million. The increase in EBITDA corresponds with the improved operating results of the Company. Cash provided from operations for the quarter ended March 31, 1999 increased $38.2 million to $104.5 million as a result of improved operating results as compared to the same prior year period. Changes in working capital include an increase in accounts receivable, accounts payable, taxes accrued and other liabilities, and deferred income taxes. These increases are primarily driven by the growth of the business. Cash used for investing activities increased to $330.5 million, or 288.7% higher than the prior year quarter driven by an increase in cash expenditures for capital projects principally due to the Optronics network. Cash provided from financing activities increased $186.5 million during the quarter as compared to the same period in 1998. This net inflow of cash is primarily attributable to new borrowings on long term debt driven by the Company's capital program and proceeds from the issuance of common stock resulting from the exercise of stock options. Debt The Company's total debt amounted to $1,472.9 million at March 31, 1999, an increase of $112.6 million from December 31, 1998. This higher debt level is driven by the Company's capital program, including the Optronics network as well as the temporary restriction on dividend payments from Frontier Telephone of Rochester. Debt Ratio and Interest Coverage The Company's debt ratio (total debt as a percentage of total capitalization) was 57.9% at March 31, 1999, as compared with 57.2% at December 31, 1998. Pre-tax interest coverage, excluding nonrecurring charges, was 4.1 times for the quarter ended March 31, 1999, as compared with 4.6 times for the same period in 1998. Capital Spending Through March 1999, gross capital expenditures amounted to approximately $230.7 million, as compared to $85.5 million in the prior year. The Company currently projects its 1999 capital expenditures to be approximately $900 million. The Company anticipates financing its capital program through a combination of internally generated cash from operations as well as external financing. Year 2000 Issues The Company's Year 2000 ("Year 2K") project is intended to address potential processing errors in computer programs that use two digits (rather than four) to define the applicable year. The Company's assessment of Year 2K issues is essentially complete. Disclosure is warranted because the issues, if unresolved by the Company and by the many unaffiliated carriers and other firms with whom the Company interconnects its networks or does business, could have impacts that are material. The Company addresses Year 2K issues in four areas: State of Readiness. Frontier has developed plans to assess and remediate key internally-developed computer systems so they will be Year 2K compliant in advance of December 31, 1999 and has implemented those plans to a significant degree. The plans encompass all operating properties as well as Frontier's corporate headquarters. These include both information technology ("IT") and non-IT compliance. The plans cover the review, and either modification or replacement where necessary, of portions of the Company's computer applications, telecommunications networks, telecommunications equipment and building facility equipment that directly connect the Company's business with customers, suppliers and service providers. Implementation of the plan began in 1996 and the Company believes that substantially all of its internally-developed IT systems are now compliant. Final assessments and remediation are expected to be substantially complete by midyear 1999, or shortly thereafter, leaving the remainder of 1999 for additional system testing, carrier interoperability testing and other remediation. These plans involve capital expenditures for new software and hardware, as well as costs to modify existing software. This will include replacement of individual end user equipment, such as personal computers that are not compliant. Initially, work with IT systems was given priority over work with non-IT systems, but the Company is comprehensively reviewing its non-IT Year 2K readiness as well, including communications with third parties who supply or maintain non-IT systems or significant non-IT subsystems. The Company has given special attention to the Year 2K issues involved in its network, switches and billing systems, and will continue to dedicate significant resources to these areas as a priority. The Company has also increased its resources in areas in which assessment and remediation has not yet reached a point where management is satisfied with progress. To date, Year 2K readiness is progressing at a pace that is acceptable to management and management maintains continuous contact with the Year 2K team to receive progress reports and to address issues. Costs. The Company has recently performed a detailed update of Year 2K costs. Costs to date that are directly attributable to Year 2K issues are $17.5 million, and the Company now anticipates spending an additional $20.1 to $20.8 million during the remainder of 1999. This includes costs directly related to Year 2K assessment and remediation and the replacement of non-compliant systems and end user equipment, including acceleration of replacement of non-compliant systems and end user equipment due to Year 2K issues. A substantial portion of the total amount has been used for third party assistance in assessment and remediation. The source of these funds is cash generated from operations. The Year 2K projects have not caused the Company to forego or defer, to any material degree, other critical IT projects. To date, the costs of addressing potential Year 2K problems are not considered material to the Company's financial condition, results of operations or cash flows and have been consistent with planned expenditures, and future costs are not expected to be material in such respects. Risks. The Company is engaged primarily in telecommunications lines of business, and therefore connects directly and indirectly with thousands of other carriers, inside and outside the United States. These connections are made through switching offices of the Company and the other carriers. The switching offices were manufactured by and often maintained by third parties. While many other carriers have announced plans to engage independently in Year 2K assessment and remediation for their networks, there is a risk that some carriers (particularly smaller carriers and carriers outside the United States) will not address or resolve Year 2K issues, and that telecommunications may therefore be affected. If this were to occur, it is likely that the Company would be affected only to the same degree as the other carriers in the telecommunications industry. A Year 2K failure in the network of smaller carriers would not be likely to have a significant impact on telecommunications generally, or on the Company. However, addressing these risks to the telecommunications industry in general is outside the Company's control. In addition, the Company is unable at this time to assess the degree to which the manufacturers of switches and similar equipment have completed their assessment and remediation of such equipment and its associated software with respect to any other carriers. Nevertheless, the Company has initiated an inquiry with its primary vendors and continues to engage in discussions related to Year 2K compliance with many of them. If the Company concludes that a manufacturer or other vendor is unable to complete remediation in time, the Company has the option of system or equipment replacement, an option that is also available to the Company with respect to its own systems and equipment. The Company has replaced some equipment and systems, and may continue to do so in appropriate circumstances. Another risk to the Company arises with respect to the timely completion of Year 2K remediation for the processing that occurs in the Company's IT and non-IT systems, including billing systems. If the Company or its vendors are unable to resolve such processing issues in a timely manner, it could pose independent risks to the Company's business that could be material. Accordingly, the Company has devoted resources it believes to be adequate to resolve all significant identified Year 2K issues in a timely manner, and has undertaken plans to make information available to customers and others related to its Year 2K activities. Consistent with the practice of other carriers, the Company generally has declined to provide Year 2K compliance warranties or other Year 2K-related contractual promises to customers or other persons. In addition, the Company is engaged in communications with third party equipment and software vendors and suppliers of services to verify their Year 2K readiness, and plans to engage in internetwork testing with other carriers during 1999. Since the Company's own Optronics NetworkSM, including the recently announced southeast expansion, is expected to be substantially deployed before December 31, 1999, the Company anticipates that the impact of other carriers who may experience business interruptions would be lessened, and such interruptions are not currently expected to have material adverse impacts on the Company. Contingency Plans. The Company consistently monitors the progress of its Year 2K program. The Company currently anticipates that it will resolve its Year 2K issues before the end of 1999, with the exception of any issues that involve other carriers or suppliers and that are outside of its control. During 1999, the Company will continue to monitor efforts undertaken through regulatory agencies and industry groups to assure that Year 2K preparations are completed in a timely manner. The Company has identified areas on a preliminary basis in which it expects to develop contingency plans. Contingency planning does not mean that a facility or system will fail. It may be merited because of many different factors, including the inherent importance of a system or facility, the response or lack of response from a third party vendor, or the results of the Company's review and evaluation. The following areas have been identified as areas in which contingency planning is or may be required: SS7 Network arrangements internally and with third parties, power availability, certain OSS and CARS operating systems, network operations and call centers, EDI and credit and collections systems, lockbox arrangements and internal telephone systems. In all of these areas it is the potential impact of a failure rather than the probability of a failure that has led the Company to identify it as an area for contingency planning. To date, the Company has not identified contingency planning requirements relative to its Internet operations. Plans will be developed and tested as necessary and closely monitored by the Company's Internal Audit department and the Year 2K Executive Steering Committee. Because of its prior use of multiple billing systems, the Company has experience in manual billing consolidation for its carrier customers, and will always have manual processes available to it. The costs of contingency planning are not expected to be material to the Company. Dividends On March 22, 1999, the Board of Directors declared the first quarter 1999 dividend of $0.05 cents per share on the Company's common stock, payable May 3, 1999 to shareholders of record on April 15, 1999. The dividend reflects an adjustment to Frontier's annualized common stock dividend which was reduced from $0.89 per share to $0.20 per share by the Company's Board of Directors on January 25, 1999. New Accounting Pronouncements On June 17, 1998, the Financial Accounting Standards board issued FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" effective for fiscal years beginning after June 15, 1999. This statement standardizes the accounting for derivatives and hedging activities and requires that all derivatives be recognized in the statement of financial position as either assets or liabilities at fair value. Changes in the fair value of derivatives that do not meet the hedge accounting criteria are to be reported in earnings. Adoption of this standard is not expected to have a material effect on the Company's financial position, results of operations or cash flows. OTHER ITEMS Open Market Plan Open Market Plan. The Company began its fifth year of operations under the Open Market Plan in January 1999. The Open Market Plan promotes telecommunications competition in the Rochester, New York marketplace by providing for (1) interconnection of competing local networks including reciprocal compensation for terminating traffic, (2) equal access to network databases, (3) access to local telephone numbers, (4) service provider telephone number portability, and (5) certain wholesale discounts to resellers of local services. Results since implementation of the Open Market Plan are considered to have been constructive for the Company as a whole. During the seven year period of the Open Market Plan, the Company will not be regulated by rate-of-return regulation, but instead, will be regulated under pure price cap regulation. Over this period, planned rate reductions of $21.0 million (the "Rate Stabilization Plan") will be implemented for Rochester area consumers, including $16.5 million of which occurred through 1998, and an additional $1.5 million which commenced in January 1999. Rates charged for basic residential and business telephone service may not be increased during the seven year period of the Plan. The Company is allowed to raise prices on certain enhanced products such as Caller ID and call forwarding. The New York State Public Service Commission ("NYSPSC") has issued a Notice Inviting Comments in which it has proposed to make further changes in pricing under the Open Market Plan. These pricing changes could reduce some prices to competitors for network elements and other offerings, but could also reduce the amount paid by the Company for reciprocal compensation. The issues being addressed by the NYSPSC have been under consideration since 1995. The Company cannot predict the ultimate impact of any NYSPSC action in this proceeding, although it is not expected to be material. The NYSPSC has also issued orders on other regulatory issues over time, related to service quality, staff allocations, provisioning and relations with other carriers. Management believes there continues to be significant market and business opportunities, as well as uncertainties, associated with the Company's Open Market Plan. There can be no assurance that the changing regulatory environment will positively impact the Company. Dividend Policy The Open Market Plan prohibits the payment of dividends by the Company's subsidiary, Frontier Telephone of Rochester, Inc. ("FTR"), to Frontier if (i) 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 (ii) a service quality penalty is imposed under the Open Market Plan. Dividend payments to Frontier 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". In 1996, FTR failed to achieve the service quality levels required by the Open Market Plan. FTR requested a waiver, but was denied. The NYSPSC's ruling resulted in a restriction on the flow of cash dividends from FTR to Frontier. On October 22, 1997, the NYSPSC adopted an order requiring FTR to issue refunds of approximately $0.9 million, or $2.60 per customer. Reserves sufficient to cover the refund were established in 1996. These refunds have been issued. On October 15, 1998, the NYSPSC approved a proposal by FTR for revision of its service incentive plan that: - required a rebate of $8.00 per customer to resolve all service penalties for 1997 and 1998, such rebates have been issued, - established a rebate/client program for missed appointments, and - increased the amounts at risk for the period 1999-2001 should FTR fail to meet required service levels. In 1998, the Company completed its commitment to the NYSPSC to increase capital expenditures to a minimum of $80.0 million and add employees in service-affecting areas. The temporary restriction of dividend payments to Frontier will remain in place until the NYSPSC is satisfied that FTR's service levels demonstrate that FTR has rectified the service deficiency. Part II - Other Information Item 1. Legal Proceedings On June 11, 1992, a group of corporate plaintiffs consisting of Cooper Industries, Inc.; Keystone Consolidated Industries, Inc.; The Monarch Machine Tool Company; Niagara Mohawk Corporation and Overhead Door Corporation commenced an action in the United States District Court for the Northern District of New York seeking contribution from fifteen corporate defendants, including Rotelcom Inc., a wholly-owned subsidiary of the registrant held through intervening subsidiaries (now named FNS). The plaintiffs seek environmental response costs incurred by the plaintiffs pursuant to a consent decree entered into by plaintiffs with the United States EPA. Two additional defendants were named in 1994. In addition to FNS, the current defendants are: Agway, Inc.; BMC Industries, Inc.; Borg-Warner Corporation; Elf Atochem North America, Inc.; Mack Trucks, Inc.; Motor Transportation Services, Inc.; Pall Trinity Micro Corporation; The Raymond Corporation; Redding-Hunter, Inc.; Smith Corona Corporation; Sola Basic Industries, Inc.; Wilson Sporting Goods Company; Phillip A. Rosen; Harvey M. Rosen; City of Cortland and New York State Electric & Gas Corporation. The consent decree concerned the clean-up of an environmental Superfund site located in Cortland, New York. It is alleged that the corporate defendants disposed of hazardous substances at the site and are therefore liable under the Comprehensive Environmental Response, Compensation and Liability Act. On November 21, 1997, the EPA issued a Proposed Remedial Action Plan" ("PRAP"). In the PRAP, the EPA outlined four alternative plans for remediating the site. A number of parties, excluding the Company, have reached agreements with the EPA to fund certain future remedy costs at the site consistent with the PRAP. There has been no allocation of liability by the Court as among or between the plaintiffs or defendants. Since February 1994, a significant number of former American Sharecom, Inc. ("ASI") shareholders have filed and amended several and various complaints in Hennepin County (Minnesota) District Court. Included among the defendants are ASI, its former principal shareholders, Steven Simon and James Weinert, and Frontier. These suits allege generally that Simon and Weinert, with and through ASI, embarked upon a scheme to gain control of ASI and acquire all of its stock through common law fraud, breach of fiduciary duty and certain violations of the Minnesota Business Corporation Act. This Act requires shareholders in a closely held corporation to act fairly toward one another and refrain from misappropriation. Another action by a few former ASI shareholders who dissented from the cashout merger that finally took ASI private was recently dismissed by the federal court in Minnesota. The claims against Frontier maintain only that Frontier controls the disposition of the restricted Frontier stock which was issued to Simon and Weinert in connection with the acquisition of ASI and that such stock should be held in trust for the benefit of the plaintiffs. At this time Simon and Weinert have either negotiated settlements with the majority of former ASI shareholders who had asserted claims or have succeeded in obtaining dismissal of many of the lawsuits. Although it is too early to determine the outcome of the remaining lawsuits, Frontier, ASI and the other defendants each are contesting the claims. In connection with the acquisition of ASI by Frontier, Simon and Weinert agreed to indemnify and defend the Company for these claims. On April 10, 1997, Jeff Thompson filed a purported class action on behalf of himself and all other similarly-situated persons in Circuit Court for Marengo County Alabama. Named as defendants are Frontier Corporation, Frontier Subsidiary Telco, Inc. and Frontier Communications of the South, Inc. ("defendants"). The complaint also reserves the right to add additional defendants and identifies all of Frontier's telephone subsidiaries. Concomitant with filing the complaint, plaintiff also filed an ex parte motion for conditional class certification which the Court granted. It conditionally certified a class consisting of "All persons or entities in the United States who have been charged by defendants or their subsidiaries or affiliates a fee for `inside wire maintenance' without having given their affirmative acceptance to a repair service contract; specifically excluded from this class, however, are all employees, agents, officers, directors and affiliates of any of the Defendants and all persons or entities who have pending and/or previously filed individual (non-class) lawsuits against any of the defendants for the same claims set forth in the Complaint." On January 30, 1998, the Supreme Court of Alabama issued a writ of mandamus to the trial court ordering it to vacate its conditional class certification. In light of the decision of the Alabama Supreme Court, plaintiffs have agreed voluntarily to dismiss this action with prejudice. A stipulation of dismissal with prejudice was entered by the trial court on February 19, 1999. The Open Market Plan discussion in the Management's Discussion and Analysis of Financial Condition and Results of Operations, Part I, Item 2 of this document is incorporated by reference. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders was held on April 29, 1999 for the purpose of electing a board of directors and approving the ratification of auditors. All of management's nominees for directors as listed in the proxy statement were elected with the following vote: Number of Shares/Votes Name For Authority Withheld - ----------------------------------------------------------- Patricia C. Barron 147,045,823 1,070,424 Raul E. Cesan 147,129,464 986,783 Joseph P. Clayton 147,103,758 1,012,489 Brenda E. Edgerton 147,070,605 1,045,642 Jairo A. Estrada 147,071,648 1,044,599 Michael E. Faherty 147,086,804 1,029,443 Alan C. Hasselwander 147,020,471 1,095,776 Eric Hippeau 147,072,138 1,044,109 Robert Holland, Jr. 147,059,024 1,057,223 Douglas H. McCorkindale 147,127,551 988,696 James F. McDonald 147,090,361 1,025,886 Leo J. Thomas 147,114,818 1,001,429 The ratification of PricewaterhouseCoopers LLP as Public Accountant for the fiscal year 1999 was approved with the following vote: For 147,085,666 Against 559,006 Abstain 471,575 Item 5. Other Information On October 9, 1997, the FCC ordered carriers that receive "dial around" calls from payphones (certain calls sent without coins, such as 800 or other calls, with special access codes) to compensate payphone owners at the rate of 28.4 cents per completed call. The Court of Appeals for the District of Columbia Circuit found that the FCC had failed to justify this rate and sent the matter back to the FCC for further consideration. On February 4, 1999, the FCC set the "dial around" compensation rate at 24 cents per completed call retroactive to October 7, 1997. This decision is subject to reconsideration and appeal. The FCC has yet to determine how to address the payphone compensation obligation for the period from November 7, 1996 through October 6, 1997. On April 2, 1999, the Company moved to intervene in a proceeding with U.S. Court of Appeals in the District of Columbia challenging the FCC's order. On July 15, 1998, an administrative complaint was filed by Bell Atlantic Corp. seeking $3.2 million in compensation for use of its payphones since October 7, 1997. On August 17, 1998, an administrative complaint was filed by Ameritech Corp. with the FCC seeking $1.9 million in compensation for the use of its payphones since October 7, 1997. On September 1, 1998, SBC Communications Inc. filed an administrative complaint with the FCC seeking $3.3 million in compensation for the use of its payphones since October 7, 1997. On November 24, 1998, U S West Communication Group filed an administrative complaint seeking $2.5 million in compensation for the use of its payphones since October 7, 1997. On April 30, 1999, the Company and U S West executed a settlement and on May 5, 1999, the parties filed a joint motion to dismiss U S West's complaint. The filing of the complaints has had no effect upon the position of the Company with respect to payphone compensation. The Company cannot predict the ultimate outcome of any of these FCC proceedings. Item 6. Exhibits and Reports on Form 8-K (a) See Index to Exhibits for exhibits required by Item 601 of Regulation S-K. The Registrant hereby agrees to furnish the Commission a copy of each of the Indentures or other instruments defining the rights of security holders of the long-term debt securities of the Registrant and any of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. (b) Reports on Form 8-K. The following reports on Form 8-K were filed during the quarter ended March 31, 1999. SEC Filing Date Item No. Financial Statements ----------------------------------------------------------- 1/26/99 5 Yes 1/26/99 5 Yes 3/19/99 5,7 No No reports on Form 8-K were filed subsequent to the quarter ended March 31, 1999. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FRONTIER CORPORATION ------------------------------------- (Registrant) Dated: May 13, 1999 /s/ Rolla P. Huff By: --------------- Rolla P. Huff President and Chief Operating Officer (principal accounting officer) FRONTIER CORPORATION INDEX TO EXHIBITS Exhibit Number Description Reference - ------------------------------------------------------------------ 3.1 Restated Certificate of Incorporation Incorporated by reference to dated January 24, 1995 Exhibit 3.1 to Form 10-K for the year ended December 31, 1995 3.2 Amendment to Restated Certificate Incorporated by reference to of Incorporation dated April 9, 1995 Exhibit 3.2 to Form 10-K for the year ended December 31, 1995 3.3 By-laws Incorporated by reference to Exhibit 3.3 to Form 10-K for the year ended December 31, 1998 4.1 Indenture between the Company and Incorporated by reference to Manufacturers Hanover Trust Company, Exhibit 4.12 to Form 10-K Trustee, dated September 1, 1986 for the year ended December 31, 1986 4.2 First Supplemental Indenture to said Incorporated by reference to Indenture with Manufacturers Hanover Exhibit 4(b) to Registration Trust Company, Trustee, dated Statement 33-32035 December 1, 1989 4.3 10.46% Non-Negotiable Convertible Incorporated by reference to Debenture due October 27, 2008 from Exhibit 4.14 to Form 10-K the Company to The Walters Trust for the year ended December 31, 1988 4.4 9% Debenture due August 15, 2021 Incorporated by reference to Exhibit 4.16 to Form 10-K for the year ended December 31, 1991 4.5 Indenture between the Company and Incorporated by reference to Chase Manhattan Bank, N.A., Trustee, Exhibit 4.1 to Form 8-K dated May 21, 1997, $300M 7.25% dated May 23, 1997. Notes due May 15, 2004. 4.6 Supplemental Indenture between the Incorporated by reference to Company and Chase Manhattan Bank, Exhibit 4.7 to Form 10-K N.A. as Trustee, dated December 8, 1997, for the year ended $100M 6.25% Notes due December 15, December 31, 1997. 2009. 4.7 $200 Million Credit Agreement Incorporated by reference to dated November 10, 1998 with Exhibit 4.8 to Form 10-K Chase Manhattan Bank, Fleet Bank, for the year ended Marine Midland Bank December 31, 1998 4.8 $275 Million Credit Agreement Incorporated by reference to dated November 10, 1998 with Exhibit 4.9 to Form 10-K Chase Manhattan Bank, Fleet Bank, for the year ended Marine Midland Bank December 31, 1998 4.9 $250 Million Credit Agreement Filed herewith dated April 29, 1999 with Morgan Stanley, First National Bank of Chicago, and Fleet National Bank, et al. 10.1 Amendment No. 1 to Directors Common Filed herewith Stock Deferred Growth Plan 10.2 Amendment No. 1 to Plan for the Filed herewith Deferral of Directors Fees 10.3 Amendment No. 1 to Directors Filed herewith Stock Incentive Plan 10.4 Amendment No. 4 to Management Filed herewith Stock Incentive Plan 10.5 Amendment No. 2 to Employees' Filed herewith Stock Option Plan 10.6 Amendment No. 1 to Omnibus Filed herewith Incentive Plan 11 Statement re: Computation of Diluted Filed herewith Earnings Per Common Share (Unaudited) 27 Financial Data Schedule Filed herewith EX-4 2 EX. 4.9 $250M CREDIT AGREEMENT $250,000,000 CREDIT AGREEMENT dated as of April 29, 1999 among FRONTIER CORPORATION The Lenders Party Hereto and MORGAN STANLEY SENIOR FUNDING, INC. as Administrative Agent THE FIRST NATIONAL BANK OF CHICAGO as Syndication Agent MORGAN STANLEY SENIOR FUNDING, INC. as Lead Arranger and Book Manager FLEET NATIONAL BANK as Documentation Agent TABLE OF CONTENTS ARTICLE I Definitions SECTION 1.01. Defined Terms 1 SECTION 1.02. Classification of Loans and Borrowings 14 SECTION 1.03. Terms Generally 14 SECTION 1.04. Accounting Terms; GAAP 15 ARTICLE II The Credits SECTION 2.01. Commitments 15 SECTION 2.02. Loans and Borrowings 15 SECTION 2.03. Requests for Borrowings 16 SECTION 2.04. Notice of Borrowing Request 16 SECTION 2.05. Funding of Borrowings 16 SECTION 2.06. Interest Elections 17 SECTION 2.07. Termination and Reduction of Commitments 18 SECTION 2.08. Repayment of Loans; Evidence of Debt 19 SECTION 2.09. Prepayment of Loans 19 SECTION 2.10. Fees 20 SECTION 2.11. Interest 20 SECTION 2.12. Alternate Rate of Interest - Eurodollar Borrowings 21 SECTION 2.13. Increased Costs 22 SECTION 2.14. Break Funding Payments 22 SECTION 2.15. Taxes 23 SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs 24 SECTION 2.17 Mitigation Obligations; Replacement of Lenders 25 ARTICLE III Representations and Warranties SECTION 3.01. Organization; Powers 26 SECTION 3.02. Authorization, Enforceability 27 SECTION 3.03. Governmental Approvals; No Conflicts 27 SECTION 3.04. Financial Condition; No Material Adverse Change 27 SECTION 3.05. Properties 27 SECTION 3.06. Litigation and Environmental Matters 28 SECTION 3.07. Compliance with Laws and Agreements 28 SECTION 3.08. Investment and Holding Company Status 28 SECTION 3.09. Taxes 28 SECTION 3.10. ERISA 29 SECTION 3.11. Disclosure 29 SECTION 3.12. Year 2000 29 SECTION 3.13. Significant Subsidiaries 29 SECTION 3.14. Borrower's Funded Debt 29 ARTICLE IV Conditions SECTION 4.01. Effective Date 30 SECTION 4.02. Each Borrowing 31 ARTICLE V Affirmative Covenants SECTION 5.01. Financial Statements and Other Information 31 SECTION 5.02. Notices of Material Events 33 SECTION 5.03. Existence; Conduct of Business 33 SECTION 5.04. Payment of Obligations 34 SECTION 5.05. Maintenance of Properties; Insurance 34 SECTION 5.06. Books and Records Inspection Rights 34 SECTION 5.07. Compliance with Laws 34 SECTION 5.08. Use of Proceeds 34 SECTION 5.09. Other Funded Debt of Borrower 34 ARTICLE VI Negative Covenants SECTION 6.01. Indebtedness of Subsidiaries 35 SECTION 6.02. Liens 35 SECTION 6.03. Fundamental Changes 36 SECTION 6.04. Transactions with Affiliates 37 SECTION 6.05. Restrictive Agreements 37 SECTION 6.06. Interest Coverage 38 ARTICLE VII Events of Default ARTICLE VIII The Administrative Agent ARTICLE IX Miscellaneous SECTION 9.01. Notices 43 SECTION 9.02. Waivers; Amendments 43 SECTION 9.03. Expenses; Indemnity; Damage Waiver 44 SECTION 9.04. Successors and Assigns 45 SECTION 9.05. Survival 48 SECTION 9.06. Counterparts; Integration; Effectiveness 48 SECTION 9.07. Severability 49 SECTION 9.08. Right of Setoff 49 SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process 49 SECTION 9.10. WAIVER OF JURY TRIAL 50 SECTION 9.11. Headings 50 SECTION 9.12. Confidentiality 50 SECTION 9.13. Interest Rate Limitation 51 SCHEDULE 1 Commitments and Lending Offices EXHIBIT 1.01.1 Assignment and Acceptance EXHIBIT 1.01.2 Borrowing Request EXHIBIT 1.01.3 Disclosure Schedule EXHIBIT 2.08 Promissory Note EXHIBIT 3.13 Significant Subsidiaries EXHIBIT 3.14 Funded Debt EXHIBIT 4.01(b) Form of legal opinion of Borrower's counsel EXHIBIT 4.01(f) Form of Global Crossing Consent EXHIBIT 6.01 Indebtedness of RTMC Holdings, Inc. EXHIBIT 6.02 Existing Liens EXHIBIT 6.05 Existing restrictions on creation of liens, etc. CREDIT AGREEMENT dated as of April 29, 1999, among FRONTIER CORPORATION, the LENDERS from time to time party hereto, MORGAN STANLEY SENIOR FUNDING, INC., as administrative agent for the Lenders (in this capacity, the "Administrative Agent"), THE FIRST NATIONAL BANK OF CHICAGO as syndication agent (in this capacity, the "Syndication Agent"), MORGAN STANLEY SENIOR FUNDING, INC., as lead arranger and book manager (in this capacity, the "Arranger") and FLEET NATIONAL BANK, as documentation agent (in this capacity, the "Documentation Agent"). The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, is bearing interest at a rate determined by reference to the Alternate Base Rate. "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" has the meaning specified in the recital of parties to this Agreement. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person who directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "Applicable Margin" means 0.50% per annum. "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Arranger" has the meaning specified in the recital of parties to this agreement. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, substantially in the form of Exhibit 1.01.1 or any other form approved by the Administrative Agent. "Availability Period" means the period from and including the Effective Date to but excluding the earlier of the date falling (a) seven days after the Effective Date (or if such date is not a Business Day, the first Business Day to occur after such date) and (b) the date of termination by the Borrower of the Commitments pursuant to Section 2.07 (b). "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means Frontier Corporation, a New York corporation. "Borrowing" means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. "Borrowing Request" means a request by the Borrower for a Borrowing in accordance with Section 2.03, substantially in the form of Exhibit 1.01.2 to this Agreement. "Bridge Credit Facility" means the $50,000,000 loan facility made available to the Borrower under a Credit Agreement dated as of April 14, 1999 made between the Borrower, the lenders described therein and Morgan Stanley Senior Funding, Inc., as administrative agent, lead arranger and book arranger. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Change in Control" means (a) the acquisition of ownership, directly or indirectly, beneficially or of record; by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of shares representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated; or (c) the acquisition of direct or indirect Control of the Borrower by any Person or group; provided that a Change in Control shall be deemed to have occurred on consummation of the transactions contemplated by the Global Crossing Transaction. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.13(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Commitment is set forth on Schedule 1, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders' Commitments is $250,000,000. "Consolidated Interest Expense" means for any period for which such amount is being determined, the interest expense of the Borrower and its Consolidated Subsidiaries for such period, as reported on the relevant financial statements delivered pursuant to Sections 5.01(a) and 5.01(b). "Consolidated Net Income" means the net income of the Borrower and its Consolidated Subsidiaries, after taxes and after extraordinary items, as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Worth" means the Net Worth of the Borrower and its Consolidated Subsidiaries, as determined on a consolidated basis in accordance with GAAP. For this purpose, "Net Worth" of a Person means, at any date of determination thereof, the excess of total assets of the Person over total liabilities of the Person, determined in accordance with GAAP. "Consolidated Tangible Net Worth" means the Tangible Net Worth of the Borrower and its Consolidated Subsidiaries, as determined on a consolidated basis in accordance with GAAP. For this purpose, "Tangible Net Worth" of a Person means, at any date of determination thereof, the excess of total Tangible Assets of the Person over total liabilities of the Person, determined in accordance with GAAP. "Consolidated Subsidiary" means any Subsidiary whose accounts are or are required to be consolidated with the accounts of the Borrower in accordance with GAAP. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amounts of such Lender's Loans at such time. "Default" means any event or condition which (a) constitutes an Event of Default, (b) upon notice, lapse of time or both would, unless cured or waived, become an Event of Default, or (c) constitutes a "Default", as such term is defined in the $200,000,000 Credit Agreement or the $275,000,000 Credit Agreement. "Disclosed Matters" means the actions, suits and proceedings and the environmental matters disclosed in Exhibit 1.01.3. "dollars" or "$" refers to lawful money of the United States of America. "EBITDA" means the sum of the following items measured for the twelve month period ending on the last day of each fiscal quarter: (a) Consolidated Net Income calculated after eliminating extraordinary and/or non-recurring items, to the extent included in the determination of Consolidated Net Income, plus (b) depreciation, amortization, and all other non-cash charges included in the determination of Consolidated Net Income, plus (c) income taxes to the extent that they reduce Consolidated Net Income, plus (d) Consolidated Interest Expense. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02). "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Article VII. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.15(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.15(a). "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Funded Debt" means, with respect to any Person, all Indebtedness of such Person (including current maturities), for money borrowed (including Capital Leases), which by its terms matures more than one year from the date as of which such Funded Debt is incurred, and any such Indebtedness of such Person maturing within one year from such date which is renewable or extendable at the option of the obligor to a date beyond one year from such date (whether or not theretofore renewed or extended), including any such Indebtedness renewable or extendable at the option of the obligor under, or payable from the proceeds of other Indebtedness which may be incurred pursuant to, the provisions of any revolving credit agreement or other similar agreement. "GAAP" means generally accepted accounting principles in the United States of America. "Global Crossing Transaction" means the merger contemplated by the Agreement and Plan of Merger, dated as of March 16, 1999, among Global Crossing Ltd., GCF Acquisition Corp. and the Borrower. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Granting Lender" has the meaning set forth in Section 9.04(g). "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect or guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of banker's acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Index Debt" means senior, unsecured, long-term indebtedness for borrowed money of the Borrower that is not guaranteed by any other Person or subject to any other credit enhancement. "Information Memorandum" means the Confidential Information Memorandum dated April 1999 relating to the Borrower and the Transactions. "Interest Election Request" means a request by the Borrower to convert or continue a Borrowing or to select Interest Periods in accordance with Section 2.06. "Interest Payment Date" means (a) with respect to any ABR Loan, the last day of each March, June, September and December and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period. "Interest Period" means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the immediately preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made. "Lenders" means the Persons listed on Schedule 1 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in U.S. Dollars at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period for a term comparable to such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan" means a loan made by the Lenders to the Borrower pursuant to this Agreement. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under this Agreement or (c) the rights of or benefits available to the Lenders under this Agreement. "Material Indebtedness" means Indebtedness (other than the Loans) or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Significant Subsidiaries in an aggregate principal amount exceeding $10,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Significant Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Significant Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Maturity Date" means the earlier to occur of: (a) April 27, 2000; and (b) the date of occurrence of a Change in Control. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Note" has the meaning set forth in Section 2.08(e) of this Agreement. "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "Participant" has the meaning set forth in Section 9.04(e). "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Permitted Encumbrances" means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; and (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary, provided that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by The Chase Manhattan Bank as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Register" has the meaning set forth in Section 9.04. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Required Lenders" means, during the Availability Period, Lenders having Credit Exposures and unused Commitments representing more than 50% of the sum of the total Credit Exposures and unused Commitments at such time and, thereafter, Lenders having Credit Exposures representing more than 50% of the total Credit Exposures at such time. "Significant Subsidiary" means at any time any Subsidiary of the Borrower (i) whose total assets constituted 10% or more of Consolidated Tangible Net Worth as of the end of the most recent fiscal quarter or (ii) whose "attributable" net income contributed 10% or more of Consolidated Net Income for the fiscal year most recently ended. The percentage of any Subsidiary's net income "attributable" to such Subsidiary for purposes of such computation shall be the same percentage of such Subsidiary's net income as is included in Consolidated Net Income. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to three months, and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" means any subsidiary of the Borrower. "Tangible Assets" means, at any date of determination thereof, in each case to the extent included in Consolidated Net Worth, total assets minus any share capital discount and expense, any unamortized discount and expense on Indebtedness, any write-up of assets, any excess of cost over market value of investments, any development, pre-operating, pre-production, and start-up expenses, any good will, and any other intangible assets. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Three-Month Secondary CD Rate" means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release II.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. "Transactions" means the execution, delivery and performance by the Borrower of this Agreement, the borrowing of Loans, and the use of proceeds thereof. "$200,000,000 Credit Agreement" means the $200,000,000, 364 day Credit Agreement, dated as of November 10, 1998, among the Borrower, The Chase Manhattan Bank, as administrative agent, and the lenders party thereto. "$275,000,000 Credit Agreement" means the $275,000,000 Credit Agreement, dated as of November 10, 1998, among the Borrower, The Chase Manhattan Bank, as administrative agent, Fleet Bank, as syndication agent, Marine Midland Bank, as documentation agent, Chase Securities, Inc., as lead arranger and book manager, and the lenders party thereto. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Type (e.g. a "Eurodollar Loan" or an "ABR Loan"). Borrowings also may be classified and referred to by Type (e.g., a "Eurodollar Borrowing" or an "ABR Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The world "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any references herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections and Exhibits shall be construed to refer to Articles and Sections of, and Exhibits to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contact rights. SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. ARTICLE II The Credits SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender's Credit Exposure exceeding such Lender's Commitment. Amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed. SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments and all other rights and obligations of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.12, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) Each Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $10,000,000. SECTION 2.03. Requests for Borrowings. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing and (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. SECTION 2.04. Notice of Borrowing Request. Promptly following receipt of a Borrowing Request in accordance with Section 2.03, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing Request. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount, with interest thereon for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.06. Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may, subject to the provisions of Section 2.02(c), elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Borrower shall not be entitled to select an Interest Period which would end after April 27, 2000. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. SECTION 2.07. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the last day of the Availability Period. (b) The Borrower may at any time during the Availability Period terminate, or reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000 and (ii) the Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.09, the sum of the Credit Exposures would exceed the total Commitments. (c) The Commitments shall automatically be reduced on prepayment of a Borrowing under Section 2.09 in an aggregate amount equal to such prepayment. (d) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and (in the case of each Eurodollar Loan) the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by a promissory note (each a "Note"). In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) substantially in the form of Exhibit 2.08 to this Agreement. Thereafter, the Loans evidenced by such Notes and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more Notes in such form payable to the order of the payee named therein (or, if such Note is a registered Note, to such payee and its registered assigns). SECTION 2.09. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section. (b) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that such notice may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified date of prepayment) if such condition is not satisfied. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11 and, in the case of prepayment of any Eurodollar Loan, any amount due in respect of such prepayment under Section 2.14. SECTION 2.10. Fees. (a) The Borrower shall pay to the Administrative Agent, for the account of the Lenders, an up-front fee in an amount equal to 0.025% of the total Commitments of $250,000,000. The up-front fee is payable on the date of the initial Borrowing hereunder, and the Borrower hereby authorizes the Administrative Agent to withhold the amount of such up-front fee from the amount of the initial Borrowing. (b) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (c) The Borrower agrees to pay to the Arranger, for its own account, an underwriting fee in the amount and at the time separately agreed upon by the Borrower and the Arranger. (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of the up-front fee to the Lenders, in the proportions agreed between the Arranger and the Lenders and, in the case of the underwriting fee, to the Arranger. Fees paid shall not be refundable under any circumstances. SECTION 2.11. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate. (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (d) Accrued interest on each Loan is payable in arrears on each Interest Payment Date for such Loan and on the Maturity Date; provided that (A) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (B) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (C) in the event of any conversion of any Loan, accrued interest on such Loan shall be payable on the effective date of such conversion. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.12. Alternate Rate of Interest - Eurodollar Borrowings. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period, then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.13. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.09(b) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.15. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or each Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from the reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or fees or of amounts payable under Section 2.13, 2.14 or 2.15, or otherwise) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set- off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at its account held with Citibank, N.A., ABA no. 021 000 089, for the account of Morgan Stanley Senior Funding, Inc., account no. 40699776, reference Frontier Corporation, attention L. Frattaroli, except that payments pursuant to Sections 213, 2.14, 2.15 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or to any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent if may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(b) or 2.16(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. Nothing herein shall be construed so as to prevent a Lender from organizing its activities as such Lender in its sole discretion thinks fit. (b) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payment required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE III Representations and Warranties The Borrower represents and warrants to the Lenders that: SECTION 3.01. Organization; Powers. Each of the Borrower and its Significant Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 3.02. Authorization, Enforceability. The Transactions are within the Borrower's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower had heretofore furnished to the Lenders its (i) consolidated balance sheet and statements of income, stockholders equity and cash flows as of and for the fiscal year ended December 31, 1998, reported on by Pricewaterhouse Coopers, LLP, independent public accounts, and (ii) its consolidated statements of income as of and for the fiscal quarter and the portion of the fiscal year ended March 31, 1999, certified by its chief financial officer or treasurer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) Since December 31, 1998, there has been no material adverse change in the business, assets, performance, operations, properties, prospects or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole (other than any such change or changes as at the date of this Agreement disclosed or relating to disclosures contained in the filings, since December 31, 1998, of the Borrower with the Securities and Exchange Commission). SECTION 3.05. Properties. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. (b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this Agreement or the Transactions. (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (c) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08. Investment and Holding Company Status. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. SECTION 3.12. Year 2000. The Borrower reasonably expects to complete any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) the Borrower's and its Subsidiaries' computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others to the Borrower) either or both of which the Borrower and its Subsidiaries plan to utilize in and following the year 2000, and the testing of all such systems and equipment, as so reprogrammed. The cost to the Borrower and its Subsidiaries of such reprogramming and testing and reasonably foreseeable remediation is not expected to result in a Default or a Material Adverse Effect. Except for remediation referred to in the preceding sentence, the computer and management information system of the Borrower and its Subsidiaries are expected to continue for the term of this Agreement to be sufficient to permit the Borrower to conduct its business without Material Adverse Effect. SECTION 3.13. Significant Subsidiaries. Exhibit 3.13 lists the name, address and state of incorporation of each Subsidiary that constitutes a Significant Subsidiary as of the date of this Agreement, along with the computation by which the Borrower has made such determination. Such Exhibit also describes the Indebtedness of each Significant Subsidiary, and each Lien to which any of the assets of each Significant Subsidiary are subject, on the date hereof. SECTION 3.14. Borrower's Funded Debt. Exhibit 3.14 describes all Funded Debt of the Borrower as of the date hereof, and no agreement, promissory note or other instrument related to or evidencing such Funded Debt contains any covenant or event of default that is more favorable to the lenders of such Funded Debt than are the covenants and Events of Default in this Agreement to the Lenders. ARTICLE IV Conditions SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Martin T. McCue, Esq., Senior Vice President and General Counsel of the Borrower, as counsel for the Borrower, substantially in the form of Exhibit 4.01(b), which opinion shall also cover such other matters relating to the Borrower, this Agreement or the Transactions as the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion. (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to the Borrower, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. (e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. (f) The Administrative Agent shall have received a copy of a consent duly signed by Global Crossing Ltd., substantially in the form of Exhibit 4.01(f). (g) The Administrative Agent shall have received a copy of a prepayment notice of the Bridge Credit Facility in full, duly signed by the Borrower. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on April 29, 1999 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.02. Each Borrowing. The obligation of each Lender to make a Loan on the occasion of any Borrowing, is subject to the satisfaction of the following conditions: (a) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct and as of the date of such Borrowing. (b) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender: (a) as soon as available and in any event within 100 days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by PricewaterhouseCoopers, LLP or other independent public accountants of recognized national standing selected by Borrower (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) as soon as available and in any event within 55 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 6.06 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request; and (g) with each financial report submitted pursuant to Sections 5.01(a) and 5.01(b), a separate report describing (i) the names of each Significant Subsidiary as of the date of the balance sheet set forth in such report and of each Subsidiary (or former Subsidiary) listed on the last such report but not on the current report, along with the computation by which Borrower determined that each such Subsidiary (or former Subsidiary) did or did not constitute a Significant Subsidiary, (ii) the name, address, form and state of organization of each Subsidiary that became a Significant Subsidiary since the date of Borrower's latest such report, (iii) the Indebtedness of each Significant Subsidiary listed on such report, and each Lien to which any of the assets of each such Significant Subsidiary were subject, as of the date of such report, and (iv) as of the date of such report, the total outstanding Indebtedness of Borrower's Subsidiaries. SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $10,000,000; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each of its Significant Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03. SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Significant Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. SECTION 5.06. Books and Records Inspection Rights. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities in accordance with GAAP. The Borrower will, and will cause each of its Significant Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority (including, without limitation, all Environmental Laws and ERISA) applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used only for refinancing the Bridge Credit Facility and for the working capital and general corporate purposes of the Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations G, U and X. SECTION 5.09. Other Funded Debt of Borrower. If after the date of this Agreement, Borrower either incurs new Funded Debt (other than pursuant to this Agreement and other than that described in Exhibit 3.14) or amends any document related to any Funded Debt (other than pursuant to this Agreement) or pursuant to which Borrower has the right to borrow Funded Debt, and if any of the covenants or events of default, contained in any document, agreement or instrument from time to time entered into by the Borrower in respect of such Funded Debt is more favorable to the lenders of such Funded Debt, than are the terms of this Agreement to the Lenders, (i) the Borrower shall promptly notify the Administrative Agent of such incurrence or amendment, (ii) the Administrative Agent shall, in turn, so notify each Lender, and (ii) this Agreement shall be amended to contain each such more favorable covenant or event of default, and the Borrower hereby agrees to so amend this Agreement and to execute and deliver all such documents requested by the Required Lenders to reflect such Amendment. Prior to the execution and delivery of such documents by the Borrower, this Agreement shall be deemed to contain each such more favorable covenant or event of default for purposes of determining the rights and obligations hereunder. ARTICLE VI Negative Covenants Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full the Borrower covenants and agrees with the Lenders that: SECTION 6.01. Indebtedness of Subsidiaries. Borrower shall not permit any of its Subsidiaries to create, incur, assume or suffer to exist any Indebtedness if at the time or as a result thereof the outstanding principal amount of all Subsidiary Indebtedness aggregates or would aggregate more than $500,000,000. For purposes of the foregoing sentence, the Indebtedness of RTMC Holdings, Inc. described in Exhibit 6.01 shall be subject to the $500,000,000 maximum only to the extent that the Indebtedness of Upstate Cellular Network underlying such Indebtedness of RTMC Holdings, Inc. has become due and payable by RTMC Holdings, Inc. SECTION 6.02. Liens. The Borrower will not, and will not permit any Significant Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or gifts in respect of any thereof, except: (a) Permitted Encumbrances; (b) any Lien on any property or asset of the Borrower or any Significant Subsidiary existing on the date hereof and set forth in Exhibit 6.02; provided that (i) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) Liens securing obligations of a Significant Subsidiary to Borrower or to another Significant Subsidiary; (d) purchase money Liens on any property hereafter acquired by Significant Subsidiaries that are regulated public utilities, or the assumption by such Subsidiaries of Liens on property existing at the time of such acquisition, or Liens incurred by such Subsidiaries in connection with any conditional sale or other title retention agreements or Capital Leases; and purchase money Liens on transmission equipment hereafter acquired by Significant Subsidiaries that are not regulated public utilities, or the assumption by such Subsidiaries of Liens on transmission equipment existing at the time of such acquisition, or Liens incurred by such Subsidiaries in connection with any acquisition of transmission equipment pursuant to any conditional sale or other title retention agreements or Capital Leases; and Liens attaching to the assets of businesses acquired by the Borrower or any Significant Subsidiary by merger, consolidation or the purchase of stock, which Liens existed at the time of such acquisition; provided, in each case, that: (i) any property subject to any of the foregoing is acquired by Borrower or any such Subsidiary in the ordinary course of its business and the Lien on any such property is created prior to or contemporaneously with such acquisition; (ii) the obligation secured by any Lien so created, assumed or existing shall not exceed 100% of the lesser of cost or fair market value as of the time of acquisition of the property covered thereby to Borrower or such Subsidiary acquiring the same; and (iii) each such Lien shall attach only to the property so acquired and fixed improvements thereon, and shall secure only those obligations which it secures on the date of such acquisition, and extensions, renewals or replacements thereof that do not increase the outstanding principal amount thereof. SECTION 6.03. Fundamental Changes. (a) The Borrower will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets, (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing, any Person may merge into the Borrower in a transaction in which the Borrower is the surviving corporation. (b) The Borrower shall not (i) permit any Significant Subsidiary to merge or consolidate with, or sell, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any Person (or enter into any agreement to do any of the foregoing), except that (x) any Significant Subsidiary may merge into or transfer assets to the Borrower; and (xx) any Significant Subsidiary may merge into or consolidate with or transfer assets to any other Subsidiary of the Borrower; or (ii) sell or dispose of any equity or voting interest in any Significant Subsidiary, except that Borrower shall be permitted to sell or dispose of such equity or voting interest as long as the purchaser or transferee is an entity in which Borrower owns an equity interest; provided, however, that the transactions prohibited in clauses (i) and (ii) above shall be permitted as long as (x) the proceeds thereof are received entirely in cash by the Borrower or a Significant Subsidiary, as the case may be, and (xx) unless waived by all the Lenders, upon completion of any such transaction, the Borrower prepays Loans in an amount that is not less than the amount determined in accordance with the next sentence. The amount by which Loans shall be prepaid pursuant to the preceding sentence shall be not less than (z) the amount of the cash proceeds received in the transaction less the expenses of, and any income and other taxes estimated to be due as a result of, the transaction, times (zz) a fraction whose numerator is the total amount of the outstanding Loans prior to such reduction and whose denominator is the sum of such total outstanding Loans and the total amount of the available commitments and the aggregate principal amount of the loans outstanding immediately prior to the transaction, under the $200,000,000 Credit Agreement and the $275,000,000 Credit Agreement. SECTION 6.04. Transactions with Affiliates. The Borrower will not, and will not permit any of its Significant Subsidiaries to sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Borrower and its Subsidiaries not involving any other Affiliate. SECTION 6.05. Restrictive Agreements. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Significant Subsidiary to pay dividends or other distribution with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by this Agreement, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Exhibit 6.05 (but shall apply to any amendment or modification expanding the scope of any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof, (vi) clause (b) of the foregoing shall not apply to Subsidiaries that are regulated public utilities, to the extent that the agencies charged with regulating them (as public utilities) may specifically prohibit or limit dividend payments, (vii) the foregoing shall not apply to restrictions that apply to Significant Subsidiaries that were acquired as Subsidiaries after the date hereof, if such Significant Subsidiaries were subject to such restrictions at the time of acquisition and if such restrictions do not extend to Borrower or any other Significant Subsidiary, and (viii) clause (b) of the foregoing shall not apply to the existence and operation of financial covenants, such as maximum debt to net worth or minimum working capital ratios, as long as they do not specifically prohibit or restrict dividend payments or other distributions. SECTION 6.06. Interest Coverage. The Borrower will not permit the ratio of EBITDA to Consolidated Interest Expense to be less than 4.50 to 1 for each twelve month period ending on the last day of each fiscal quarter. ARTICLE VII Events of Default If any of the following events ("Events of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay (i) any interest on any Loan or any facility fee payable under this Agreement, when and as the same shall become due and payable and such failure shall continue unremedied for a period of five days, or (ii) any other fee or any other amount payable under this Agreement (other than an amount referred to in clause (a) or clause (b)(i) of this Article), when and as the same shall become due and payable, and such failure shall continue unremedied for a period of ten days after notice to the Borrower from the Administrative Agent or from the Lender to which such amount is payable; (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any amendment or modification hereof or waiver hereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any amendment or modification hereof or waiver hereunder, shall prove to have been incorrect when made or deemed made; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the Borrower's existence only) or 5.08 or in Article VI; (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days; (f) the Borrower or any Significant Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its schedule maturity; provided that this clause shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 30 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) the Borrower or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (j) the Borrower or any Significant Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due; (k) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against the Borrower, any Significant Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Significant Subsidiary to enforce any such judgment; (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or (m) the occurrence of an "Event of Default", as such term is defined in the $200,000,000 Credit Agreement or the $275,000,000 Credit Agreement. then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE VIII The Administrative Agent Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub- agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may at any time and, upon request by the Required Lenders, shall forthwith, resign by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. ARTICLE IX Miscellaneous SECTION 9.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at 180 South Clinton Avenue, Rochester, New York 14646, Attention of Treasurer (Telecopy No. (716) 325-7638), with a copy to 180 South Clinton Avenue, Rochester, New York 14646, Attention of Corporate Counsel (Telecopy No. (716) 324-7639); (b) if to the Administrative Agent, to Morgan Stanley Senior Funding, Inc., 1585 Broadway, New York, New York 10036, Attention of Jim Morgan (Telecopy No. 212 761-0592); and (c) if to any Lender, to it at its address (or telecopy number, set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender,(ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) amend Section 9.04(g) without the written consent of each Granting Lender or (vi) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Arranger, the Syndication Agent, the Documentation Agent and their respective Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with (A) all due diligence, (B) syndication of the credit facilities provided for herein (including printing, distribution and bank meetings), (C) transportation, computer, duplication, appraisal, consultant, audit, insurance, search filing and recording expenses and fees and (D) the preparation and administration of this Agreement, the Notes and any other agreement or instrument contemplated hereby, or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans. (b) The Borrower shall indemnify the Administrative Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, the Notes or any other agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, in its capacity as such, and, provided, further, that such expense, loss, claim, damage, liability or related expense was not caused by the Administrative Agent's gross negligence or willful misconduct. (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly after written demand therefor. SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it and any Notes held by it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 with respect to each assignment other than an assignment by a Lender to one of its Affiliates, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default under clause (h) or (i) of Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it and any Notes held by it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iv) such Lender shall remain the holder of any such Note for all purposes of this Agreement and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement or any such Note and to approve any amendment, modification or waiver of any provision of this Agreement or any such Note; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.16(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.15(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (h) Notwithstanding anything to the contrary contained herein, any Lender, (a"Granting Lender") may grant to a special purpose funding vehicle (an "SPC") the option to fund all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or payment under this Agreement for which a Lender would otherwise be liable for so long as, and to the extent, the Granting Lender provides such indemnity or makes such payment. Notwithstanding anything to the contrary contained in this Agreement, any SPC may disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This Section 9.04(g) may not be amended without the written consent of the Granting Lender. SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court for the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction. (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now of hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12. Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidentiality basis from a source other than the Borrower. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] S-1 FRONTIER CORPORATION By________________________________ Name: Title: S-2 MORGAN STANLEY SENIOR FUNDING,INC., as Administrative Agent, Arranger and Lender By ________________________________ Name: Title: THE FIRST NATIONAL BANK OF CHICAGO as Syndication Agent and Lender By ________________________________ Name: Title: FLEET NATIONAL BANK as Documentation Agent and Lender By __________________________________ Name: Title: BANCO DI NAPOLI S.P.A. as Lender By __________________________________ Name: Title: BANK HAPOALIM B.M., as Lender By __________________________________ Name: Title: By __________________________________ Name: Title: BAYERISCHE HYPO-UND VEREINSBANK AG, NEW YORK BRANCH as Lender By __________________________________ Name: Title: By __________________________________ Name: Title: BANK OF MONTREAL as Lender By __________________________________ Name: Title: BANCA NAZIONALE DEL LAVORO S.p.A. - New York Branch as Lender By __________________________________ Name: Title: BANCO SANTANDER CENTRAL HISPANOS.A. as Lender By __________________________________ Name: Title: CoBANK, ACB as Lender By __________________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED as Lender By __________________________________ Name: Title: FIFTH THIRD BANK as Lender By __________________________________ Name: Title: NATIONAL BANK OF KUWAIT, S.A.K., GRAND CAYMAN BRANCH as Lender By __________________________________ Name: Title: By __________________________________ Name: Title: MELLON BANK, N.A. as Lender By __________________________________ Name: Title: MERITA BANK PLC as Lender By __________________________________ Name: Title: CARIPLO-CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SpA as Lender By __________________________________ Name: Title: By __________________________________ Name: Title: VIA BANQUE as Lender By __________________________________ Name: Title: LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE By __________________________________ Name: Title: SCHEDULE I COMMITMENTS AND LENDING OFFICES Print this table without graphics. Domestic Eurodollar Term Lending Lending Name of Initial Commitment Office Office Lender Morgan Stanley $5,000,000 Morgan Stanley Morgan Stanley Senior Funding, Senior Funding, Senior Funding, Inc. Inc. Inc. 1585 Broadway 1585 Broadway 10th Floor 10th Floor New York, NY New York, NY 10036 10036 Attn: Jim Morgan Attn: Jim Morgan T: (212) 761-4866 T: (212) 761-4866 F: (212) 761-0592 F: (212) 761-0592 The First $24,000,000 The First The First National Bank National Bank of National Bank of of Chicago Chicago Chicago IFNP ILI-0634 IFNP ILI-0634 Chicago, IL Chicago, IL 60670 60670 Attn: John Attn: John Beirne Beirne T:(312) 732-3659 T: (312) 732-3659 F:(312) 732-4840 F: (312) 732-4840 Fleet National $24,000,000 Fleet National Fleet National Bank Bank Bank 1 East Avenue 1 East Avenue NYRO3016 NYRO3016 Rochester, NY Rochester, NY 14534 14534 Attn: Sheila Attn: Sheila Hanley Hanley T:(716) 546-9020 T:(716) 546-9020 F:(716) 546-9800 F:(716) 546-9800 Banco di Napoli $19,000,000 Banco di Napoli Banco di Napoli S.P.A. S.P.A. S.P.A. 4 East 54th 4 East 54th Street Street New York, NY New York, NY 10022 10022 Attn: Vincenzo Attn: Vincenzo Orlando Orlando T:(212) 872-2427 T:(212) 872-2427 F:(212) 872-2426 F:(212) 872-2426 Bank Hapoalim $19,000,000 Bank Hapoalim Bank Hapoalim B.M. B.M. B.M. 1177 Avenue of 1177 Avenue of the Americas the Americas New York, NY New York, NY 10036-2790 10036-2790 Attn: Donna Attn: Donna Gindoff Gindoff T:(212) 782-2179 T:(212) 782-2179 F:(212) 782-2187 F: (212) 782-2187 Bayerische Hypo- $19,000,000 Bayerische Hypo- Bayerische Hypo- und Vereinsbank and Vereinsbank and Vereinsbank AG, New York AG, New York AG, Grand Cayman Branch Branch Branch c/o 150 East 42nd Bayerische Hypo- Street and Vereinsbank AG New York, NY 150 East 42nd St 10017 New York, NY 10017 Attn: Christian Attn: Christian Walter Walter T:(212) 672-5460 T:(212) 672-5460 F:(212) 672-5540 F: (212) 672-5530 Bank of $17,000,00 Bank of Montreal Bank of Montreal Montreal 115 South LaSalle 115 South LaSalle Street Street Chicago, IL Chicago, IL 60603 60603 Attn: Josie Attn: Josie Nichols Nichols T:(312) 750-3748 T: (312) 750-3748 F:(312) 750-6061 F: (312) 750-6061 Banca Nazionale $17,000,00 Banca Nazionale Banca Nazionale del Lavoro del Lavoro S.p.A. del Lavoro S.p.A. S.p.A. - New - New York Branch - New York Branch York Branch 25 West 51st 25 West 51st Street Street New York, NY New York, NY 10019 10019 Attn: Giulio Attn: Giulio Giovine Giovine T:(212) 314-0239 T: (212) 314-0239 F:(212) 765-2978 F: (212) 765-2978 Banco Santander $17,000,000 Banco Santander Banco Santander Central Hispano Central Hispano Central Hispano S.A. S.A. - New York S.A. - New York Branch Branch 50 Broadway 50 Broadway New York, NY New York, NY 10004 10004 Attn: Jesus Attn: Jesus Lopez Lopez T:(212) 361-5143 T: (212) 361-5143 F:(212) 361-5149 F: (212) 361-5149 CoBank, ACB $17,000,000 CoBank, ACB CoBank, ACB 5500 S. Quebec 5500 S. Quebec St. St. Englewood, CO Englewood, CO 80111 80111 Attn: Deanne Attn: Deanne Sullivan Sullivan T:(303) 740-4315 T: (303) 740-4315 The Industrial $17,000,000 The Industrial The Industrial Bank of Japan, Bank of Japan, Bank of Japan, Limited Limited Limited New York Branch New York Branch 1251 Avenue of 1251 Avenue of the Americas the Americas New York, NY New York, NY 10020-1104 10020-11104 Attn: Richard Attn: Richard Emmich Emmich T:(212) 282-4067 T:(212) 282-4067 F:(212) 282-4480 F:(212) 282-4480 Fifth Third $13,000,000 Fifth Third Bank Fifth Third Bank Bank 38 Fountain 38 Fountain Square Plaza Square Plaza MD 109054 MD 109054 Cincinnati, OH Cincinnati, OH 45262 45262 Attn: Jennifer Attn: Jennifer Pund Pund T:(513) 579-5389 T: (513) 579-5389 F:(513) 579-5226 F: (513) 579-5226 National Bank $13,000,000 National Bank of National Bank of of Kuwait, Kuwait, S.A.K., Kuwait, S.A.K., S.A.K., Grand Grand Cayman Grand Cayman Cayman Branch Branch Branch 299 Park Avenue 299 Park Avenue New York, NY New York, NY 10171-0023 10171-0023 Attn: Ms. Thelma Attn: Ms. Thelma Chaudry Chaudry T:(212) 303-9821 T: (212) 303-9821 F:(212) 319-8269 F: (212) 319-8269 Mellon Bank, $7,000,000 Mellon Bank, N.A. Mellon Bank, N.A. N.A. 3 Mellon Bank 3 Mellon Bank Center Center Rm. 1203 Rm. 1203 Pittsburgh, PA Pittsburgh, PA 15259 15259 Attn: Genie Attn: Genie McCreary McCreary T:(412) 234-4749 T: (412) 234-4749 F:(412) 209-6129 F: (412) 209-6129 Merita Bank Plc $7,000,000 Merita Bank Plc Merita Bank Plc 437 Madison 437 Madison Avenue Avenue 21st Floor 21st Floor New York, NY New York, NY 10022 10022 Attn: Thelma Attn: Thelma Dongallo Dongallo T:(212) 318-9348 T: (212) 318-9348 F:(212) 421-4420 F: (212) 421-4420 CARIPLO-Cassa $5,000,000 CARIPLO-Cassa di CARIPLO-Cassa di di Risparmio Risparmio delle Risparmio delle delle Provincie Provincie Provincie Lombarde SpA Lombarde SpA Lombarde SpA 10 East 53rd 10 East 53rd Street Street New York, NY New York, NY 10022 10022 Attn: Marilena Attn: Marilena Greene, AVP Greene, AVP T:(212) 527-8744 T:(212) 527-8744 F:(212) 527-8777 F: (212) 527-8777 Via Banque $5,000,000 Via Banque Via Banque 10 rue Volney 10 rue Volney 75002 PARIS 75002 PARIS Att: Mrs. Att: Mrs. Plissard/Mr. Plissard/Mr. Camut Camut T: 33 14 926-2853 T: 33 14 926-2853 F: 33 14 926-2999 F: 33 14 926-2999 Landesbank $5,000,000 Landesbank Landesbank Schleswig- Schleswig- Schleswig- Holstein Holstein Holstein Girozentrale Girozentrale Girozentrale Martensdamm 6 Martensdamm 6 24103 Kiel / 24103 Kiel / Germany Germany Attn: Dr. Attn: Dr. Nikolai Ulrich Nikolai Ulrich T:+49 431 900 2166 T:+49 431 900 2166 F:+49 431 900 2751 F:+49 431 900 2751 EXHIBIT 1.01.1 - FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of April 29, 1999 (as amended or modified from time to time, the "Credit Agreement") among Frontier Corporation, a New York corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement), Morgan Stanley Senior Funding, Inc., as administrative agent for the Lenders (the "Administrative Agent") and as lead arranger and book manager, The First National Bank of Chicago as syndication agent and Fleet National Bank as documentation agent. Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule I hereto agree as follows: 1. The Assignor hereby sells and assigns to the Assignee without recourse, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the Loans owing to the Assignee will be as set forth on Schedule 1 hereto. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iv) attaches the Note held by the Assignor and requests that the Administrative Agent exchange such Note for a new Note payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto or new Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an amount equal to the Commitment retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 3.04 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (iv) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; and (v) attaches any applicable documentation required under Section 2.15(e) of the Credit Agreement. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date of acceptance hereof by the Administrative Agent, unless otherwise specified on Schedule 1 hereto. 5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and facility fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. Schedule 1 to Assignment and Acceptance Percentage interest assigned: _____% Assignee's Commitment: $_______________ Aggregate outstanding principal amount of Loans assigned: $_______________ Principal amount of Note payable to Assignee: $_______________ Principal amount of Note payable to Assignor: $_______________ Effective Date: _______________, 199_/200_ [NAME OF ASSIGNOR], as Assignor By Title: Dated: _______________, 199_ [NAME OF ASSIGNEE], as Assignee By Title: Domestic Lending Office: [Address] Eurodollar Lending Office: [Address] Accepted this __________ day of _______________, 199_/200_ Morgan Stanley Senior Funding, Inc., as Administrative Agent By Title: [Approved this __________ day of _______________, 199_/200_ FRONTIER CORPORATION By ] Title: EXHIBIT 1.01.2 - FORM OF BORROWING REQUEST Morgan Stanley Senior Funding, Inc., as Administrative Agent for the Lenders parties to the Credit Agreement referred to below [Date] Attention: ____________________ Ladies and Gentlemen: The undersigned, Frontier Corporation, refers to the Credit Agreement, dated as of April 29, 1999 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto and Morgan Stanley Senior Funding, Inc., as Administrative Agent for said Lenders and as lead arranger and book manager, The First National Bank of Chicago as syndication agent and Fleet National Bank as documentation agent, and hereby gives you notice, irrevocably, pursuant to Section 2.03 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.03(a) of the Credit Agreement: (i) The Business Day of the Proposed Borrowing is _______________, 199_/200_. (ii) The Type of Loans comprising the Proposed Borrowing is [ABR Loans] [Eurodollar Loans]. (iii) The aggregate amount of the Proposed Borrowing is $_______________. [(iv) The initial Interest Period for each Eurodollar Loan made as part of the Proposed Borrowing is __________ month[s].] The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in Article 3 of the Credit Agreement are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and (B) no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Default. Very truly yours, FRONTIER CORPORATION By Title: EXHIBIT 2.08 FORM OF NOTE U.S.$_______________ Dated: _______________, 199_ FOR VALUE RECEIVED, the undersigned, FRONTIER CORPORATION, a New York corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") on the Maturity Date (as defined in the Credit Agreement referred to below) the principal sum of U.S.$[amount of the Lender's Commitment in figures] or, if less, the aggregate principal amount of the Loans made by the Lender to the Borrower pursuant to the Credit Agreement dated as of April 29, 1999 among the Borrower, the Lender and certain other lenders parties thereto, and Morgan Stanley Senior Funding, Inc., as Administrative Agent for the Lender and such other lenders described therein, and as lead arranger and book manager, The First National Bank of Chicago as syndication agent and Fleet National Bank as documentation agent (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined) outstanding on the Maturity Date. The Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Morgan Stanley Senior Funding, Inc., as Administrative Agent, at 1585 Broadway, New York, New York 10036, in same day funds. Each Loan owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Loans by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Loan being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. This Promissory Note is governed by, and construed in accordance with, the laws of the State of New York. FRONTIER CORPORATION By Title: LOANS AND PAYMENTS OF PRINCIPAL Amount of Amount of Principal Unpaid Notation Date Loan Paid Principal Made By or Prepaid Balance EX-10 3 EX 10.1 DIR. COMMON STOCK DEF. PLAN FRONTIER CORPORATION DIRECTORS COMMON STOCK DEFERRED GROWTH PLAN Amendment No. 1 Pursuant to Section 14, the Plan is amended, effective March 16, 1999, as follows: 1. Section 9 is amended by deleting the second paragraph of the current provision in its entirety and substituting in its place the following: Prior to a Change in Control (as defined in Section 11), payments from a Participant Account that has been invested in Company securities shall be made only in whole shares of such securities with any fractional share made in cash. On and after a Change in Control, such payments shall be made in cash or in shares, as determined by the participant, in accordance with a participant's election and the provisions of Section 11 hereof. Each participant or beneficiary shall execute any documents reasonably deemed necessary by the Administrator to comply with any applicable securities laws. 2. Section 11 is amended by deleting the current provision in its entirety and substituting in its place the following: 11. Change in Control In the event of a Change in Control, as defined in the trust agreement, amounts credited to Participant Accounts shall be paid out in cash or in shares, as determined by the participant, in accordance with the terms of the trust agreement and any participant elections. If no trust agreement is in effect, "Change in Control" shall have the meaning given this term in the Company's Supplemental Management Pension Plan and benefits shall be paid in accordance with each participant's elections. IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this amendment on its behalf this 23rd day of March, 1999. FRONTIER CORPORATION /s/ Josephine S. Trubek By_________________________ Josephine S. Trubek Title: Corporate Secretary EX-10 4 EX 10.2 DEF. OF DIR. FEES FRONTIER CORPORATION PLAN FOR THE DEFERRAL OF DIRECTORS FEES Amendment No. 1 Pursuant to Section 14, the Plan is amended, effective March 16, 1999, as follows: 1. Section 9 is amended by deleting the second paragraph of the current provision in its entirety and substituting in its place the following: Payments from a Participant Fixed Income Account shall be made only in cash. Prior to a Change in Control (as defined in Section 11), payments from a Participant Common Stock Account shall be made only in whole shares of Common Stock with any fractional share which is part of a lump sum payment or a final installment made in cash. On and after a Change in Control, such payments shall be made in cash or in shares, as determined by the participant, in accordance with a participant's election and the provisions of Section 11 hereof. Each participant or beneficiary shall execute any documents reasonably deemed necessary by the Administrator to comply with any applicable securities laws. 2. Section 11 is amended by deleting the current provision in its entirety and substituting in its place the following: 11. Change in Control In the event of a Change in Control, as defined in the trust agreement, amounts credited to Participant Accounts shall be paid out in cash or in shares, as determined by the participant, in accordance with the terms of the trust agreement and any participant elections. If no trust agreement is in effect, "Change in Control" shall have the meaning given this term in the Company's Supplemental Management Pension Plan and benefits shall be paid in accordance with each participant's elections. IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this amendment on its behalf this 23rd day of March 1999. FRONTIER CORPORATION /s/ Josephine S. Trubek By_________________________ Josephine S. Trubek Title: Corporate Secretary EX-10 5 EX. 10.3 DIR. STOCK INCENTIVE PLAN FRONTIER CORPORATION DIRECTORS STOCK INCENTIVE PLAN Amendment No. 1 Pursuant to Section 12, the Plan is amended, effective March 16, 1999, as follows: 1. Section 13(a) is amended by deleting the current provision in its entirety and substituting in its place the following: (a) Notwithstanding other provisions of the Plan, in the event of a change in control of the Company (as defined in subsection (c) below), all of a participant's options shall become immediately vested and exercisable and all of a participant's certificates held by the Company under a stock grant shall be immediately delivered to the participant. IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this amendment on its behalf this 23rd day of March 1999. FRONTIER CORPORATION /s/ Josephine S. Trubek By___________________________ Josephine S. Trubek Title: Corporate Secretary EX-10 6 EX. 10.4 MGT. STOCK INCENTIVE PLAN FRONTIER CORPORATION MANAGEMENT STOCK INCENTIVE PLAN Amendment No. 4 Pursuant to Section 14, the Plan is hereby amended, effective March 16, 1999, as follows: 1. Section 9(a) is amended by deleting the current provision in its entirety and substituting in its place the following: (a) Options If the employment of a participant terminates by reason of the participant's disability or death, any option may be exercised, in the case of disability, by the participant or, in the case of death, the participant's designated beneficiary (or personal representative if there is no designated beneficiary) at any time prior to the earlier of the expiration date of the option or the expiration of one year after the date of disability or death, but only if, and to the extent that the participant was entitled to exercise the option at the date of disability or death. If the employment of a participant terminates on account of retirement, all of the participant's outstanding options shall become immediately vested and these options together with previously vested but unexercised options may be exercised prior to the earlier of the expiration date of the option or the expiration of 13 months from the date of retirement. For this purpose, "retirement" means any termination of employment on or after a participant is entitled to receive an early retirement benefit under any defined benefit pension plan maintained by the Company or an affiliate in which the participant has any accrued benefit. If the participant does not have an accrued benefit in any such plan, "retirement" means the participant's termination of employment on or after he has reached age 55. Upon termination of the participant's employment for any reason other than retirement, disability or death, all nonvested options held by the participant shall be forfeited and any options that are vested on the date of termination may be exercised prior to the earlier of the expiration date of the option or the expiration of 90 days from the date of termination. An option that remains exercisable after the expiration of three months from termination of employment shall be treated as a NQSO after three months even if it would have been treated as an ISO if exercised with three months of termination. Effective Dates: The reduction, in the first sentence, from three years to one year in the right to exercise options following disability is effective for options granted after December 31, 1998. The definition of retirement, in the new third sentence, is effective January 1, 1999. The provisions in the second sentence for the vesting and exercising of options on account of retirement are effective for options granted after December 31, 1998. The provisions in the fifth sentence concerning the exercise of options upon termination of employment for reasons other than disability, death or retirement are effective January 1, 1999. 2. Section 15(a) is amended by deleting the current provision in its entirety and substituting in its place the following: (a) Notwithstanding other provisions of the Plan, in the event of a change in control of the Company (as defined in subsection (c) below), all of a participant's restricted stock awards shall become immediately vested to the same extent as if all restrictions had been satisfied and all options shall become immediately vested and exercisable. IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this amendment on its behalf this 23rd day of March 1999. FRONTIER CORPORATION /s/ Josephine S. Trubek By: -------------------------- Josephine S. Trubek Title: Corporate Secretary EX-10 7 EX. 10.5 EMP. STOCK OPTION PLAN FRONTIER CORPORATION EMPLOYEES' STOCK OPTION PLAN Amendment No. 2 Pursuant to Section 12, the Plan is amended, effective March 16, 1999, as follows: 1. Section 7 is amended by deleting the first paragraph of the current provision in its entirety and substituting in its place the following: If the employment of a participant terminates by reason of the participant's disability or death, any option may be exercised, in the case of disability, by the participant or, in the case of death, the participant's designated beneficiary (or personal representative if there is no designated beneficiary) at any time prior to the earlier of the expiration date of the option or the expiration of one year after the date of disability or death, but only if, and to the extent that, the participant was entitled to exercise the option on the date of his disability or death. If the employment of a participant terminates on account of retirement, all of the participant's outstanding options shall become immediately vested and these options together with previously vested but unexercised options may be exercised at any time prior to the earlier of the expiration date of the option or the expiration of 13 months from the date of retirement. For this purpose, "retirement" means any termination of employment on or after a participant is entitled to receive an early retirement benefit under any defined benefit pension plan maintained by the Company or an affiliate in which the participant has an accrued benefit. If the participant does not have an accrued benefit in any such plan, "retirement" means the participant's termination of employment on or after he has reached age 55. Upon termination of the participant's employment for any reason other than retirement, disability or death, all non-vested options held by the participant shall be forfeited and any options that are vested on the date of termination may be exercised prior to the earlier of the expiration date of the option or the expiration of 90 days from the date of termination. 2. Section 13(a) is amended by deleting the current provision in its entirety and substituting in its place the following: (a) Notwithstanding any other provisions of the Plan or otherwise to the contrary, in the event of a change in control of the Company (as defined in subsection (c) below), all of a participant's options shall become immediately vested and exercisable. IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this amendment on its behalf this 23rd day of March 1999. FRONTIER CORPORATION /s/ Josephine S. Trubek By: -------------------------- Josephine S. Trubek Title: Corporate Secretary EX-10 8 EX. 10.6 OMNIBUS INCENTIVE PLAN FRONTIER CORPORATION OMNIBUS INCENTIVE PLAN Amendment No. 1 Pursuant to Section 4, the Plan is amended, effective March 16, 1999, as follows: 1. Section 4 is amended by deleting the current provision in its entirety and substituting in its place the following: Prior to a change in control of the Company (as defined in Section 7(b)), this Plan and any module thereto may be amended, modified or terminated by the Company's Board of Directors, the Committee on Management, or the Committee. Following a change in control of the Company, no amendment, modification or termination of the Plan or any module thereto, without the written consent of a participant to whom an award shall theretofore have been granted, shall adversely affect the rights of such participant under such award. 1. Section 7(a) is amended by deleting the current provision in its entirety and substituting in its place the following: (a) Notwithstanding other provisions of the Plan, in the event of a change in control of the Company (as defined in subsection (b) below), any unvested awards of a Participant will become immediately vested in full.. IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this amendment on its behalf this 23rd day of March 1999. FRONTIER CORPORATION /s/ Josephine S. Trubek By___________________________ Josephine S. Trubek Title: Corporate Secretary EX-11 9 COMP. OF DILUTED EPS Exhibit 11 Frontier Corporation Computation of Diluted Earnings Per Common Share (Unaudited)
3 Months Ended In thousands of dollars, March 31, except per share data 1999 1998 - ------------------------------------------------------------- Basic Income Applicable to Common Stock $ 39,651 $ 33,663 Interest expense on convertible debentures, net of tax 90 90 - ------------------------------------------------------------ Diluted Income Applicable to Common Stock $ 39,741 $ 33,753 ============================================================ Weighted Average Shares Outstanding- Basic 171,548 170,071 Stock options and warrants 3,386 2,230 Convertible debentures 503 503 - ------------------------------------------------------------ Weighted Average Shares Outstanding- Diluted 175,437 172,804 ============================================================ Diluted Earnings Per Common Share $ 0.23 $ 0.20 ============================================================
EX-27 10 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FRONTIER CORPORATION'S FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000084567 FRONTIER CORPORATION 1,000 3-MOS DEC-31-1999 MAR-31-1999 97,286 0 483,589 45,787 9,772 589,949 3,406,480 1,573,204 3,248,465 580,041 1,463,612 0 18,286 172,574 880,573 3,248,465 0 674,832 0 594,651 8 0 15,219 70,863 30,961 39,902 0 0 0 39,902 .23 .23
-----END PRIVACY-ENHANCED MESSAGE-----