-----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, Vic4XeOK8SY04wiSTUf604Fv18lr36qocjtwd70AGlgKMJ/hdoxgkdJBKwBO19js b1E4U0XH8ag+HuaT5WC4Qg== 0000950132-99-000090.txt : 19990215 0000950132-99-000090.hdr.sgml : 19990215 ACCESSION NUMBER: 0000950132-99-000090 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19990212 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: S-3 SEC ACT: SEC FILE NUMBER: 333-72333 FILM NUMBER: 99538019 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 S-3 1 FORM S-3 As filed with the Securities and Exchange Commission on February 12, 1999 Registration No. 333- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _______________ FRONTIER CORPORATION (Exact name of registrant as specified in its governing instrument) New York 16-0613330 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) _______________ Martin T. McCue Senior Vice President and General Counsel 180 South Clinton Avenue Rochester, New York 14646-0700 (716) 777-1000 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) _______________ Copies of all correspondence to: Karen Gratch, Esq. Jeffrey L. Forman, Esq. Frontier Corporation Jaffe, Raitt, Heuer & Weiss, P.C. 30300 Telegraph Road One Woodward Avenue Bingham Farms, Michigan 48025-4510 Suite 2400 Detroit, Michigan 48226 Approximate date of commencement of proposed sale to the public: After the effective date of this Registration Statement and from time to time thereafter as determined by market conditions. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ----- If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. X ------ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ----- If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ------ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ------ _______________ CALCULATION OF REGISTRATION FEE
================================================================================================================== Proposed Maximum Amount of Title of Each Class of Securities Aggregate Offering Price Registration Fee - ------------------------------------------------------------------------------------------------------------------ Debt Securities, Class A Preferred Stock, $100.00 par value, $600,000,000 $166,800.00 Cumulative Preferred Stock, $100.00 par value, Common Stock, $1.00 par value(1), and Securities Warrants =================================================================================================================
(1) Common Stock may be issued on a primary basis or upon exercise of the Securities Warrants. --------------------------------------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Subject to Completion Prospectus dated February 12, 1999 Prospectus ---------- $600,000,000 Frontier Corporation Debt Securities, Preferred Stock, Common Stock and Securities Warrants We intend to offer at one or more times (1) unsecured debt securities, (2) shares of preferred stock, (3) shares of our common stock, and (4) warrants exercisable for debt securities, preferred stock or common stock with an aggregate public offering price of up to $600,000,000 (or its equivalent based on the exchange rate at the time of sale) in amounts, at prices and on terms to be determined at the time of offering. We may offer such securities separately or together, in separate series in amounts, at prices and on terms to be described in one or more supplements to this prospectus. We will provide you with the specific terms of these securities in supplements to this prospectus. You should read this prospectus and the supplement carefully before you invest. See "Risk Factors" on page 3 for certain factors relating to an investment in the Securities. __________________________________ These Securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. __________________________________ The date of this Prospectus is February 12, 1999. About This Prospectus This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the "SEC") utilizing a "shelf " registration process. Under this shelf process, we may, from time to time, sell any combination of the securities described in this Prospectus in one or more offerings of one or more series. The aggregate principal amount of securities which we may offer under this Prospectus is $600,000,000. Each time we sell securities, we will provide a Prospectus Supplement that will contain specific information about the terms of that offering. The Prospectus Supplement may also add, update or change information contained in this Prospectus. The information in this Prospectus is accurate as of February 12, 1999. You should read both this Prospectus and any Prospectus Supplement together with additional information described under the heading "Where You Can Find More Information". We believe that we have included or incorporated by reference all information material to investors in this Prospectus, but certain details that may be important for specific investment purposes have not been included. To see more detail, you should read the exhibits filed with or incorporated by reference into the registration statement. Where You Can Find More Information We file annual, quarterly and special reports and other information with the SEC. You may read and copy any document we file at the SEC's public reference rooms in Washington D.C., New York, New York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the SEC's public reference rooms. Our SEC filings are also available to the public over the Internet at the SEC's web site at http://www.sec.gov. The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the following documents we filed with the SEC and our future filings with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until we or any underwriters sell all of the securities: 1. Our Annual Report on Form 10-K for the year ended December 31, 1997; 2. Our Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1998; and 3. Our Current Reports on Form 8-K dated January 29, March 2, June 17, and September 16, 1998, and January 26, 1999 (two reports were filed on this date). You should note that one of the two Current Reports on Form 8-K dated January 26, 1999 contains our audited consolidated financial statements for the three years ended December 31, 1998 as well as our management's discussion and analysis of financial condition and results of operations for the three years ended December 31, 1998. You may request a copy of these filings at no cost, by writing or calling us at the following address: Frontier Corporation 180 South Clinton Avenue Rochester, New York 14646-0700 Attn: Investor Relations (800) 836-0342 You should rely only on the information incorporated by reference or provided in this prospectus and any supplement. We have not authorized anyone else to provide you with different information. The Company We are a leading provider of integrated telecommunications services, including Internet and data applications, long distance, local telephone and wireless, to business, carrier and targeted residential customers in the United States, Canada and the United Kingdom. -2- Through our Integrated Services segment, we are one of the nation's largest long distance companies. This segment provides domestic and international voice, data products, video and audio conference communications, digital distribution services, Internet service and other communication products primarily to small to mid-size business customers and targeted consumer markets. This segment also includes Competitive Local Exchange Carrier ("CLEC") services, currently available in 32 states plus Washington D.C., providing us with the ability to offer integrated local and long distance telephone service to over 70% of the United States. In order to support the development of our Integrated Services segment, we have invested in the construction of a nationwide fiber optic network which is currently expected to be completed in 1999. Once complete, we expect the fiber optic network to encompass approximately 20,000 route miles, interconnecting major population centers across the country. Through our other principal business segment, the Local Communications Services segment, we are one of the largest local exchange providers in the United States. This business consists of 34 incumbent local telephone companies which as of December 31, 1998 served over one million access lines in thirteen states. Also included in this segment are the revenues and expenses of Frontier Communications of Rochester Inc., a competitive telecommunications company that provides an array of services on a retail basis in the Rochester, New York marketplace. Prior to 1995, Local Communications Services provided the majority of our revenue and income. We complemented our internal growth in the Integrated Services business with a number of strategic acquisitions and a merger in 1995 that approximately doubled the size of the business. As a result of our strategic decision to expand the Integrated Services business, revenue from the Integrated Services segment represented approximately 72%, 70%, 73% and 69% of consolidated revenue for 1998, 1997, 1996 and 1995, respectively. Our principal executive offices are located at 180 South Clinton Avenue, Rochester, New York 14646-0995, and our main telephone number is (716) 777-1000. Risk Factors You should consider carefully the following information, together with the other information contained in or incorporated by reference in this Prospectus, in considering whether to purchase the securities described in this Prospectus. Changes in Rates of Growth of the Economy and Overall Industry To some extent, our revenue and earnings per share growth are related to the overall economy and to the telecommunications industry in general. Factors that may influence our performance within the telecommunications industry include product pricing and development, integration of services, the effects of competition and the expansion of the business. The performance of the economy and the telecommunications industry could cause our actual results to vary significantly. Competition Risk Technological innovation and regulatory changes are accelerating the pace of competition for telecommunications services. As a result, we face intensified competition in all aspects of providing telecommunications services. There are significant uncertainties surrounding the introduction of new products and services and the capital expenditures that will be required by us to remain in a competitive position. In addition, there are uncertainties surrounding the impact on competition as a result of the enactment of the Telecommunications Act. Acquisition Integration Our growth strategy over the last few years has involved both internal growth and growth through acquisitions. This growth strategy involves certain operational and financial risks. The operational risks include the possibility that implementation of an acquisition does not provided the economies of scale or synergies anticipated by management. Successful integration and expansion of our network as a result of the acquisitions is dependent on management's ability to anticipate market growth, install facilities, consolidate databases, obtain rights of way and negotiate leases economically and efficiently. The integration of a growing employee base and the elimination of redundant operations and facilities has -3- required, and will continue to require, significant management resources. Although management's plans are to minimize the risks associated with acquisitions, there can be no assurance that we will be able to effectively assimilate such acquisitions. Contingent Liabilities We, and a number of our subsidiaries, are continuously involved in various judicial administrative proceedings involving matters incidental to the business. Unless otherwise stated specifically, we believe that the probable outcome of any of these matters, or the combination of all of these matters, will not have a material adverse effect on our consolidated results of operations or financial position. However, there can be no assurance that the resolution of these matters will not be contrary to management's expectations. Use of Proceeds Unless otherwise specified in the applicable Prospectus Supplement, we will use the net proceeds from the issuance of the (1) unsecured debt securities ("Debt Securities"), (2) shares of our Class A Preferred Stock, par value $100.00 per share (the "Class A Preferred Stock"), (3) shares of our Cumulative Preferred Stock, par value $100.00 per share (the "Cumulative Preferred Stock"; the Class A Preferred Stock and Cumulative Preferred Stock are sometimes hereinafter collectively referred to as the "Preferred Stock"), (4) shares of our common stock, $1.00 par value (the "Common Stock"), and (5) warrants exercisable for Debt Securities, Preferred Stock or Common Stock ("Securities Warrants"; the Debt Securities, Preferred Stock, Common Stock, and Securities Warrants are sometimes hereinafter collectively referred to as the "Securities"), with an aggregate public offering price of up to $600,000,000 (or its equivalent based on the exchange rate at the time of sale) for general corporate purposes. Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends Presented below is our ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividends for each of the last five fiscal years. Our ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. The ratio of earnings to combined fixed charges and preferred stock dividend requirements is computed by dividing earnings by the sum of fixed charges and preferred stock dividends requirements. For purposes of computing these ratios, earnings is defined as consolidated pretax income from continuing operations before adjustment for income from equity investees, adjusted to include . fixed charges, and . amortization of capitalized interest, . less capitalized interest and preference security dividend requirements of consolidated subsidiaries Fixed charges are defined as the sum of . fixed interest costs, both expensed and capitalized, . amortization of debt issuance costs and discounts and premiums related to indebtedness, . the interest component of rent expense, and . preference security dividend requirements of consolidated subsidiaries. -4- Preferred stock dividend requirements represent the amount of pretax earnings required to cover any preferred stock dividend requirements. Frontier Corporation Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividend Requirements
(1) (2) (3) (4) (5) 1998 1997 1996 1995 1994 --------------------------------------------------- Ratio of earnings to fixed charges 3.3 1.4 4.1 4.0 4.9 Ratio of earnings to combined fixed charges and preferred stock dividend requirements 3.3 1.4 4.0 3.9 4.8
(1) Included in earnings for 1998 was a one-time pre-tax charge of $6.5 million acquisition related charge associated with the GlobalCenter transaction and a $2.6 million pre-tax charge reflecting the Company's adoption of Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"), offset by a combined pre-tax gain of $20.4 million associated with the sale of our interest in the cellular licensee for Minnesota RSA No. 10, and certain other non-strategic investments and properties. If such charges/gains had not occurred, the ratio of earnings to fixed charges and earnings to combined fixed charges and preferred stock dividend requirements would have been 3.2:1. (2) Operating results for 1997 include one-time pre-tax charges of $96.6 million related to certain network costs no longer required for long distance traffic volumes and $86.8 million associated with a restructuring and refocusing of the business, offset by a pre-tax gain of $18.8 million related to the sale of our 69.5% interest in the South Alabama Cellular Communications Partnership. If such charges/gains had not occurred, the ratio of earnings to fixed charges and earnings to combined fixed charges and preferred stock dividend requirements would have been 2.9:1 and 2.8:1, respectively. (3) Operating results for 1996 include a $67.7 million pre-tax charge resulting from the curtailment of certain of our pension plans ($28.0 million), a one-time charge associated with our conference calling product line ($20.8) and the write-off of in-process product development costs ($18.9 million). Additionally, results for 1996 include costs relating to union negotiations at our largest telephone operating subsidiary ($2.8 million), offset by a pre-tax gain of $5.0 million as a result of the sale of our minority investment in a Canadian long distance company. If such charges/gains had not occurred, the ratio of earnings to fixed charges and earnings to combined fixed charges and preferred stock dividend requirements would have been 4.7:1 and 4.6:1, respectively. (4) Included in earnings for 1995 is a one-time pre-tax acquisition related charge of $114.2 million associated with the integration of our 1995 acquisitions. This charge is offset by the non-taxable gain of $4.8 million resulting from the sale of one of our telephone subsidiaries. If such charges/gains had not occurred, the ratio of earnings to fixed charges and earnings to fixed charges and preferred stock dividend requirements would have been 5.3:1 and 5.2:1, respectively. (5) Operating results for 1994 include the pre-tax gain relating to the sale of Minot Telephone of $11.3 million. If this gain had not occurred, the ratio of earnings to fixed charges and earnings to fixed charges and preferred stock dividend requirements would have been 4.8:1 and 4.7:1, respectively. Description of Debt Securities The following description sets forth certain general terms and provisions of the Debt Securities to which this Prospectus and any applicable Prospectus Supplement may relate. The particular terms of the Debt Securities being offered and the extent to which such general provisions may apply will be set forth in the applicable Indenture or in one or more indentures supplemental thereto and described in a Prospectus Supplement relating to such Debt Securities. The Senior Indenture (as defined herein) and the Form of Subordinated Indenture (as defined herein) have been filed as exhibits to the registration statement of which this Prospectus is a part. General The Debt Securities will be our direct, unsecured obligations and may be either senior Debt Securities ("Senior Securities") or subordinated Debt Securities ("Subordinated Securities"). The Debt Securities will be issued under one or more indentures (the "Indentures"). Senior Securities and Subordinated Securities will be issued pursuant to separate indentures (respectively, a "Senior Indenture" and a "Subordinated Indenture"), in each case between a trustee (a "Trustee") and us. The Indentures will be -5- subject to and governed by the Trust Indenture Act of 1939, as amended (the "TIA"). The statements made under this heading relating to the Debt Securities and the Indentures are summaries of the anticipated provisions of the Debt Securities, and may not contain all the information that is important to you. For a more complete description of the legal terms of such Debt Securities, you should carefully read the Indentures and terms of such Debt Securities. All section references appearing herein are to sections of each Indenture unless otherwise indicated and capitalized terms used but not defined below shall have the respective meanings set forth in each Indenture. The indebtedness represented by Subordinated Securities will be subordinated in right of payment to the prior payment in full of our Senior Debt (as defined below) as described under "--Subordination." Except as set forth in the applicable Indenture or in one or more indentures supplemental thereto and described in a Prospectus Supplement relating thereto, the Debt Securities may be issued without limit as to aggregate principal amount, in one or more series, in each case as established from time to time in or pursuant to authority granted by a resolution of our Board of Directors or as established in the applicable Indenture or in one or more indentures supplemental to such Indenture. All Debt Securities of one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the holders of the Debt Securities of such series, for issuances of additional Debt Securities of such series. It is anticipated that each Indenture will provide that there may be more than one Trustee thereunder, each with respect to one or more series of Debt Securities. Any Trustee under an Indenture may resign or be removed with respect to one or more series of Debt Securities, and a successor Trustee may be appointed to act with respect to such series. In the event that two or more persons are acting as Trustee with respect to different series of Debt Securities, each such Trustee shall be a trustee of a trust under the applicable Indenture separate and apart from the trust administered by any other Trustee, and, except as otherwise indicated herein, any action described herein to be taken by each Trustee may be taken by each such Trustee with respect to the one or more series of Debt Securities for which it is Trustee under the applicable Indenture. You should refer to the Prospectus Supplement for the following information for each particular series of Debt Securities: (1) The title of such Debt Securities and whether such Debt Securities are Senior Securities or Subordinated Securities; (2) The aggregate principal amount of such Debt Securities and any limit on such aggregate principal amount; (3) The percentage of the principal amount at which such Debt Securities will be issued and, if other than the principal amount thereof, the portion of the principal amount thereof payable upon declaration of acceleration of the maturity thereof; (4) If convertible in whole or in part into Common Stock or Preferred Stock, the terms on which such Debt Securities are convertible, including the initial conversion price or rate (or method for determining the same), the portion that is convertible and the conversion period, and any applicable limitations on the ownership or transferability of the Common Stock or Preferred Stock receivable on conversion; (5) The date or dates, or the method for determining such date or dates, on which the principal of such Debt Securities will be payable; (6) The rate or rates (which may be fixed or variable), or the method by which such rate or rates shall be determined, at which such Debt Securities will bear interest, if any; (7) The date or dates, or the method for determining such date or dates, from which any such interest will accrue, the dates on which any such interest will be payable, the regular record dates for such interest payment dates, or the method by which such dates shall be determined, the persons to whom such interest shall be payable, and the basis upon which interest shall be calculated if other than that of a 360-day year of twelve 30-day months; (8) The place or places, if any, other than or in addition to The City of New York, where the principal (and premium, if any) and interest, if any, on such Debt Securities will be payable, where such Debt Securities may be surrendered for conversion or registration of transfer or exchange and where notices or demands to or upon us in respect of such Debt Securities and the applicable Indenture may be served; -6- (9) The period or periods within which, the price or prices at which and the other terms and conditions upon which such Debt Securities may be redeemed, in whole or in part, at our option, if we are to have such an option; (10) The obligation, if any, of us to redeem, repay or purchase such Debt Securities pursuant to any sinking fund or analogous provision or at the option of a holder thereof, and the period or periods within which or the date and dates on which, the price or prices at which and the other terms and conditions upon which such Debt Securities will be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (11) If other than U.S. dollars, the currency or currencies in which such Debt Securities are denominated and payable, which may be a foreign currency or units of two or more foreign currencies or a composite currency or currencies, and the terms and conditions relating thereto; (12) If the amount of payments of principal of (and premium, if any) or interest, if any, on such Debt Securities may be determined with reference to a index, formula or other method (which index, formula or method may, but need not be, based on a currency, currencies, currency unit or units or composite currency or currencies), the manner in which such amounts shall be determined; (13) Any additions to, modifications of or deletions from the terms of such Debt Securities with respect to Events of Default or covenants set forth in the applicable Indenture; (14) Whether such Debt Securities will be issued in certificate or book-entry form; (15) Whether such Debt Securities will be in registered or bearer form and, if in registered form, the denominations thereof if other than $1,000 and any integral multiple thereof and, if in bearer form, the denominations thereof and terms and conditions relating thereto; (16) The applicability, if any, of the defeasance and covenant defeasance provisions of Article Fourteen of the applicable Indenture; (17) Whether and under what circumstances we will pay any additional amounts on such Debt Securities in respect of any tax, assessment or governmental charge and, if so, whether we will have the option to redeem such Debt Securities in lieu of mailing such payment; and (18) Any other terms of such Debt Securities not inconsistent with the provisions of the applicable Indenture (Section 301). The Debt Securities may provide for less than the entire principal amount thereof to be payable upon declaration of acceleration of the maturity thereof ("Original Issue Discount Securities"). Material federal income tax, accounting and other considerations applicable to Original Issue Discount Securities will be described in the applicable Prospectus Supplement. Except as set forth in the applicable Indenture or in one or more indentures supplemental thereto, the applicable Indenture will not contain any provisions that would limit our ability to incur indebtedness or that would afford holders of Debt Securities protection in the event of a highly leveraged or similar transaction involving us or in the event of a change of control. Reference is made to the applicable Prospectus Supplement for information with respect to any deletions from, modifications of or additions to the Events of Default or our covenants that are described below, including any addition of a covenant or other provision providing event risk or similar protection. Denomination, Interest, Registration and Transfer Unless otherwise described in the applicable Prospectus Supplement, the Debt Securities of any series will be issuable in denominations of $1,000 and integral multiples thereof (Section 302). Unless otherwise specified in the applicable Prospectus Supplement, the principal of (and applicable premium, if any) and interest on any series of Debt Securities will be payable at the corporate trust office of the Trustee, the address of which will be stated in the applicable Prospectus Supplement; provided that, at our option, payment of interest may be made by check mailed to the address of the person entitled thereto as it appears in the applicable register for such Debt Securities or by wire transfer of funds to such person at an account maintained within the United States (Sections 301, 305, 306, 307 and 1002). Any interest not punctually paid or duly provided for on any Interest Payment Date with respect to a Debt Security ("Defaulted Interest") will forthwith cease to be payable to the holder of a Debt Security -7- (the "Holder") on the applicable regular record date and may either be paid to the person in whose name such Debt Security is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to the Holder of such Debt Security not less than ten days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more completely described in the Indenture (Section 307). Subject to certain limitations imposed upon Debt Securities issued in book-entry form, the Debt Securities of any series will be exchangeable for other Debt Securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations upon surrender of such Debt Securities at the corporate trust office of the applicable Trustee referred to above. In addition, subject to certain limitations imposed upon Debt Securities issued in book-entry form, the Debt Securities of any series may be surrendered for conversion or registration of transfer or exchange thereof at the corporate trust office of the applicable Trustee. Every Debt Security surrendered for conversion, registration of transfer or exchange must be duly endorsed or accompanied by a written instrument of transfer. No service charge will be made for any registration of transfer or exchange of any Debt Securities, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. If the applicable Prospectus Supplement refers to any transfer agent (in addition to the applicable Trustee) initially designated by us with respect to any series of Debt Securities, we may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, except that we will be required to maintain a transfer agent in each place of payment for such series. We may at any time designate additional transfer agents with respect to any series of Debt Securities (Section 1002). Neither we nor any Trustee shall be required to: . issue, register the transfer of or exchange Debt Securities of any series during a period beginning at the opening of business 15 days before any selection of Debt Securities of that series to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption; . register the transfer of or exchange any Debt Security, or portion thereof, called for redemption, except the unredeemed portion of any Debt Security being redeemed in part; or . issue, register the transfer of or exchange any Debt Security that has been surrendered for repayment at the option of the Holder, except the portion, if any, of such Debt Security not to be so repaid (Section 305). Merger, Consolidation or Sale We will be permitted to consolidate with, or sell, lease or convey all or substantially all of its assets to, or merge with or into, any other entity provided that: (a) either we shall be the continuing entity, or the successor entity (if other than us) formed by or resulting from any such consolidation or merger or which shall have received the transfer of such assets shall expressly assume payment of the principal of (and premium, if any) and interest on all of the Debt Securities and the due and punctual performance and observance of all of the covenants and conditions contained in each Indenture; (b) immediately after giving effect to such transaction and treating any indebtedness that becomes an obligation of us or any Subsidiary as a result thereof as having been incurred by us or such Subsidiary at the time of such transaction, no Event of Default under the Indentures, and no event which, after notice or the lapse of time, or both, would become such an Event of Default, shall have occurred and be continuing; and (c) an officer's certificate and legal opinion covering such conditions shall be delivered to each Trustee (Sections 801 and 803). Certain Covenants Existence. Except as described above under "Merger, Consolidation or Sale", we will be required to do or cause to be done all things necessary to preserve and keep in full force and effect our existence, rights (charter and statutory) and franchises; provided, however, that we shall not be required to preserve any right or franchise if we determine that the preservation thereof is no longer desirable in the conduct of our business and that the loss thereof is not disadvantageous in any material respect to the Holders of the Debt Securities. Maintenance of Properties. We will be required to cause all of our material properties used or useful in the conduct of our business or the business of any Subsidiary to be maintained and kept in good -8- condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in our judgment may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times (Section 1007). Insurance. We will be required to, and will be required to cause each of our Subsidiaries to, keep all of our and its insurable properties insured against loss or damage at least equal to their then full insurable value with insurers of recognized responsibility and, if described in the applicable Prospectus Supplement, having a specified rating from a recognized insurance rating service (Section 1008). Payment of Taxes and Other Claims. We will be required to pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon our income, profits or property or of any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon our property or that of any Subsidiary; provided, however, that we shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings (Section 1009). Provision of Financial Information. Whether or not we are subject to Section 13 or 15(d) of the Exchange Act, we will be required, to the extent permitted under the Exchange Act, to file with the Commission the annual reports, quarterly reports and other documents which we would have been required to file with the Commission pursuant to such Sections 13 or 15(d) if we were so subject (the "Financial Information"), such documents to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which we would have been required so to file such documents if we were so subject. We also will be required in any event (x) within 15 days of each Required Filing Date (1) to transmit by mail to all Holders of Debt Securities, as their names and addresses appear in the Security Register, without cost to such Holders, copies of the Financial Information and (2) to file with the Trustee copies of the Financial Information, and (y) if filing such documents by us with the Commission is not permitted under the Exchange Act, promptly upon written request and payment of the reasonable cost of duplication and delivery, to supply copies of such documents to any prospective Holder (Section 1010). Additional Covenants and/or Modifications to the Covenants Described Above Any additional covenants by us and/or modifications to the covenants described above with respect to any Debt Securities or series thereof, including any covenants relating to limitations on incurrence of indebtedness or other financial covenants, will be set forth in the applicable Indenture or an indenture supplemental thereto and described in the Prospectus Supplement relating thereto. Events of Default, Notice and Waiver Each Indenture will provide that the following events are "Events of Default" with respect to any series of Debt Securities issued thereunder: (1) default for 30 days in the payment of any installment of interest on any Debt Security of such series; (2) default in the payment of principal of (or premium, if any, on) any Debt Security of such series at its maturity; (3) default in making any sinking fund payment as required for any Debt Security of such series; (4) default in the performance or breach of any other covenant or warranty of ours contained in the applicable Indenture (other than a covenant added to the Indenture solely for the benefit of a series of Debt Securities issued thereunder other than such series), continued for 60 days after written notice as provided in the applicable Indenture; (5) default in the payment of an aggregate principal amount exceeding $10,000,000 of any of our indebtedness or any mortgage, indenture or other instrument under which such indebtedness is issued or by which such indebtedness is secured, such default having occurred after the expiration of any applicable grace period and having resulted in the acceleration of the maturity of such indebtedness, but only if such indebtedness is not discharged or such acceleration is not rescinded or annulled; -9- (6) certain events of bankruptcy, insolvency or reorganization, or court appointment of a receiver, liquidator or trustee for us or any Significant Subsidiary or either its or our property; and (7) any other Event of Default provided with respect to a particular series of Debt Securities (Section 501). If an Event of Default under any Indenture with respect to Debt Securities of any series at the time outstanding occurs and is continuing, then in every such case the applicable Trustee or the Holders of not less than 25% of the principal amount of the Outstanding Debt Securities of that series will have the right to declare the principal amount (or, if the Debt Securities of that series are Original Issue Discount Securities or indexed securities, such portion of the principal amount as may be specified in the terms thereof) of all the Debt Securities of that series to be due and payable immediately by written notice thereof to us (and to the applicable Trustee if given by the Holders). However, at any time after such a declaration of acceleration with respect to Debt Securities of such series (or of all Debt Securities then Outstanding under any Indenture, as the case may be) has been made, but before a judgment or decree for payment of the money due has been obtained by the applicable Trustee, the Holders of not less than a majority in principal amount of Outstanding Debt Securities of such series (or of all Debt Securities then Outstanding under the applicable Indenture, as the case may be) may rescind and annul such declaration and its consequences if (a) we shall have deposited with the applicable Trustee all required payments of the principal of (and premium, if any) and interest on the Debt Securities of such series (or of all Debt Securities then Outstanding under the applicable Indenture, as the case may be), plus certain fees, expenses, disbursements and advances of the applicable Trustee and (b) all events of default, other than the non-payment of accelerated principal (or specified portion thereof), with respect to Debt Securities of such series (or of all Debt Securities then Outstanding under the applicable Indenture, as the case may be) have been cured or waived as provided in such Indenture (Section 502). Each Indenture also will provide that the Holders of not less than a majority in principal amount of the Outstanding Debt Securities of any series (or of all Debt Securities then Outstanding under the applicable Indenture, as the case may be) may waive any past default with respect to such series and its consequences, except a default (x) in the payment of the principal of (or premium, if any) or interest on any Debt Security of such series or (y) in respect of a covenant or provision contained in the applicable Indenture that cannot be modified or amended without the consent of the Holder of each Outstanding Debt Security affected thereby (Section 513). Each Trustee will be required to give notice to the Holders of Debt Securities within 90 days of a default under the applicable Indenture unless such default shall have been cured or waived; provided, however, that such Trustee may withhold notice to the Holders of any series of Debt Securities of any default with respect to such series (except a default in the payment of the principal of (or premium, if any) or interest on any Debt Security of such series or in the payment of any sinking fund installment in respect of any Debt Security of such series) if specified responsible officers of such Trustee consider such withholding to be in the interest of such Holders (Section 601). Each Indenture will provide that no Holders of Debt Securities of any series may institute any proceedings, judicial or otherwise, with respect to such Indenture or for any remedy thereunder, except in the cases of failure of the applicable Trustee, for 60 days, to act after it has received a written request to institute proceedings in respect of an Event of Default from the Holders of not less than 25% in principal amount of the Outstanding Debt Securities of such series, as well as an offer of indemnity reasonably satisfactory to it (Section 507). This provision will not prevent, however, any Holder of Debt Securities from instituting suit for the enforcement of payment of the principal of (and premium, if any) and interest on such Debt Securities at the respective due dates thereof (Section 508). Subject to provisions in each Indenture relating to its duties in case of default, no Trustee will be under any obligation to exercise any of its rights or powers under an Indenture at the request or direction of any Holders of any series of Debt Securities then Outstanding under such Indenture, unless such Holders shall have offered to the Trustee thereunder reasonable security or indemnity (Section 602). The Holders of not less than a majority in principal amount of the Outstanding Debt Securities of any series (or of all Debt Securities then Outstanding under an Indenture, as the case may be) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the applicable Trustee, or of exercising any trust or power conferred upon such Trustee. However, a Trustee may refuse to follow any direction which is in conflict with any law or the applicable Indenture, which may subject such Trustee to personal liability or which may be unduly prejudicial to the Holders of Debt Securities of such series not joining therein (Section 512). Within 120 days after the close of each fiscal year, we will be required to deliver to each Trustee a certificate, signed by one of several specified officers, stating whether or not such officer has knowledge of any default under the applicable Indenture and, if so, specifying each such default and the nature and status thereof (Section 1011). -10- Modification of the Indentures Modifications and amendments of an Indenture will be permitted to be made only with the consent of the Holders of not less than a majority in principal amount of all Outstanding Debt Securities issued under such Indenture which are affected by such modification or amendment; provided, however, that no such modification or amendment, without the consent of the Holder of each such Debt Security affected thereby, may, (a) change the stated maturity of the principal of, or any installment of interest (or premium, if any) on, any such Debt Security; (b) reduce the principal amount of, or the rate or amount of interest on, or any premium payable on redemption of, any such Debt Security, or reduce the amount of principal of an Original Issue Discount Security that would be due and payable upon declaration of acceleration of the maturity thereof or would be provable in bankruptcy, or adversely affect any right of repayment of the Holder of any such Debt Security; (c) change the place of payment, or the coin or currency, for payment of principal or premium, if any, or interest on any such Debt Security; (d) impair the right to institute suit for the enforcement of any payment on or with respect to any such Debt Security; (e) reduce the above-stated percentage of Outstanding Debt Securities of any series necessary to modify or amend the applicable Indenture, to waive compliance with certain provisions thereof or certain defaults and consequences thereunder or to reduce the quorum or voting requirements set forth in the applicable Indenture; or (f) modify any of the foregoing provisions or any of the provisions relating to the waiver of certain past defaults or certain covenants, except to increase the required percentage to effect such action or to provide that certain other provisions may not be modified or waived without the consent of the Holder of such Debt Security (Section 902). The Holders of not less than a majority in principal amount of Outstanding Debt Securities of each series affected thereby will have the right to waive our compliance with certain covenants in such Indenture (Section 1013). Modifications and amendments of an Indenture will be permitted to be made by us and the respective Trustee thereunder without the consent of any Holder of Debt Securities for any of the following purposes: (1) to evidence the succession of another person to us as obligor under such Indenture; (2) to add to our covenants for the benefit of the Holders of all or any series of Debt Securities or to surrender any right or power conferred upon us in the Indenture; (3) to add Events of Default for the benefit of the Holders of all or any series of Debt Securities; (4) to add or change any provisions of an Indenture to facilitate the issuance of, or to liberalize certain terms of, Debt Securities in bearer form, or to permit or facilitate the issuance of Debt Securities in uncertificated form, provided that such action shall not adversely affect the interests of the Holders of the Debt Securities of any series in any material respect; (5) to change or eliminate any provisions of an Indenture, provided that any such change or elimination shall become effective only when there are no Debt Securities Outstanding of any series created prior thereto which are entitled to the benefit of such provision; (6) to secure the Debt Securities; (7) to establish the form or terms of Debt Securities of any series, including the provisions and procedures, if applicable, for the conversion of such Debt Securities into Common Stock or Preferred Stock; (8) to provide for the acceptance of appointment by a successor Trustee or facilitate the administration of the trusts under an Indenture by more than one Trustee; -11- (9) to cure any ambiguity, defect or inconsistency in an Indenture, provided that such action shall not adversely affect the interests of Holders of Debt Securities of any series issued under such Indenture in any material respect; or (10) to supplement any of the provisions of an Indenture to the extent necessary to permit or facilitate defeasance and discharge of any series of such Debt Securities, provided that such action shall not adversely affect the interests of the Holders of the Debt Securities of any series in any material respect (Section 901). Each Indenture will provide that in determining whether the Holders of the requisite principal amount of Outstanding Debt Securities of a series have given any request, demand, authorization, direction, notice, consent or waiver thereunder or whether a quorum is present at a meeting of Holders of Debt Securities: (a) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon declaration of acceleration of the maturity thereof; (b) the principal amount of any Debt Security denominated in a foreign currency that shall be deemed Outstanding shall be the U.S. dollar equivalent, determined on the issue date for such Debt Security, of the principal amount (or, in the case of Original Issue Discount Security, the U.S. dollar equivalent on the issue date of such Debt Security of the amount determined as provided in (a) above); (c) the principal amount of an indexed security that shall be deemed Outstanding shall be the principal face amount of such indexed security pursuant to the applicable Indenture; and (d) Debt Securities owned by us or any other obligor upon the Debt Securities or any of our affiliates or of such other obligor shall be disregarded. Each Indenture will contain provisions for convening meetings of the Holders of Debt securities of a series (Section 1501). A meeting will be permitted to be called at any time by the applicable Trustee, and also, upon request, by us or the Holders of at least 10% in principal amount of the Outstanding Debt Securities of such series, in any such case upon notice given as provided in the Indenture. Except for any consent that must be given by the Holder of each Debt Security affected by certain modifications and amendments of an Indenture, any resolution presented at a meeting or adjourned meeting duly reconvened at which a quorum is present may be adopted by the affirmative vote of the Holders of a majority in the principal amount of the Outstanding Debt Securities of that series; provided, however, that, except as referred to above, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Debt Securities of a series may be adopted at a meeting or adjourned meeting or at which a quorum is present by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Debt Securities of that series. Any resolution passed or decision taken at any meeting of Holders of Debt Securities of any series duly held in accordance with an Indenture will be binding on all Holders of Debt Securities of that series. The quorum at any meeting called to adopt a resolution, and at any reconvened meeting, will be persons holding or representing a majority in principal amount of the Outstanding Debt Securities of a series; provided, however, that if any action is to be taken at such meeting with respect to a consent or waiver which may be given by the Holders of not less than a specified percentage in principal amount of the Outstanding Debt Securities of a series, the persons holding or representing such specified percentage in principal amount of the Outstanding Debt Securities of such series will constitute a quorum. Notwithstanding the foregoing provisions, each Indenture will provide that if any action is to be taken at a meeting of Holders of Debt Securities of any series with respect to any request, demand, authorization, direction, notice, consent, waiver and other action that such Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal amount of all Outstanding Debt Securities affected thereby, or the Holders of such series and one or more additional series: (1) there shall be no minimum quorum requirement for such meeting, and (2) the principal amount of the Outstanding Debt Securities of such series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under such Indenture. Subordination Upon any distribution to our creditors in a liquidation, dissolution or reorganization, the payment of the principal of and interest on any Subordinated Securities will be subordinated to the extent provided in the applicable Indenture in right of payment to the prior payment in full of all Senior Debt (Sections 1601 and 1602 of the Subordinated Indenture), but our obligation to make payment of the principal and -12- interest on such Subordinated Securities will not otherwise be affected (Section 1608 of the Subordinated Indenture). No payment of principal or interest will be permitted to be made on Subordinated Securities at any time if a default on Senior Debt exists that permits the Holders of such Senior Debt to accelerate its maturity and the default is the subject of judicial proceedings or we receive notice of the default (Section 1602 of the Subordinated Indenture). After all Senior Debt is paid in full and until the Subordinated Securities are paid in full, Holders will be subrogated to the right of Holders of Senior Debt to the extent that distributions otherwise payable to Holders have been applied to the payment of Senior Debt (Section 1607 of the Subordinated Indenture). By reason of such subordination, in the event of a distribution of assets upon insolvency, certain of our general creditors may recover more, ratably, than Holders of Subordinated Securities. Senior Debt will be defined in the Subordinated Indenture as the principal of and interest on, or substantially similar payments to be made by us in respect of, the following; whether outstanding at the date of execution of the applicable Indenture or thereafter incurred, created or assumed: (1) our indebtedness for money borrowed or represented by purchase money obligations; (2) our indebtedness evidenced by notes, debentures, or bonds or other securities issued under the provisions of an indenture, fiscal agency agreement or other agreement; (3) our obligations as lessee under leases of property either made as part of any sale and leaseback transaction to which we are a party or otherwise; (4) indebtedness of partnerships and joint ventures which is included in our consolidated financial statements; and (5) indebtedness, obligations and liabilities of others in respect of which we are liable contingently or otherwise to pay or advance money or property or as guarantor, endorser or otherwise, in each case other than (a) any such indebtedness, obligation or liability referred to in clauses (1) through (5) above as to which, in the instrument creating or evidencing the same pursuant to which the same is outstanding, it is provided that such indebtedness, obligation or liability is not superior in right of payment to the Subordinated Securities or ranks pari passu with the Subordinated Securities; (b) any such indebtedness, obligation or liability which is subordinated to our indebtedness to substantially the same extent as or to a greater extent than the Subordinated Securities are subordinated; and (c) the Subordinated Securities. If this Prospectus is being delivered in connection with a series of Subordinated Securities, the accompanying Prospectus Supplement or the information incorporated herein by reference will contain the approximate amount of Senior Debt outstanding as of the end of our most recent fiscal quarter. Discharge, Defeasance and Covenant Defeasance We may be permitted under the applicable Indenture to discharge certain obligations to Holders of any series of Debt Securities issued thereunder that have not already been delivered to the applicable Trustee for cancellation and that either have become due and payable or will become due and payable within one year (or scheduled for redemption within one year) by irrevocably depositing with the applicable Trustee, in trust, funds in such currency or currencies, currency unit or units or composite currency or currencies in which such Debt Securities are payable in an amount sufficient to pay the entire indebtedness on such Debt Securities in respect of principal (and premium, if any) and interest to the date of such deposit (if such Debt Securities have become due and payable) or to the stated maturity or redemption date, as the case may be. Each Indenture will provide that, if the provisions of Article Fourteen are made applicable to the Debt Securities of or within any series pursuant to Section 301 of such Indenture, we may elect either (a) to defease and be discharged from any and all obligations with respect to such Debt Securities (except for the obligation to pay additional amounts, if any, upon the occurrence of certain events of tax, assessment or governmental charge with respect to payments on such Debt Securities, and the obligations to register the transfer or exchange of such Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or agency in respect of such Debt Securities and to hold moneys for payment in trust) ("defeasance") (Section 1402) or (b) to be released from its obligations with respect to such Debt Securities under certain specified sections of Article Ten of such Indenture as specified in the applicable Prospectus Supplement and any omission to comply with such obligations shall not constitute an Event of Default with respect to such Debt Securities ("covenant defeasance") -13- (Section 1403), in either case upon our irrevocable deposit with the applicable Trustee, in trust, of an amount, in such currency or currencies, currency unit or units or composite currency or currencies in which such Debt Securities are payable at stated maturity, or Government Obligations (as defined below), or both, applicable to such Debt Securities which through the scheduled payment of principal and interest in accordance with their terms will provide money in an amount sufficient without reinvestment to pay the principal of (and premium, if any) and interest on such Debt Securities, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust will only be permitted to be established if, among other things, we have delivered to the applicable Trustee an opinion of counsel (as specified in the applicable Indenture) to the effect that the Holders of such Debt Securities will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, and such opinion of counsel, in the case of defeasance, will be required to refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable U.S. federal income tax law occurring after the date of the Indenture (Section 1404). "Government Obligations" means securities which are (1) direct obligations of the United States of America or the government which issued the foreign currency in which the Debt Securities of a particular series are payable, for the payment of which its full faith and credit is pledged or (2) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such government which issued the foreign currency in which the Debt Securities of such series are payable, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation of the United States of America or such government, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the Holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the Holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt (Section 101 of each Indenture). Unless otherwise provided in the applicable Prospectus Supplement, if after we have deposited funds and/or Government Obligations to effect defeasance or covenant defeasance with respect to Debt Securities of any series, (a) the Holder of a Debt Security of such series is entitled to, and does, elect pursuant to the applicable Indenture or the terms of such Debt Security to receive payment in a currency, currency unit or composite currency other than that in which such deposit has been made in respect of such Debt Security, or (b) a Conversion Event (as defined below) occurs in respect of the currency, currency unit or composite currency in which such deposit has been made, the indebtedness represented by such Debt Security will be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any) and interest on such Debt Security as they become due out of the proceeds yielded by converting the amount so deposited in respect of such Debt Security into the currency, currency unit or composite currency in which such Debt Security becomes payable as a result of such election or such cessation of usage based on the applicable market exchange rate. "Conversion Event" means the cessation of use of: (a) a currency, currency unit or composite currency both by the government of the country which issued such currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community; (b) the ECU both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities; or (c) any currency unit or composite currency other than the ECU for the purposes for which it was established. Unless otherwise provided in the applicable Prospectus Supplement, all payments of principal of (and premium, if any) and interest on any Debt Security that is payable in a foreign currency that ceases to be used by its government of issuance shall be made in U.S. dollars. In the event we effect covenant defeasance with respect to any Debt Securities and such Debt Securities are declared due and payable because of the occurrence of any Event of Default other than the Event of Default described in clause (iv) under "Events of Default, Notice and Waiver" with respect to certain specified sections of Article Ten of each Indenture (which sections would no longer be applicable to such Debt Securities as a result of such covenant defeasance) or described in clause (vii) under "Events of Default, Notice and Waiver" with respect to any other covenant as to which there has been covenant defeasance, the amount in such currency, currency unit or composite currency in which such Debt Securities are payable, and Government Obligations on deposit with the applicable Trustee, will be sufficient to pay amounts due on such Debt Securities at the time of their stated maturity but may not be -14- sufficient to pay amounts due on such Debt Securities at the time of the acceleration resulting from such Default. However, we would remain liable to make payment of such amounts due at the time of acceleration. The applicable Prospectus Supplement may further describe the provisions, if any, permitting such defeasance or covenant defeasance, including any modifications to the provisions described above, with respect to the Debt Securities of or within a particular series. Conversion Rights The terms and conditions, if any, upon which the Debt Securities are convertible into Common Stock or Preferred Stock will be set forth in the applicable Prospectus Supplement relating thereto. Such terms will include whether such Debt Securities are convertible into Common Stock or Preferred Stock, the conversion price (or manner of calculation thereof), the conversion period, provisions as to whether conversion will be at the option of the Holders or us, the events requiring an adjustment of the conversion price and provisions affecting conversion in the event of the redemption of such Debt Securities and any restrictions on conversion. Redemption of Securities The Indenture provides that the Debt Securities may be redeemed at any time at our option, in whole or in part, at the Redemption Price, except as may otherwise be provided in connection with any Debt Securities or series thereof. From and after notice has been given as provided in the Indenture, if funds for the redemption of any Debt Securities called for redemption shall have been made available on such redemption date, such Debt Securities will cease to bear interest on the date fixed for such redemption specified in such notice, and the only right of the Holders of the Debt Securities will be to receive payment of the Redemption Price. Notice of any optional redemption of any Debt Securities will be given to Holders at their addresses, as shown in the Security Register, not more than 60 nor less than 30 days prior to the date fixed for redemption. The notice of redemption will specify, among other items, the Redemption Price and the principal amount of the Debt Securities held by such Holder to be redeemed. If we elect to redeem Debt Securities, we will notify the Trustee at least 45 days prior to the redemption date (or such shorter period as satisfactory to the Trustee) of the aggregate principal amount of Debt Securities to be redeemed and the redemption date. If less than all the Debt Securities are to be redeemed, the Trustee shall select the Debt Securities to be redeemed pro rata, by lot or in such manner as it shall deem fair and appropriate. Global Securities The Debt Securities of a series may be issued in whole or in part in the form of one or more global securities (the "Global Securities") that will be deposited with, or on behalf of, a depository identified in the applicable Prospectus Supplement relating to such series. Global Securities may be issued in either registered or bearer form and in either temporary or permanent form. The specific terms of the depository arrangement with respect to a series of Debt Securities will be described in the applicable Prospectus Supplement relating to such series. Capital Stock Structure We have the authority to issue: . 300,000,000 shares of Common Stock, of which 171,635,518 shares were issued and outstanding as of the close of business on December 31, 1998; . 850,000 shares of Cumulative Preferred Stock, issuable in series, of which a total of 185,009 shares, constituting four series, were issued and outstanding as of the close of business on December 31, 1998; and . 4,000,000 shares of Class A Preferred Stock, none of which were outstanding as of December 31, 1998 and which when issued, will rank junior to the Cumulative Preferred Stock as to dividends or distributions, and upon our liquidation, dissolution and winding up. -15- Description of Common Stock The following description of the Common Stock sets forth certain general terms and provisions of the Common Stock to which any Prospectus Supplement may relate, including a Prospectus Supplement providing that Common Stock will be issuable upon conversion of our Debt Securities or Preferred Stock or upon the exercise of the Securities Warrants issued by us. The statements below describing the Common Stock summarize the material terms of the Common Stock and may not contain all the information that is important to you. For a more complete description of the legal terms of the Common Stock, you should carefully read our Restated Certificate of Incorporation, as amended (the "Charter"), and Bylaws. Please see "Where You Can Find More Information". Dividend Rights Subject to the terms of any contractual restriction on the declaration or payment of dividends, dividends may be declared and paid on the Common Stock out of legally available surplus. However, no dividends may be paid on the Common Stock until accrued and unpaid dividends on the outstanding series of Cumulative Preferred Stock have been paid or declared and funds set aside for their payment. Subsidiary Dividend Restriction Our ability to pay dividends is substantially dependent upon the earnings and available cash flow of our subsidiaries and the availability of such earnings to us by way of dividends, distributions, loans and other advances. In January, 1999, we began our fifth year of operations under the "Open Market Plan". The Open Market Plan prohibits the payment of dividends by our subsidiary, Frontier Telephone of Rochester, Inc. ("FTR"), to us if (1) FTR's senior debt is downgraded to "BBB" by Standard & Poor's ("S&P"), or the equivalent rating by other rating agencies, or is placed on credit watch for such a downgrade, or (2) a service quality penalty is imposed under the Open Market Plan. Dividend payments to us also require FTR's directors to certify that such dividends will not impair FTR's service quality or its ability to finance its short and long- term capital needs on reasonable terms while maintaining an S&P debt rating target of "A". FTR made a $56 million dividend payment to us in 1996 with respect to its 1995 operations. However, in 1996, FTR failed to achieve the service quality levels required by the Open Market Plan. On December 19, 1996, pursuant to the Open Market Plan, FTR requested the New York State Public Service Commission ("NYSPSC") staff to exclude certain months from the calculation used to measure service quality, due to operating conditions considered by management to be abnormal and beyond FTR's control. In April 1997, FTR received notice from the NYSPSC that its request for a waiver of certain conditions in the Open Market Plan related to service quality results was denied. The NYSPSC's ruling has resulted in a temporary restriction on the flow of cash dividends from FTR to us and a refund to FTR's customers of $.9 million. Reserves sufficient to cover the refund were established in 1996. On October 22, 1997, the NYSPSC adopted an order requiring FTR to issue refunds of approximately $2.60 per customer. These refunds have been completed. The temporary restriction of dividend payments to us will remain in place until the NYSPSC is satisfied that FTR's 1997 and 1998 service levels demonstrate that FTR has rectified the service deficiency. Weather and other events have adversely impacted service levels in recent months. During August 1998, the NYSPSC determined that FTR would be required to make refunds totaling approximately $1.0 million for its failure to meet service quality targets for periods prior to 1998. The NYSPSC also announced that it would prospectively increase the sum subject to refund by FTR and promote further improvements in service quality. Cash restricted for dividend payments by FTR as of December 31, 1998 was approximately $53.0 million. Voting Rights The holders of Common Stock have exclusive voting rights of one vote for each share held, subject to the voting rights of the outstanding Cumulative Preferred Stock described below and any subsequent voting rights that may be established for any other Preferred Stock by our Board of Directors. The holders of the Common Stock are not entitled to cumulative voting in the election of directors. When four or more quarterly dividends on the Cumulative Preferred Stock are in arrears, and until such arrearages at full dividend rates have been paid or declared and set apart for payment, the holders of the Cumulative Preferred Stock as a class have the right to elect a majority of the Board of Directors. In such event, the holders of the Common Stock have the right to elect only the remaining directors. Liquidation Rights On our liquidation, the holders of the Cumulative Preferred Stock will be entitled to their full par value per share plus accumulated dividends. In addition, the holders of any other Preferred Stock issued after the date of this Prospectus will be entitled to a liquidation preference equal to at least the par value of -16- such stock. After satisfaction of outstanding liabilities and the preferential liquidation rights of the Preferred Stock, the holders of Common Stock are entitled to share ratably in the distribution of all remaining assets. Preemptive Rights Holders of the Common Stock have no preemptive rights to purchase any stock issued by us, any securities convertible into such stock, or any rights or options to acquire such stock. Transfer Agent and Registrar The transfer agent and registrar for the Common Stock is BankBoston, N.A., 150 Royall Street, Canton, Massachusetts 02021. The Rights Agreement On April 9, 1995, our Board of Directors declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of Common Stock. The dividend was payable on April 24, 1995 to the shareholders of record on that date. Each Right entitles the registered holder to purchase from us one one- hundredth of a share of our Series A Junior Participating Class A Preferred Stock, par value of $100.00 per share (the "Rights Preferred Stock"), at a price of $80.00 per one-hundredth of a share of Rights Preferred Stock, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement dated as of April 9,1995, as the same may be amended from time to time (the "Rights Agreement"), between The First National Bank of Boston, as Rights Agent, and us. The Rights are not exercisable until the earlier to occur of (1) ten days following the first date of a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired beneficial ownership of 20% or more of the outstanding shares of Common Stock or such earlier date as a majority of the Board of Directors shall have become aware of the existence of an Acquiring Person, or (2) ten business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender order or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 20% or more of the outstanding shares of Common Stock. The term "Acquiring Person" excludes us and our subsidiaries, our employee benefit plans and our subsidiaries and trustees and other entities holding securities for such plans and contains certain other persons. The Rights will expire on April 24, 2005, unless such date is extended or unless the Rights are earlier redeemed or exchanged by us, in each case as described below. In the event that any person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right at the then current exercise price of the Right, that number of shares of Common Stock having a market value of two times the exercise price of the Right (subject to certain anti-dilution adjustments). In the event that, after a person or group has become an Acquiring Person, we are acquired in a merger or other business combination transaction or 50% or more of our consolidated assets or earning power are sold, proper provision will be made so that each holder of a Right (other than Rights beneficially owned by an Acquiring Person which will have become void) will thereafter have the right to receive, upon the exercise thereof at the then current exercise price of the Right, that number of shares of common stock of the person with whom has engaged in the foregoing transaction (or its parent), which number of shares at the time of such transaction will have a market value of two times the exercise price of the Right (subject to certain anti-dilution adjustments). At any time after any person or group becomes an Acquiring Person and prior to the acquisition by such person or group of 50% or more of the outstanding shares of Common Stock, our Board of Directors may exchange the Rights (other than Rights owned by such person or group which will have become void), in whole or in part, at an exchange ratio of one share of Common Stock, or one one-hundredth of a share of Rights Preferred Stock (or of a share of a class or series of our preferred stock having equivalent rights, preferences and privileges), per Right (subject to certain anti-dilution adjustments). At any time prior to the time an Acquiring Person becomes such, our Board of Directors may redeem the Rights in whole, but not in part, at a price of $.01 per Right, subject to adjustment. For so long as the Rights are then redeemable, we may, except with respect to the redemption price, amend the Rights in any manner. After the Rights are no longer redeemable, we may, except with respect to the redemption price, amend the Rights in any manner that does not adversely affect the interest of holders of the Rights. This summary description of the Rights summarizes the material terms of the Rights and may not contain all the information that is important to you. For a more complete description of the legal terms of the -17- Rights, you should carefully read the Rights Agreement. Please see "Where You Can Find More Information". Description of Preferred Stock The following description of the terms of the Preferred Stock sets forth certain general terms and provisions of the Preferred Stock to which any Prospectus Supplement may relate. Certain other terms of any series of the Preferred Stock offered by any Prospectus Supplement will be described in such Prospectus Supplement. The description of certain provisions of the Preferred Stock set forth below and in any Prospectus Supplement will summarize the material terms of the Preferred Stock and may not contain all the information that is important to you. For a more complete description of the legal terms of the Preferred Stock, you should carefully read the Charter and any amendment to the Charter relating to a series of the Preferred Stock which will be filed with the Commission and incorporated by reference as an exhibit to the to the Registration Statement of which this Prospectus is a part at or prior to the time of the issuance of such series of the Preferred Stock. Please see "Where You Can Find More Information". General We are authorized to issue 4,000,000 shares of Class A Preferred Stock, of which no shares were outstanding as of the close of business on December 31, 1998, and 850,000 shares of Cumulative Preferred Stock, of which 185,009 shares were outstanding as of the close of business on December 31, 1998. We have established five separate series of Cumulative Preferred Stock, which includes 215,000 shares in the aggregate, and a series of 3,000,000 shares of Class A Preferred Stock in connection with the Rights Agreement. Under the Charter, our Board of Directors (without further shareowner action) may from time to time establish and issue one or more series of Preferred Stock with such designations, powers, preferences or rights of the shares of such series and the qualifications, limitations or restrictions thereon. The Preferred Stock shall have the dividend, liquidation, redemption and voting rights set forth below unless otherwise provided in a Prospectus Supplement relating to a particular series of the Preferred Stock. Reference is made to the Prospectus Supplement relating to the particular series of the Preferred Stock offered thereby for specific terms, including: (1) the designation and the number of shares offered; (2) the amount of liquidation preference per share; (3) the initial public offering price at which such Preferred Stock will be issued; (4) the dividend rate (or method of calculation), the dates on which dividends shall be payable and the dates from which dividends shall commence to accumulate, if any; (5) any redemption or sinking fund provisions; (6) any conversion rights; and (7) any additional voting, dividend, liquidation, redemption, sinking fund and other rights, preferences, privileges, limitations and restrictions. The Preferred Stock will, when issued for lawful consideration, be fully paid and nonassessable and will have no preemptive rights. Rank Unless otherwise specified in the Prospectus Supplement, the Preferred Stock will, with respect to dividend rights and rights upon our liquidation, dissolution or winding up, rank: (a) senior to all classes or series of Common Stock and to all equity securities ranking junior to such Preferred Stock; (b) on a parity with all equity securities issued by us the terms of which specifically provide that such equity securities rank on a parity with the Preferred Stock; and (c) junior to all equity securities issued by us the terms of which specifically provide that such equity securities rank senior to the Preferred Stock. -18- As used in the Articles for these purposes, the term "equity securities" does not include convertible debt securities. The Series A Preferred Stock is junior to the Cumulative Preferred Stock and any Preferred Stock established out of Series A Preferred Stock shall be junior as to the Cumulative Preferred Stock. The rights of the holders of each series of the Preferred Stock will be subordinate to those of our general creditors. Dividends Holders of shares of the Preferred Stock of each series shall be entitled to receive, when, as and if declared by our Board of Directors, out of our assets legally available for payment, cash dividends at such rates and on such dates as will be set forth in the applicable Prospectus Supplement. Such rate may be fixed or variable or both. Each such dividend shall be payable to holders of record as they appear on our stock transfer books on such record dates as shall be fixed by our Board of Directors, as specified in the Prospectus Supplement relating to such series of Preferred Stock. Dividends on any series of the Preferred Stock may be cumulative or non- cumulative, as provided in the applicable Prospectus Supplement. Dividends, if cumulative, will be cumulative from and after the date set forth in the applicable Prospectus Supplement. If our Board of Directors fails to declare a dividend payable on a dividend payment date on any series of the Preferred Stock for which dividends are noncumulative, then the holders of such series of the Preferred Stock will have no right to receive a dividend in respect of the dividend period relating to such dividend payment date, and we will have no obligation to pay the dividend accrued for such period, whether or not dividends on such series are declared payable on any future dividend payment date. So long as the shares of any series of the Preferred Stock shall be outstanding, we may not declare or pay any dividends on any shares of our Common Stock or any of our other stock ranking as to dividends or distributions of assets junior to such series of Preferred Stock (the Common Stock and any such other stock being herein referred to as "Junior Stock"), whether in cash or property or in obligations or our stock, other than Junior Stock which is neither convertible into, nor exchangeable or exercisable for, any of our securities other than Junior Stock, unless full dividends (including if such Preferred Stock is cumulative, dividends for prior dividend periods) shall have been paid or declared and set apart for payment on all outstanding shares of the Preferred Stock of such series and all other classes and series of our Preferred Stock (other than Junior Stock). Any dividend payment made on shares of a series of Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to shares of such series which remains payable. Redemption A series of Preferred Stock may be redeemable, in whole or from time to time in part, at our option, and may be subject to mandatory redemption pursuant to a sinking fund or otherwise, in each case upon terms, at the times and at the redemption prices set forth in the Prospectus Supplement relating to such series. Shares of the Preferred Stock redeemed by us will be restored to the status of authorized but unissued shares of Preferred Stock. The Prospectus Supplement relating to a series of Preferred Stock that is subject to mandatory redemption will specify the number of shares of such Preferred Stock that shall be redeemed by us in each year commencing after a date to be specified, at a redemption price per share to be specified together with an amount equal to all accrued and unpaid dividends thereon (which shall not, if such Preferred Stock does not have a cumulative dividend, include any accumulation in respect of unpaid dividends for prior dividend periods) to the date of redemption. The redemption price may be payable in cash or other property, as specified in the applicable Prospectus Supplement. If the redemption price for Preferred Stock of any series is payable only from the net proceeds of the issuance of our capital stock, the terms of such Preferred Stock may provide that, if no such capital stock shall have been issued or to the extent the net proceeds from any issuance are insufficient to pay in full the aggregate redemption price then due, such Preferred Stock shall automatically and mandatorily be converted into shares of our applicable capital stock pursuant to conversion provisions specified in the applicable Prospectus Supplement. So long as any dividends on shares of any series of the Preferred Stock or any other series of our preferred stock ranking on a parity as to dividends and distribution of assets with such series of the Preferred Stock are in arrears, no shares of any such series of the Preferred Stock or such other series of our Preferred Stock will be redeemed (whether by mandatory or optional redemption) unless all such shares are simultaneously redeemed, and we will not purchase or otherwise acquire any such shares. In the event that fewer than all of the outstanding shares of a series of the Preferred Stock are to be redeemed, whether by mandatory or optional redemption, the number of shares to be redeemed will be determined by lot or pro rata (subject to rounding to avoid fractional shares) as may be determined by us or by any other method as may be determined by us in our sole discretion to be equitable. From and after the redemption date (unless default shall be made by us in providing for the payment of the redemption price plus accumulated and unpaid dividends, if any), dividends shall cease to accumulate on the shares -19- of the Preferred Stock called for redemption and all rights of the holders thereof (except the right to receive the redemption price plus accumulated and unpaid dividends, if any) shall cease. Liquidation Preference Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, then, before any distribution or payment shall be made to the holders of any Junior Stock, the holders of each series of Preferred Stock shall be entitled to receive out of our assets legally available for distribution to shareowners, liquidating distributions in the amount of the liquidation preference per share (set forth in the applicable Prospectus Supplement), plus an amount equal to all dividends accrued and unpaid thereon (which shall not include any accumulation in respect of unpaid dividends for prior dividend periods if such Preferred Stock does not have a cumulative dividend). After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Preferred Stock will have no right or claim to any of our remaining assets. In the event that upon any such voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Preferred Stock and the corresponding amounts payable on all shares of other classes or series of our capital stock ranking on a parity with the Preferred Stock in the distribution of assets, then the holders of the Preferred Stock and all other such classes or series of capital stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. If liquidating distributions shall have been made in full to all holders of shares of Preferred Stock, our remaining assets shall be distributed among the holders of Junior Stock, according to their respective rights and preferences and in each case according to their respective number of shares. For such purposes, our consolidation or merger with or into any other corporation, or the sale, lease or conveyance of all or substantially all of our property or business, shall not be deemed to constitute our liquidation, dissolution or winding up. Voting Rights Except as indicated below or in a Prospectus Supplement relating to a particular series of the Preferred Stock, or except as required by applicable law, holders of the Preferred Stock will not be entitled to vote for any purpose. As described in "Description of Common Stock - Voting Rights", when four or more quarterly dividends on the Cumulative Preferred Stock are in arrears, and until such arrearages at full dividend rates have been paid or declared and set apart for payment, the holders of the Cumulative Preferred Stock as a class have the right to elect a majority of the Board of Directors. In addition, the affirmative vote of various proportions of the Cumulative Preferred Stock is required to: (1) increase the authorized amount of the Cumulative Preferred Stock; (2) create shares having preferential rights equal or superior to the Cumulative Preferred Stock; (3) issue any shares of Cumulative Preferred Stock or any shares having preferential rights equal or superior to the Cumulative Preferred Stock without compliance with certain requirements as to earnings; and (4) create, alter or abolish any voting rights or preferential rights or redemption provisions affecting the Cumulative Preferred Stock adversely. Conversion Rights The terms and conditions, if any, upon which shares of any series of Preferred Stock are convertible into Common Stock will be set forth in the applicable Prospectus Supplement relating thereto. Such terms will include the number of shares of Common Stock into which the Preferred Stock is convertible, the conversion price (or manner of calculation thereof), the conversion period, provisions as to whether conversion will be at the option of the holders of the Preferred Stock or us, the events requiring an adjustment of the conversion price and provisions affecting conversion. Transfer Agent and Registrar The Transfer Agent and Registrar for the Preferred Stock will be set forth in the applicable Prospectus Supplement. -20- Description of Securities Warrants We may issue Securities Warrants for the purchase of Debt Securities, Preferred Stock or Common Stock. Securities Warrants may be issued independently or together with any other Securities offered by any Prospectus Supplement and may be attached to or separate from such Securities. Each series of Securities Warrants will be issued under a separate warrant agreement (each, a "Warrant Agreement") to be entered into between us and a warrant agent specified in the applicable Prospectus Supplement (the "Warrant Agent"). The Warrant Agent will act solely as our agent in connection with the Securities Warrants of such series and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of Securities Warrants. The following summaries of certain provisions of the Securities Warrant Agreement and the Securities Warrants do not purport to be complete as they summarize the material terms of the Securities Warrants and may not contain all the information that is important to you. For a more complete description of the legal terms of the Securities Warrants, you should carefully read the provisions of the Securities Warrant Agreement and the Securities Warrant certificates relating to each series of Securities Warrants which will be filed with the Commission and incorporated by reference as an exhibit to the Registration Statement of which this Prospectus is a part at or prior to the time of the issuance of such series of Securities Warrants. Please see "Where You Can Find More Information". If Securities Warrants are offered, the applicable Prospectus Supplement will describe the terms of such Securities Warrants, including, in the case of Securities Warrants for the purchase of Debt Securities, the following where applicable: (a) the offering price; (b) the denominations and terms of the series of Debt Securities purchasable upon exercise of such Securities Warrants; (c) the designation and terms of any series of Debt Securities with which such Securities Warrants are being offered and the number of such Securities Warrants being offered with such Debt Securities; (d) the date, if any, on and after which such Securities Warrants and the related series of Debt Securities will be transferable separately; (e) the principal amount of the series of Debt Securities purchasable upon exercise of each such Securities Warrant and the price at which such principal amount of Debt Securities of such series may be purchased upon such exercise; (f) the date on which the right to exercise such Securities Warrants shall commence and the date on which such right shall expire (the "Expiration Date"); (g) whether the Securities Warrants will be issued in registered or bearer form; (h) any special United States federal income tax consequences; (i) the terms, if any, on which we may accelerate the date by which the Securities Warrants must be exercised; and (j) any other material terms of such Securities Warrants. In the case of Securities Warrants for the purchase of Preferred Stock or Common Stock, the applicable Prospectus Supplement will describe the terms of such Securities Warrants, including the following where applicable: . the offering price; . the aggregate number of shares purchasable upon exercise of such Securities Warrants, the exercise price, and in the case of Securities Warrants for Preferred Stock, the designation, aggregate number and terms of the series of Preferred Stock purchasable upon exercise of such Securities Warrants; . the designation and terms of any series of Preferred Stock with which such Securities Warrants are being offered and the number of such Securities Warrants being offered with such Preferred Stock; . the date, if any, on and after which such Securities Warrants and the related series of Preferred Stock or Common Stock will be transferable separately; -21- . the date on which the right to exercise such Securities Warrants shall commence and the Expiration Date; . any special United States federal income tax consequences; and . any other material terms of such Securities Warrants. Securities Warrant certificates may be exchanged for new Securities Warrant certificates of different denominations, may (if in registered form) be presented for registration of transfer, and may be exercised at the corporate trust office of the Securities Warrant agent or any other office indicated in the applicable Prospectus Supplement. Prior to the exercise of any Securities Warrant to purchase Debt Securities, holders of such Securities Warrants will not have any of the rights of holders of the Debt Securities purchasable upon such exercise, including the right to receive payments of principal, premium, if any, or interest, if any, on such Debt Securities or to enforce covenants in the applicable indenture. Prior to the exercise of any Securities Warrants to purchase Preferred Stock or Common Stock, holders of such Securities Warrants will not have any rights of holders of such Preferred Stock or Common Stock, including the right to receive payments of dividends, if any, on such Preferred Stock or Common Stock, or to exercise any applicable right to vote. Exercise of Securities Warrants Each Securities Warrant will entitle the holder thereof to purchase such principal amount of Debt Securities or number of shares of Preferred Stock or Common Stock, as the case may be, at such exercise price as shall in each case be set forth in, or calculable from, the Prospectus Supplement relating to the offered Securities Warrants. After the close of business on the Expiration Date (or such later date to which such Expiration Date may be extended by us), unexercised Securities Warrants will become void. Securities Warrants may be exercised by delivering to the Securities Warrant Agent payment as provided in the applicable Prospectus Supplement of the amount required to purchase the Debt Securities, Preferred Stock or Common Stock, as the case may be, purchasable upon such exercise together with certain information set forth on the reverse side of the Securities Warrant certificate. Securities Warrants will be deemed to have been exercised upon receipt of payment of the exercise price, subject to the receipt within five (5) business days, of the Securities Warrant certificate evidencing such Securities Warrants. Upon receipt of such payment and the Securities Warrant certificate properly completed and duly executed at the corporate trust office of the Securities Warrant agent or any other office indicated in the applicable Prospectus Supplement, we will, as soon as practicable, issue and deliver the Debt Securities, Preferred Stock or Common Stock, as the case may be, purchasable upon such exercise. If fewer than all of the Securities Warrants represented by such Securities Warrant certificate are exercised, a new Securities Warrant certificate will be issued for the remaining amount of Securities Warrants. Amendments and Supplements to Warrant Agreement The Warrant Agreements may be amended or supplemented without the consent of the holders of the Securities Warrants issued thereunder to effect changes that are not inconsistent with the provisions of the Securities Warrants and that do not adversely affect the interests of the holders of the Securities Warrants. Common Stock Warrant Adjustments Unless otherwise indicated in the applicable Prospectus Supplement, the exercise price of, and the number of shares of Common Stock covered by, a Common Stock Warrant are subject to adjustment in certain events, including (1) payment of a dividend on the Common Stock payable in capital stock and stock splits, combinations or reclassification of the Common Stock; (2) issuance to all holders of Common Stock of rights or warrants to subscribe for or purchase shares of Common Stock at less than their current market price (as defined in the Warrant Agreement for such series of Securities Warrants); and (3) certain distributions of evidences of indebtedness or assets (including securities but excluding cash dividends or distributions paid out of consolidated earnings or retained earnings or dividends payable other than in Common Stock) or of subscription rights and warrants (excluding those referred to above). No adjustment in the exercise price of, and the number of shares of Common Stock covered by, a Common Stock Warrant will be made for regular quarterly or other periodic or recurring cash dividends or distributions or for cash dividends or distributions to the extent paid from consolidated earnings or retained earnings. No adjustment will be required unless such adjustment would require a change of at least 1% in the exercise price then in effect. Except as stated above, the exercise price of, and the number of shares of Common Stock covered by, a Common Stock Warrant will not be adjusted for the issuance of Common Stock or any securities convertible into or exchangeable for Common Stock, or carrying the right or option to purchase or otherwise acquire the foregoing, in exchange for cash, other property or services. -22- In the event of any (1) consolidation or merger of us with or into any entity (other than a consolidation or a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock); (2) sale, transfer, lease or conveyance of all or substantially all of our assets; or (3) reclassification, capital reorganization or change of the Common Stock (other than solely a change in par value or from par value to no par value), then any holder of a Common Stock Warrant will be entitled, on or after the occurrence of any such event, to receive on exercise of such Common Stock Warrant the kind and amount of shares of stock or other securities, cash or other property (or any combination thereof) that the holder would have received had such holder exercised such holder's Common Stock Warrant immediately prior to the occurrence of such event. If the consideration to be received upon exercise of the Common Stock Warrant following any such event consists of common stock of the surviving entity, then from and after the occurrence of such event, the exercise price of such Common Stock Warrant will be subject to the same anti-dilution and other adjustments described in the second preceding paragraph, applied as if such common stock were Common Stock. Plan of Distribution We may sell the Securities to one or more underwriters for public offering and sale by them or may sell the Securities to investors directly or through agents. Direct sales to investors may be accomplished through subscription rights distributed to our shareowners. In connection with the distribution of subscription rights to shareowners, if all of the underlying Securities are not subscribed for, we may sell such unsubscribed Securities directly to third parties or may engage the services of an underwriter to sell such unsubscribed Securities to third parties. Any underwriter or agent involved in the offer and sale of the Securities will be named in the applicable Prospectus Supplement. The distribution of the Securities may be effected from time to time in one or more transactions at a fixed price or prices, or at prices related to the prevailing market prices at the time of sale or at negotiated prices (any of which may represent a discount from the prevailing market prices). We also may, from time to time, authorize underwriters acting as our agents to offer and sell the Securities upon the terms and conditions as are set forth in the applicable Prospectus Supplement. In connection with the sale of Securities, underwriters may be deemed to have received compensation from us in the form of underwriting discounts or commissions and may also receive commissions from purchasers of Securities for whom they may act as agent. Underwriters may sell Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent. Any underwriting compensation paid by us to underwriters or agents in connection with the offering of Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in the applicable Prospectus Supplement. Underwriters, dealers and agents participating in the distribution of the Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Securities may be deemed to be underwriting discounts and commissions, under the Securities Act. Underwriters, dealers and agents may be entitled, under agreements entered into with us, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act. If so indicated in the applicable Prospectus Supplement, we will authorize dealers acting as our agents to solicit offers by certain institutions to purchase Securities from us at the public offering price set forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and delivery on the date or dates stated in such Prospectus Supplement. Each Contract will be for an amount not less than, and the aggregate principal amount of Securities sold pursuant to Contracts shall be not less nor more than, the respective amounts stated in the applicable Prospectus Supplement. Institutions with whom Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions, and other institutions but will in all cases be subject to our approval. Contracts will not be subject to any conditions except (1) the purchase by an institution of the Securities covered by its Contracts shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which such institution is subject; and (2) if the Securities are being sold to underwriters, we shall have sold to such underwriters the total principal amount of the Securities less the principal amount thereof covered by the Contracts. Certain of the underwriters and their affiliates may be customers of, engage in transactions with and perform services for us and our Subsidiaries in the ordinary course of business. -23- Legal Matters The legality of the Debt Securities, the Preferred Stock, the Common Stock and the Securities Warrants offered hereby will be passed upon for us by Martin T. McCue, a Senior Vice President and our General Counsel. Experts The consolidated financial statements incorporated in this Prospectus by reference to our Current Report on Form 8-K dated January 26, 1999 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants. The consolidated financial statements incorporated in this Prospectus by reference to our Current Report on Form 8-K dated June 17, 1998 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, except as it relates to ALC Communications Corporation, and insofar as it relates to ALC Communications Corporation, so incorporated in reliance on the report of Ernst & Young LLP, independent accountants, whose report therein is incorporated by reference to our Current Report on Form 8-K dated June 17, 1998. The consolidated financial statements and consolidated financial statement schedule incorporated in this Prospectus by reference to our Annual Report on Form 10-K for the year ended December 31, 1997 have been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP, except as they relate to ALC Communications Corporation, and insofar as they relate to ALC Communications Corporation, so incorporated in reliance on the report of Ernst & Young LLP, independent accountants, whose reports therein are incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 1997 (the financial statements and financial statement schedule contained in the Annual Report on Form 10-K for the year ended December 31, 1997 have not been restated to reflect the pooling of interests acquisition of GlobalCenter, Inc.) Such respective financial statements have been so incorporated in reliance on the reports of such independent accountants given on the authority of such respective reports of said firms as experts in accounting and auditing. Statement Regarding Forward-Looking Information From time to time, information provided by us, including written and oral statements made by our representatives, may contain forward-looking information as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as expansion and growth of our business, future capital expenditures and our business strategy, are forward-looking statements. In reviewing such information, it should be kept in mind that actual results may differ materially from those projected or suggested in such forward-looking information. This forward-looking information is based on various factors and was derived utilizing numerous assumptions. Many of these factors have previously been identified in filings or statements made by or on our behalf. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include: international, national and local general economic and market conditions; demographic changes; the size and growth of the overall telecommunications market; our ability to sustain, manage or forecast our growth; the size, timing and mix of purchases of our products; new product and service development and introduction; changes in consumer preferences; existing governmental regulations; adverse publicity; dependence on distributors; liability and other claims asserted against us; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; general risks associated with doing business outside of the United States, including, without limitation, import duties, tariffs, quotas and political instability; our ability to attract and retain qualified personnel; our ability to protect trademarks, patents and other intellectual property; our use of proceeds from the offering; and other factors referenced or incorporated by reference in this Prospectus or any Prospectus Supplement that may be attached to this Prospectus. Given such uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments. -24- ================================================== =================================================== No dealer, salesperson or other individual has been authorized to give any information or to make any representations not contained or incorporated by reference in this Prospectus in connection with any offering to be made by the Prospectus. If given or made, such information or representations must not be relied upon as having been authorized by us. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, the Securities, in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any offer or sale made hereunder shall, under any circumstance, create an implication that there has been no change in the facts set Frontier Corporation forth in this Prospectus or in our affairs since the date hereof. Table of Contents $600,000,000 Prospectus ______________ Page Prospectus ---- About this Prospectus............................2 ______________ Where You Can Find More Information..............2 The Company......................................2 Risk Factors.....................................3 Use of Proceeds..................................4 Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends........................4 Description of Debt Securities...................5 Capital Stock Structure..........................15 Description of Common Stock......................16 Description of Preferred Stock...................18 Description of Securities Warrants...............21 Plan of Distribution.............................23 Legal Matters....................................24 Experts..........................................24 Statement Regarding Forward-Looking Information.....................................24 ================================================= ================================================
February 12, 1999 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following table sets forth the estimated expenses to be incurred in connection with the issuance and distribution of the securities being registered.
Registration Fee................... $166,800 Fees of Rating Agencies............ 75,000 Printing and Duplicating Expenses.. 70,000 Legal Fees and Expenses............ 100,000 Accounting Fees and Expenses....... 50,000 NASD Fees.......................... 20,000 Blue Sky Fees and expenses......... 50,000 Miscellaneous...................... 100,000 -------- Total.............................. $631,800
Item 15. Indemnification of Directors and Officers Frontier Corporation's bylaws authorize Frontier Corporation ("Frontier") to obligate itself to indemnify its present and former directors and officers and to pay or reimburse expenses for such individuals in advance of the final disposition of a proceeding to the maximum extent permitted from time to time by the New York Business Corporation Law (the "NYBCL"). The NYBCL permits a corporation to indemnify its present and former directors and officers to whatever extent shall be authorized by a corporation's certificate of incorporation or a bylaw or vote adopted by the shareholders. The NYBCL does not permit indemnification with respect to any matter as to which the director or officer has been adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interest of the corporation. In addition, the NYBCL provides that no indemnification of directors in shareholder derivative suits may be made in respect of (1) a threatened action, or a pending action which is settled or otherwise disposed of, or (2) any claim, issue or matter as to which the director or officer has been adjudged to be liable to the corporation, unless only to the extent that the court in which the was brought or, if no action is brought, any court of competent jurisdiction, determines upon application that, in view of the circumstances of the case, the director or officer is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper. The statutory provisions for indemnification and advancement of expenses are not exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled independently of the applicable statutory provision. The NYBCL permits a corporation to limit or eliminate a director's personal liability to the corporation or the holders of its capital stock for breach of duty. Frontier's Charter contains a provision providing for elimination of the liability of its directors to the maximum extent permitted by New York law. This limitation is generally unavailable for acts or omissions by a director which were: . in bad faith; . involved intentional misconduct or a knowing violation of law; or . involved a financial profit or other advantage to which such director was not legally entitled. The NYBCL also prohibits limitations on director liability for acts or omissions which resulted in a violation of a statute prohibiting certain dividend declarations, certain payments to shareholders after dissolution and particular types of loans. II-1 Item 16. Exhibits
Exhibit No. Description ------ ----------- 4.1 Indenture, dated as of May 21, 1997, between Frontier and Chase Manhattan Bank, NA, as Trustee (Senior Debt Indenture) (Incorporated by referenced to Exhibit 4.1 of Frontier's Current Report on Form 8-K dated May 23, 1997) 4.2 Form of Subordinated Debt Indenture (Incorporated by reference to Exhibit 4.2 of Frontier's Registration Statement on Form S-3 (Registration No. 33-64307)) 4.3 Restated Certificate of Incorporation dated January 24, 1995 (Incorporated by reference to Exhibit 3.1 of Frontier's Annual Report on Form 10-K for the year ended December 31, 1995) 4.4 Amendment to Restated Certificate of Incorporation dated April 9, 1995 (Incorporated by reference to Exhibit 3.2 of Frontier's Annual Report on Form 10-K for the year ended December 31, 1995) 4.5 Rights Agreement, dated as of April 9, 1995, between Frontier and The First National Bank of Boston, as Rights Agent (Incorporated by referenced to Exhibit 1 of Frontier's Current Report on Form 8-K dated April 9, 1995) 4.6 Form of Certificate of Amendment to Articles of Incorporation for Preferred Stock (Incorporated by reference to Exhibit 4.5 of Frontier's Registration Statement on Form S-3 (Registration No. 33-64307)) 4.7 Form of Debt Security (Incorporated by reference to Exhibit 4.6 of Frontier's Registration Statement on Form S-3 (Registration No. 33-64307)) 4.8 Form of Securities Warranty Agreement (Incorporated by reference to Exhibit 4.7 of Frontier's Registration Statement on Form S-3 (Registration No. 33-64307)) *5.1 Opinion of Martin T. McCue, Senior Vice President and General Counsel of Frontier, as to legality of securities *10.1 Employment Agreement, dated May 22, 1998 between Frontier and Rolla Huff, current Executive Vice President and Chief Financial Officer *12.1 Calculation of Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends *23.1 Consent of PricewaterhouseCoopers LLP, independent accountants *23.2 Consent of Ernst & Young LLP, independent accountants *23.3 Consent of Martin T. McCue (included in Exhibit 5.1) *24.1 Power of Attorney *24.2 Resolution of Frontier's Executive Committee authorizing signature of registration statement pursuant to Power of Attorney 25.1 Statement of Eligibility of Trustee on Form T-1 (Incorporated by reference to Exhibit 25.1 of Frontier's Registration Statement on Form S-3 (Registration No. 33-64307))
*Filed herewith II-2 ITEM 17. Undertakings The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table set forth in this registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; provided, however, that subparagraphs (i) and (ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the Securities offered herein, and the offering of such Securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the Securities being registered which remain unsold at the termination of the offering. The undersigned Registrant hereby undertakes that, for the purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the Securities offered herein, and the offering of such Securities at that time shall be deemed to be the initial bona fide offering thereof; and insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 15 above or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted against the registrant by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that for the purpose of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed a part of this Registration Statement as of the time it was declared effect. The undersigned Registrant hereby undertakes, in connection with securities to be offered pursuant to warrants, to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering. II-3 The undersigned Registrant hereby undertakes to file an application for purposes of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Rochester, New York on February 11, 1999 FRONTIER CORPORATION, a New York business corporation By: /s/ Joseph P. Clayton ----------------------- Joseph P. Clayton, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Name Title Date ---- ----- ---- /s/ Joseph P. Clayton President, Chief Executive February 11, 1999 - ------------------------------------ Officer, and Director Joseph P. Clayton /s/ Rolla P. Huff Executive Vice President and Chief February 11, 1999 - ------------------------------------ Financial Officer (Principal Rolla P. Huff Accounting Officer) Director February , 1999 - ------------------------------------ Patricia C. Barron - ------------------------------------ Director February , 1999 Raul E. Cesan Director February , 1999 - ------------------------------------ Brenda E. Edgerton Jairo A. Estrada* Director February 11, 1999 - ------------------------------------ Jairo A. Estrada Michael E. Flaherty* Director February 11, 1999 - ------------------------------------ Michael E. Flaherty Alan C. Hasselwander* Director February 11, 1999 - ------------------------------------ Alan C. Hasselwander Director February , 1999 - ------------------------------------ Eric Hippeau /s/ Robert Holland, Jr. Director February 11, 1999 - ------------------------------------ Robert Holland, Jr. Douglas H. McCorkindale* Director February 11, 1999 - ------------------------------------ Douglas H. McCorkindale Director February , 1999 - ------------------------------------ James F. McDonald
II-5
Name Title Date ---- ----- ---- Dr. Leo J. Thomas* Director February 11, 1999 - ------------------------------------ Dr. Leo J. Thomas
*By: /s/ Josephine S. Trubek ------------------------------- Josephine S. Trubek (Attorney-in-fact) II-6 INDEX TO EXHIBITS
Exhibit No. Description ------- ----------- 4.1 Indenture, dated as of May 21, 1997, between Frontier and Chase Manhattan Bank, NA, as Trustee (Senior Debt Indenture) (Incorporated by referenced to Exhibit 4.1 of Frontier's Current Report on Form 8-K dated May 23, 1997) 4.2 Form of Subordinated Debt Indenture (Incorporated by reference to Exhibit 4.2 of Frontier's Registration Statement on Form S-3 (Registration No. 33-64307)) 4.3 Restated Certificate of Incorporation dated January 24, 1995 (Incorporated by reference to Exhibit 3.1 of Frontier's Annual Report on Form 10-K for the year ended December 31, 1995) 4.4 Amendment to Restated Certificate of Incorporation dated April 9, 1995 (Incorporated by reference to Exhibit 3.2 of Frontier's Annual Report on Form 10-K for the year ended December 31, 1995) 4.5 Rights Agreement, dated as of April 9, 1995, between Frontier and The First National Bank of Boston, as Rights Agent (Incorporated by referenced to Exhibit 1 of Frontier's Current Report on Form 8-K dated April 9, 1995) 4.6 Form of Certificate of Amendment to Articles of Incorporation for Preferred Stock (Incorporated by reference to Exhibit 4.5 of Frontier's Registration Statement on Form S-3 (Registration No. 33-64307)) 4.7 Form of Debt Security (Incorporated by reference to Exhibit 4.6 of Frontier's Registration Statement on Form S-3 (Registration No. 33-64307)) 4.8 Form of Securities Warranty Agreement (Incorporated by reference to Exhibit 4.7 of Frontier's Registration Statement on Form S-3 (Registration No. 33-64307)) *5.1 Opinion of Martin T. McCue, Senior Vice President and General Counsel of Frontier, as to legality of securities *10.1 Employment Agreement, dated May 22, 1998 between Frontier and Rolla Huff, current Executive Vice President and Chief Financial Officer *12.1 Calculation of Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends *23.1 Consent of PricewaterhouseCoopers LLP, independent accountants *23.2 Consent of Ernst & Young LLP, independent accountants *23.3 Consent of Martin T. McCue (included in Exhibit 5.1) *24.1 Power of Attorney *24.2 Resolution of Frontier's Executive Committee authorizing signature of registration statement pursuant to Power of Attorney 25.1 Statement of Eligibility of Trustee on Form T-1 (Incorporated by reference to Exhibit 25.1 of Frontier's Registration Statement on Form S-3 (Registration No. 33-64307))
*Filed herewith II-7 EX-5.1 2 OPINION LETTER February 11, 1999 Board of Directors Frontier Corporation 180 South Clinton Avenue Rochester, New York 14646 Ladies and Gentlemen: I am the Senior Vice President and General Counsel of Frontier Corporation, a New York business corporation (the "Company"), and am delivering this opinion letter in connection with its registration statement on Form S-3 (the "Registration Statement") filed with the Securities and Exchange Commission relating to the proposed public offering of up to $600,000,000 in aggregate amount of one or more series of (i) unsecured debt securities (the "Debt Securities"), (ii) Class A Preferred Stock, $100.00 par value (the "Class A Preferred Stock"), (iii) Cumulative Preferred Stock, $100.00 par value (the "Cumulative Preferred Stock"; the Class A Preferred Stock and Cumulative Preferred Stock are hereinafter collectively preferred to as the "Preferred Shares"); (iv) common stock, $1.00 par value (the "Common Shares"), or (v) warrants to purchase Common Shares or Preferred Shares (the "Securities Warrants" and, together with the Debt Securities, Preferred Shares and Common Shares, the "Securities"), all of which Securities may be offered and sold by the Company from time to time as set forth in the prospectus which forms a part of the Registration Statement (the "Prospectus"), and as to be set forth in one or more supplements to the Prospectus (each, a "Prospectus Supplement"). I assume that the issuance, sale, amount and terms of the Securities to be offered from time to time will be duly authorized and determined by proper action of the Board of Directors of the Company (each, a "Board Action") in accordance with the Company's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), and applicable New York law. I further assume that (i) any senior Debt Securities will be issued pursuant to that certain Indenture, dated May 21, 1997, between the Company and The Chase Manhattan Bank, as trustee, (the "Senior Debt Indenture"), (iii) any subordinated Debt Securities will be issued pursuant to a "Subordinated Debt Indenture", the form of which is filed as Exhibit 4.2 to the Registration Statement, and (iii) any Securities Warrants will be issued under one or more warrant agreements (each, a "Warrant Agreement"), each to be between the Company and a financial institution identified therein as a warrant agent (each, a "Warrant Agent"). For purposes of this opinion letter, I have examined copies of the following documents: 1. An executed copy of the Registration Statement. 2. The Certificate of Incorporation, as certified by the Secretary of the Company on the date hereof as then being complete, accurate and in effect. 3. The Bylaws of the Company, as certified by the Secretary of the Company on the date hereof as then being complete, accurate and in effect. Frontier Corporation Board of Directors February 11, 1999 Page 2 4. The Senior Indenture. 5. The form of Indenture between the Company and the bank to be named therein, filed as Exhibit 4.2 to the Registration Statement (the "Subordinated Debt Indenture"; the Subordinated Debt Indenture and Senior Debt Indenture are hereinafter sometimes collectively referred to as the "Indentures"). 6. Minutes of Board of Directors, Executive Committee, and Shareholder meetings of the Company. I have not, except as specifically identified above, made any independent review or investigation of factual or other matters, including the organization, existence, good standing, assets, business or affairs of the Company. In my examination of the aforesaid documents, I have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity, accuracy and completeness of all documents submitted to me, and the conformity with the original documents of all documents submitted to me as certified, telecopied, photostatic, or reproduced copies. This opinion letter is given, and all statements herein are made, in the context of the foregoing. This opinion letter is based as to matters of law solely on the New York Business Corporation Law and New York contract law. I express no opinion herein as to any other laws, statutes, regulations, or ordinances. Based upon, subject to and limited by the foregoing, I am of the opinion that, as of the date hereof: 1. When the Registration Statement has become effective under the Securities Act of 1933 (the "Act") and when the Debt Securities have been (a) duly established by an Indenture or any supplemental indenture thereto, (b) duly authorized and established by applicable Board Action and duly authenticated by the Trustee, and (c) duly executed and delivered on behalf of the Company against payment therefor in accordance with the terms of such Board Action, any applicable underwriting agreement, an Indenture and any applicable supplemental indenture, and as contemplated by the Registration Statement and/or the applicable Prospectus Supplement, the Debt Securities will constitute binding obligations of the Company, enforceable in accordance with the terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights (including, without limitation, the effect of statutory and other law regarding fraudulent conveyances, fraudulent transfers and preferential transfers) and as may be limited by the exercise of judicial discretion and the application of principles of equity, including, without limitation, requirements of good faith, fair dealing, conscionability and materiality (regardless of whether the Debt Securities are considered in a proceeding in equity or at law). 2. When the Registration Statement has become effective under the Act and when a series of the Preferred Shares has been duly authorized and established by applicable Board Action, in accordance with the terms of the Certificate of Incorporation and applicable law, and, upon issuance and delivery of certificates for such Preferred Shares against payment therefor in accordance with the terms of such Board Action and any applicable underwriting agreement, and as contemplated by the Registration Frontier Corporation Board of Directors February 11, 1999 Page 3 Statement and/or the applicable Prospectus Supplement, the shares represented by such certificates will be validly issued, fully paid and non-assessable. 3. When the Registration Statement has become effective under the Act, upon due authorization by Board Action of an issuance of Common Shares, and upon issuance and delivery of certificates for Common Shares against payment therefor in accordance with the terms of such Board Action and any applicable underwriting agreement, and as contemplated by the Registration Statement and/or the applicable Prospectus Supplement, the shares represented by such certificates will be validly issued, fully paid and non-assessable. 4. When the Registration Statement has become effective under the Act and when the Securities Warrants have been (a) duly established by the related Warrant Agreement, (b) duly authorized and established by applicable Board Action and duly authenticated by the Warrant Agent, and (c) duly executed and delivered on behalf of the Company against payment therefor in accordance with the terms of such Board Action, any applicable underwriting agreement and the applicable Warrant Agreement and as contemplated by the Registration Statement and/or the applicable Prospectus Supplement, the Securities Warrants will constitute binding obligations of the Company, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights (including, without limitation, the effect of statutory and other law regarding fraudulent conveyances, fraudulent transfers and preferential transfers) and as may be limited by the exercise of judicial discretion and the application of principles of equity, including, without limitation, requirements of good faith, fair dealing, conscionability and materiality (regardless of whether the Securities Warrants are considered in a proceeding in equity or at law). To the extent that the obligations of the Company under an Indenture may be dependent upon such matters, I assume for purposes of this opinion that the Trustee is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Trustee is duly qualified to engage in the activities contemplated by the Indenture; that the Indenture has been duly authorized, executed and delivered by the Trustee and constitutes the legally valid and binding obligation of the Trustee enforceable against the Trustee in accordance with its terms; that the Trustee is in compliance, with respect to acting as a trustee under the Indenture, with all applicable laws and regulations; and that the Trustee has the requisite organizational and legal power and authority to perform its obligations under the Indenture. To the extent that the obligations of the Company under any Warrant Agreement may be dependent upon such matters, I assume for purposes of this opinion that the applicable Warrant Agent is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Warrant Agent is duly qualified to engage in the activities contemplated by the Warrant Agreement; that the Warrant Agreement has been duly authorized, executed and delivered by the Warrant Agent and constitutes the legally valid and binding obligation of the Warrant Agent enforceable against the Warrant Agent in accordance with its terms; that the Warrant Agent is in compliance, with respect to acting as a Warrant Agent under the Warrant Agreement, with all applicable laws and regulations; and that the Warrant Agent has the requisite organizational and legal power and authority to perform its obligations under the Warrant Agreement. Frontier Corporation Board of Directors February 11, 1999 Page 4 The opinions expressed in Paragraphs (1) and (4) above shall be understood to mean only that if there is a default in performance of an obligation, (i) if a failure to pay or other damage can be shown and (ii) if the defaulting party can be brought into a court which will hear the case and apply the governing law, then, subject to the availability of defenses and to the exceptions set forth in Paragraphs (1) and (4), the court will provide a money damage (or perhaps injunctive or specific performance) remedy. I assume no obligation to advise you of any changes in the foregoing subsequent to the delivery of this opinion letter. This opinion letter has been prepared solely for your use in connection with the filing of the Registration Statement on the date of this opinion letter and should not be quoted in whole or in part or otherwise be referred to, nor filed with or furnished to any governmental agency or other person or entity, without the prior written consent of the undersigned. I hereby consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the reference to me under the caption "Legal Matters" in the prospectus constituting a part of the Registration Statement. Sincerely yours, /s/ Martin T. McCue Martin T. McCue Senior Vice President and General Counsel EX-10.1 3 EMPLOYMENT AGREEMENT (HUFF) EXHIBIT 10.1 May 22, 1998 Mr. Rolla Huff 5604 Tanner Trail Plano, Texas 75093 Dear Mr. Huff: I am writing this letter in the hope that we will soon be able to welcome you to Frontier Corporation. The Board of Directors (the "Board") of Frontier Corporation, on behalf of Frontier and its subsidiaries and affiliates (together, the "Company") has determined that it is in the best interests of the Company and its shareowners to retain your services for the future and in case of a "Change of Control", as defined later in this letter agreement ("Agreement"). It is therefore the intent of this Agreement to assure your complete dedication to the Company by providing you with compensation and benefits arrangements while you fulfill your duties during the pendency of a Change of Control, should such an event occur, which provide you with a measure of security commensurate with your importance to the Company, and to assure itself of continuity in its relationship with customers and employees. Therefore, upon your signature on a counterpart of this Agreement, the following terms and conditions shall become effective as stated below. However, this Agreement does not supersede any stock option agreements or restricted stock grant agreements between the Company and you, all of which shall remain in full force and effect. 1. Employment. ---------- 1.1 Term. The Company shall employ you in an executive position as ---- Chief Financial Officer at the Executive Vice President level, or in such comparable management capacity as the Company may from time to time designate. This Agreement shall become effective as of June 1, 1998 and shall have an initial term ("Term") of three (3) years, ending May 31, 2001. This Agreement shall continue from year to year thereafter, unless earlier terminated or extended in accordance with its terms. You acknowledge that, except as set forth in this Agreement, your employment is "at will". If, during the Term, a "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) commences any action that, if consummated, would result in a Change of Control of the Company or if any person publicly announces an intention or proposal to commence any such action, you agree that you will not leave the Company's employ (other than as a result of death or Disability), you will render the services contemplated in this Agreement for the reasonable duration of the Company's defense against such action and until such action has been abandoned or terminated or a Change in Control has occurred, and you will actively promote the Company's interest during such period. Any termination of your employment during the Term for reasons other than your death shall be evidenced by a written notice ("Notice of Termination"), which shall specify the provision of this Agreement relied upon for such termination and describe with reasonable detail the facts and circumstances claimed by the sender of such Notice of Termination to provide the basis for termination. Any such Notice of Termination shall also specify the effective date of termination (the "Termination Date"). If you die during the Term, the Termination Date shall be the date of your death, except as otherwise provided herein. 1.2 Present and Future Duties. Your role in the Company shall be that ------------------------- of its chief financial officer, with responsibility for the financial management, reporting, compliance and related activities, both internal and external, of the corporation and its subsidiaries and its affiliates . You may also have certain other corporate staff functions reporting to you, including that of the controller, internal audit staff, investor relations and such other areas as the board or the chief executive officer of the Company may from time to time determine. You shall perform all duties required of or incidental to your position with the Company, or as may be assigned to you, and which are reasonably consistent with your role and other responsibilities. You agree to use your best efforts in the business of the Company and to devote your full time attention and energy to the business of the Company. You agree not to work, either on a part-time or independent contracting or consulting basis, with or without compensation, for any other business or enterprise during the Term without the Company's prior consent. Such consent shall not be unreasonably withheld in the case of service on the boards of directors of other corporations and community organizations. Assuming you have successfully performed the duties of your position, it is anticipated that, on or before December 31, 1999, you will be considered by the Company's Board and its Chief Executive Officer for the post of the Company's President and Chief Operating Officer. The Board may elect to offer or not to offer this position to you, and if it does so, it may select an effective date not later than June 1, 2000, based on its evaluation of your performance, your developmental needs, and its assessment of what will be most beneficial to shareowners. If the Company fails to extend to you an offer to become the Company's President and Chief Operating Officer by December 31, 1999, or if the position of President and Chief Operating Officer is offered to and accepted by another person on or before such date, you may elect, at any time before close of business on January 27, 2000, to terminate this agreement and resign, subject, however, to the continuation of all obligations under Sections 2 and 3, below, which shall continue according to their terms, and to the continuation of all obligations under Sections 4 and 5 below, which shall continue according to their terms, but which shall thereafter have a Restricted Period of twelve (12) months. If you terminate the relationship and it is not done to 2 avoid termination by the Company for Cause, the termination shall be deemed as a Voluntary Termination under Section 7.3. You will receive, in full satisfaction of this Agreement and any other promises or claims of promises, a severance payment of one (1) year's base salary at the rate effective as of the date of such termination, or at the 1999 rate if termination occurs after December 31, 1999, plus any applicable bonus, at Standard payout (60% of the then-prevailing base salary) and calculated in the same manner as set out in Section 7.1.5. In addition, any options awarded to you and that may not yet have vested shall be deemed to have vested as of the calendar day immediately prior to the last day upon which you work. If you terminate the relationship as outlined above, your ability to exercise any outstanding options shall be defined in accordance with the terms and conditions of the applicable plan in effect at that time. Further, the Company will waive or otherwise deem satisfied any timing condition that applies to you with respect to any restricted stock awarded to you, and the Company and you agree that if the Company has met the performance criteria for one or more of the applicable tranches, the Company shall, in its sole discretion, either release the shares or pay to you the value of such restricted stock in cash, in full and final settlement of all restricted stock obligations to you. 1.3 Base Compensation. The Company shall pay you as base compensation ----------------- at an annual salary rate of $375,000, in installments in accordance with the Company's policies from time to time in effect. Thereafter, your annual salary may be further adjusted by the Company consistent with the Company's results and your performance during the prior year. However, unless the annual salaries of all senior executives of the Company are reduced across-the-board, your annual salary in any year shall not be less than your annual salary during the prior year. 1.4 Incentive Compensation. You shall receive a guaranteed bonus of ---------------------- $300,000 for 1998, which shall be paid on or around February 15, 1999, but no later than February 28, 1999. The Company shall establish and review with you for 1999 and thereafter the performance goals ("Performance Goals") for the Company and for you individually, and a methodology for calculating the amount of incentive compensation to be paid upon achievement of such Performance Goals, which, for 1999 will have a minimum target for threshold performance at 30% of your base salary, for standard performance at 60% of your base salary, and for premier performance at 105% of your base salary. Your eligibility for a corporate bonus will be calculated on the same basis as other similarly situated executives. Your incentive will be based on the success of the Company as reflected in increased shareowner value, with such metrics to be mutually agreed upon by you with the Chief Executive Officer of the Company, and with the subsequent concurrence of the Board. Incentive compensation shall be payable to you at such time or times as are established under the Company's policies (including the Company's Executive Compensation Program) in effect from time to time. 3 1.5 Benefits; Perquisites. You shall be entitled to receive the --------------------- benefits and perquisites provided by the Company under its Executive Compensation program in effect from time to time for executives at the executive vice president level. However, the Company also agrees with you that the following benefits shall be available to you while you are employed by the Company: (a) you will be entitled to choose to become a member of two clubs in the Rochester area; (b) you will be provided with such reasonable telecommunications services and telecommunications reimbursements as are required in connection with your work for the Company; (c) you will be provided with an automobile appropriate to your position under the Company's existing executive automobile policy; (d) you will receive such accounting, tax and financial counseling services with respect to your finances as are made available to others at the executive vice president level; and (e) the Company will reimburse the reasonable costs of an annual physical examination as it does for other executives. In addition, the Company agrees that, in connection with your relocation to the Rochester, New York area, it will: (a) offer to you the Company's "platinum" moving plan; (b) make certain cost reimbursements and payment of price differentials related to relocation to the Rochester area described below in Section 7.3.1; and (c) pay a mortgage differential, if necessary, as addressed below in Section 7.3.1. 1.6 Expenses. You shall be reimbursed for any reasonable expenses -------- prudently incurred in connection with your employment during the Term, upon presentation to the Company of an itemized account and receipts of such expenses as required by the Company's policies from time to time in effect. 2. Developments and Intellectual Property. You acknowledge that all -------------------------------------- developments, including but not limited to trade secrets (including strategies, business plans and customer lists), discoveries, improvements, ideas and writings which either directly or indirectly relate to or may be useful in the business of the Company (the "Developments") which you, either alone or in conjunction with any other person or persons, shall conceive, make, develop, acquire or acquire knowledge of during the Term are the sole and exclusive property of the Company. You will cooperate with the Company's reasonable requests to obtain or maintain rights or protections under United States or foreign law with respect to all Developments. The Company will reimburse you for all reasonable expenses incurred by you in order to comply with this provision of this Agreement, regardless of when such expenses may be incurred. 3. Confidential Information. You acknowledge that by reason of your ------------------------ employment by the Company, especially as a senior executive thereof, you will in the future have access to information of the Company that the Company deems to be confidential and/or proprietary, including but not limited to, information about the Company's target markets and customer segments, strategies, plans, products and services, methods of operation, employees, financial forecasts and results, sales, profits, expenses, customer lists and the relationships between the Company or a subsidiary and its customers, suppliers and others who have business dealings with it. You 4 covenant and agree that during the Term and thereafter, without time or geographic limitation, you will not disclose any such information to any person without the prior written authorization of the Chief Executive Officer of the Company or the Board. If your employment ends for any reason other than your death, you agree to return promptly to Company all such information and any other tangible product or document which has been produced or received by, or otherwise submitted to you during your employment, and no copies shall be retained by you or made available to any other person or entity. This provision includes but is not limited to information printed or stored on paper, magnetic tape, floppy disks, hard drives or other computer storage media. 4. Non-Competition. --------------- 4.1 Covenant. You and the Company acknowledge that you have a special, -------- unique and extraordinary expertise in telecommunications and in finance, and that in your employment with the Company, you will have continuing access to information about the Company's target markets, strategies, plans, product or service offerings, methods of operation, financial and operating expectations and results, customer base, sales, marketing and pricing strategies, most valued employees, and customer and supplier relationships. In consideration of the benefits provided to you under this Agreement, which you acknowledge are independent consideration, you covenant and agree that during the Restricted Period (as defined below), you will not, directly or indirectly, without the Company's prior consent, own, manage, operate, finance, join, control or participate in the ownership or control of, or be associated as an officer, director, executive, partner or principal, agent, representative, consultant or otherwise with, or use or permit your name to be used in connection with, any enterprise that directly or indirectly competes (as defined below) with any telecommunications business of the Company in a Restricted Area (as defined below). You acknowledge that so long as you are able to use your skills for enterprises that do not directly or indirectly compete with the business of the Company, you will not be unreasonably limited in your ability to work. 4.2 Definitions. ----------- 4.2.1 "Competes" means the production, marketing, promotion, distribution or selling of any product, capability, functionality or service of any person or entity other than the Company which resembles or competes with a product or service produced, marketed, promoted, distributed or sold by the Company (or to your knowledge was under development by the Company) during the period of your employment by the Company (whether under this Agreement or otherwise). 4.2.2 "Restricted Area" means: (a) The Standard Metropolitan Statistical Area (or an equivalent Census Office classification for an equal or larger populated area) in which any Company business 5 office or sales office, or Company place of employment is located, which office or place has more than ten (10) full-time employees, or where more than 5% of the Company's customers or gross revenues, in a line of business where you had responsibilities during your employment, are derived; or (b) Any state of the United States, any province of Canada or any foreign country from which the Company or any of its subsidiaries or affiliates derives more than $50 million in revenue. 4.2.3 "Restricted Period" means: (a) The period of your employment by the Company (whether under this Agreement or otherwise), if your employment is terminated because of your death or Disability; (b) The period of your employment by the Company (whether under this Agreement or otherwise) and 24 months thereafter, if your employment is terminated by the Company for Cause or without Cause (and not by the Company following Change of Control); (c) The period of your employment by the Company (whether under this Agreement or otherwise) and, if this Agreement is still in effect at the Termination Date, the number of months remaining in the Term at the Termination Date or 12 months, whichever is longer (but in no event more than 24 months), if you terminate your employment voluntarily (and not for Good Reason); or (d) The period of your employment by the Company under this Agreement, if your employment is terminated by you for Good Reason or by the Company on any basis following Change of Control. 4.2.4 Exception. This Section shall not be construed to prohibit --------- the ownership by you of not more than 2.5% of any class of securities of any corporation which competes with the Company and which has a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 4.3 Savings Clause. You and the Company specifically agree that this -------------- covenant not to compete and its specific limitations constitute a reasonable covenant under the circumstances and is supported by the consideration stated above, and further agree that if, in the opinion of any court of competent jurisdiction, any of the provisions of this Section 4 are ever determined by a court to exceed the time, geographic scope or other limitations permitted by applicable law in any jurisdiction, then such excessive provisions shall be deemed reduced, in such jurisdiction only, to the maximum time, geographic scope or other limitation permitted in such jurisdiction, and you agree to the enforcement of the remainder of the covenant as so amended. 5. Non-Solicitation. You also covenant and agree that during the Restricted ---------------- Period set out in Section 4.2.3, and without regard to the 6 activity or activities in which you are engaging, whether it is within or without the telecommunications industry, you will not, directly or through employees, agents, recruiters, independent contractors or others: (a) offer, promise, provide or guarantee employment, work for compensation, business opportunity or other means of financial gain, or solicit, invite an inquiry on employment or other compensatory relationship, respond to such inquiry with a promise or grant of an employment or other compensatory relationship, or otherwise seek to influence any person to leave the Company or to undertake activities that would be adverse to the Company's interests, where such person is employed by the Company or is in an independent contractor relationship in which a majority of their time is spent on Company-related activities, or is a supplier of services to the Company who would thereafter become unavailable to provide such services to the Company, or who has been in such an employment or independent contractor relationship within the 12 months prior to your contact(s); or (b) solicit from, convert, attempt to convert, divert business from, or attempt to divert business from any of the Company's customers, customer accounts or locations, whether such activity is intended to benefit you or any other person or entity, and whether or not such activity is successful. 6. Equitable Relief. You specifically acknowledge that the restrictions ---------------- contained in each of Sections 2, 3, 4 and 5 of this Agreement are, in view of the nature of the business of the Company, and your position with it, reasonable and necessary to protect the legitimate interests of the Company, and that any violation of the provisions of those Sections will result in irreparable injury to the Company for which there would be no adequate remedy at law. You also acknowledge that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, and to an equitable accounting of all earnings, profits and other benefits arising from such violation. These rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. You agree to submit to the jurisdiction of any New York State court located in Monroe County or the United States District Court for the Western District of New York or of the state court or the federal court located in or presiding over the county in which the Company has its corporate headquarters at the applicable time in any action, suit or proceeding brought by the Company to enforce its rights under Sections 2, 3, 4 and/or 5 of this Agreement, and that any separate claim you have shall not constitute a defense to the enforcement of the covenants and agreements in those paragraphs. 7. Company's Obligations upon Termination. The sole obligations of the -------------------------------------- Company upon the termination of your employment are as set forth in this Section 7. Any and all amounts to be paid to you in connection with your termination shall be paid in a lump sum promptly after the Termination Date, but not more than thirty (30) days thereafter. 7 7.1 Termination upon Disability or Death. If your employment with the ------------------------------------ Company ends by reason of your death or Disability (as defined later in this Agreement), the Company shall pay you all amounts earned or accrued through the Termination Date but not paid as of the Termination Date, including: 7.1.1 Base compensation; 7.1.2 Reimbursement for reasonable and necessary expenses incurred by you on behalf of the Company during the Term; 7.1.3 Pay for earned but unused vacation and floating holidays; 7.1.4 All compensation you previously deferred (if any) to the extent not yet paid; and 7.1.5 An amount equal to your "Pro Rata Bonus". Your Pro Rata Bonus shall be determined by multiplying the "Bonus Amount" (as defined below) by a fraction, the numerator of which is the number of days in the fiscal year through the Termination Date and the denominator of which is 365. The term "Bonus Amount" means for each period for which a bonus is payable to employees under the short term incentive compensation program then in effect and for which you have not yet been paid: (i) a bonus at the level actually achieved by the Company for the fiscal year if you worked for the Company for the full fiscal year; and (ii)(a) a bonus established under the applicable plan using the level actually achieved for such prorated portion of the fiscal year in which the Termination Date occurs as relates to your actual employment, using such measurements as are used generally by the Company for monitoring employee bonus qualification; or (b) if you leave at a time in which the performance of the Company is not measured generally by the Company for employee bonus purposes, but the Company has met its bonus goals for the most recent period for which bonus measurements were taken and the goals met, then the bonus at standard level for the number of full months of the fiscal year that you worked for the Company. The amounts described in Sections 7.1.1 through 7.1.4, inclusive, are called elsewhere in this Agreement, collectively, the "Accrued Compensation". Except as otherwise provided in this Section 7.1, your entitlement to any other compensation or benefits shall be determined in accordance with the Company's employee benefit plans and other applicable programs and practices, including any long term compensation benefits, then in effect. 7.2 Termination Without Cause. If the Company terminates your ------------------------- employment without Cause (as defined later in this Agreement and 8 not in anticipation of a Change of Control), the Company shall pay you: 7.2.1 All Accrued Compensation; 7.2.2 A Pro Rata Bonus (as defined in Section 7.1.5 above); and 7.2.3 Severance ("Severance") equal to: (a) twice the sum of (i) the annual base compensation you would have received for the entire fiscal year in which the Termination Date occurs plus (ii) the Bonus Amount plus (iii) $18,000, being the agreed cash equivalent of the annual value of the perquisites provided to you under the Company's Executive Compensation Program, plus (iv) the Company contributions which would have been made on your behalf to the 401(k) retirement savings plan maintained by the Company (b) reduced by the present value of such amounts identified in subpart (a) as are "parachute payments" within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code") in the event of a change of control of the Company, determined in accordance with Section 280G(d)(4) of the Code. The foregoing shall be in lieu of any other amount of severance relating to salary or bonus continuation to be received by you upon termination of your employment under any severance plan, policy or arrangement of the Company. In addition, the Company shall continue to provide to you and your family at the Company's expense, for 24 months following the Termination Date, the life insurance, medical, dental, vision and hospitalization benefits provided to you and your family immediately prior to the Termination Date, and will pay to you the cash value of certain in-the-money options (or facilitate their exercise without financial penalty to you), and of restricted stock that has vested in the relevant tranch and for which the Company has met its performance criteria . Except as otherwise provided in this Section 7.2, your entitlement to any other compensation or benefits shall be determined in accordance with the Company's employee benefit plans and other applicable programs and practices then in effect. 7.3 Termination for Cause or Voluntary Termination. If your employment ---------------------------------------------- is terminated for Cause (as defined later in this Agreement and not in anticipation of a Change of Control), or if you voluntarily terminate your employment other than for Good Reason, the Company shall pay you all Accrued Compensation. Except as otherwise provided in this Section 7.3, your entitlement to any other compensation or benefits shall be determined in accordance with the Company's employee benefit plans and other applicable programs and practices then in effect. 7.3.1 You and Company acknowledge that at the inception of this Agreement, the Company has agreed to pay the reasonable costs of travel and temporary living expenses in connection with 9 this Agreement. You agree that, except in connection with a Change of Control, within such reasonable time period as you and Company agree, not to exceed 180 days, you will move your residence to such place as the Company has its headquarters location, under the Company's relocation program. The Company will reimburse you for any difference between the sale price of your home received after a good faith effort to sell it, and the sum of the price at which you purchased that home and the cost of major improvements which you made to that home within the past twelve months which costs have not otherwise been paid or credited to you. In addition, the Company will reimburse to you each month the cost of any mortgage differential that you must accept after reasonably seeking a mortgage rate comparable to that which currently applies to your home. You agree that, if you should decline to make such move, or should fail to comply with Company's request or directive, such refusal or failure shall be a basis for Company to terminate your employment for Cause, at its election, and it may decline to pay any sums identified above, and may reclaim any amounts paid. This subsection 7.3.1 shall cease to apply upon a Change of Control. 7.4 Termination for Good Reason or by Company Following Change of ------------------------------------------------------------- Control. If you terminate your employment for Good Reason or the Company terminates your employment in anticipation of or following a Change of Control, the Company shall pay you: 7.4.1 All Accrued Compensation; 7.4.2 A Pro Rata Bonus; and 7.4.3 Severance equal to: (a) three times the sum of (i) the annual base compensation you would have received for the entire fiscal year in which the Termination Date occurs plus (ii) the Bonus Amount plus (iii) $18,000 (being the agreed cash equivalent of the annual value of the perquisites provided to you under the Company's Executive Compensation Program), plus (iv) the Company contributions which would have been made on your behalf to the 401(k) retirement savings plan maintained by the Company (b) reduced by the present value of such amounts identified in subsection (a) as are "parachute payments" within the meaning of Section 280G(b)(2) of the Code in the event of a change of control of the Company, determined in accordance with Section 280G(d)(4) of the Code. The foregoing severance shall be in lieu of any other amount of severance relating to salary or bonus continuation to be received by you upon termination of your employment under any severance plan, policy or arrangement of the Company. In addition, the Company shall continue to provide to you and your family at the Company's expense, for 36 months following the Termination Date, the life insurance, medical, dental, vision and hospitalization benefits provided to you and your family immediately prior to the Termination Date, and will pay to you the cash value of certain in-the-money options (or facilitate their exercise without financial penalty to you), and of restricted stock that has vested in 10 the relevant tranch and for which the Company has met its performance criteria . The Company shall reimburse you for all reasonable legal fees and expenses which you may incur following a Change of Control as a result of the Company's attempts to contest the validity or enforceability of this Agreement or your attempts to obtain or enforce any right or benefit provided to you under this Agreement, provided any actions you have taken are determined to have been undertaken in good faith and upon a reasonable basis. Except as otherwise provided in this Section 7.4, your entitlement to any other compensation or benefits shall be determined in accordance with the Company's employee benefit plans and other applicable programs and practices, including any long term compensation benefits, then in effect. 8. Gross-Up Payment. Notwithstanding anything else in this Agreement, if it ---------------- is found that any or all of the payments made to you, including but not limited to payments made by the Company, or under any plan or arrangement maintained by the Company, to you or for your benefit (other than any additional payments required under this Section 8) (the "Payments") or any income you receive in the form of restricted stock of the Company or options of the Company, would be subject to the excise tax imposed by Section 4999 of the Code or you incur any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively the "Excise Tax"), then you are entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that, after you pay all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, you will retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The procedures for the calculation and contesting of any claim that such Excise Tax is due are set forth in the Addendum. 9. No Obligation to Mitigate Damages. You are not required to mitigate --------------------------------- damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, and the amounts to be paid to you under Section 7 of this Agreement shall not be reduced by any compensation you may earn from other sources. However, if, during any period that you would otherwise be entitled to receive any payments or benefits under this Agreement, you breach your obligations under Section 2, 3, 4 and/or 5 of this Agreement, the Company may immediately terminate any and all payments and the provision of benefits (to the extent permitted by law and the terms of the benefit plans maintained by the Company from time to time) hereunder. 10. Successor to Company. The Company will require any successor or assignee -------------------- to all or substantially all of the business and/or assets of the Company, whether by merger, sale of assets or otherwise, by agreement in form and substance reasonably satisfactory to you, to 11 assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if such succession or assignment had not taken place. Such agreement of assumption must be express, absolute and unconditional. If the Company fails to obtain such an agreement within three business days prior to the effective date of such succession or assignment, you shall be entitled to terminate your employment under this Agreement for Good Reason. 11. Survival. Notwithstanding the expiration or termination of this -------- Agreement, except as otherwise specifically provided herein, your obligations under Sections 2, 3, 4 and/or 5 of this Agreement and the obligations of the Company under this Agreement shall survive and remain in full force and effect. This Agreement shall inure to the benefit of, and be enforceable by, your personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you die while any amounts are still payable to you, all such amounts, unless otherwise provided in this Agreement, shall be paid in accordance with the terms of this Agreement to your devisee(s), legatee(s) or other designee(s) or, if there is no such designee(s), to your estate. 12. Definitions. Whenever used in this Agreement, the following terms shall ----------- have the meanings below: 12.1 "Cause" means: 12.1.1 You have willfully and continually failed to substantially perform your duties (other than due to an incapacity resulting from physical or mental illness or due to any actual or anticipated failure after you have given a Notice of Termination for Good Reason) after a written demand for substantial performance is delivered to you by the Chief Executive Officer or the Board which specifically identifies the manner in which it is believed that you have not substantially performed your duties; or 12.1.2 You have willfully engaged in conduct which is demonstrably and materially injurious to the Company (monetarily or otherwise), including but not limited to a breach of fiduciary duty; or 12.1.3 You have willfully engaged in conduct which is illegal or in violation of a material provision of the Company's Code of Ethics; or 12.1.4 You have been convicted of a felony or a crime involving moral turpitude; or 12.1.5 You have violated the provisions of Section 2 and/or Section 3 and/or Section 4 and/or Section 5 of this Agreement 12 and, in any of the events described in Sections 12.1.1 through 12.1.5 above, the - --- Board adopts a resolution or its minutes reflect a finding that in the good faith opinion of the Board you were culpable for the conduct set forth in any of Sections 12.1.1 through 12.1.5 and specifying the particulars thereof in detail. For the purposes of this Agreement, no act or failure to act on your part shall be considered willful unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interests of the Company. Any such resolution of the Board must receive the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose of considering the issue, and you must receive reasonable notice of the meeting and have an opportunity, with your counsel, to present your case to the Board. 12.2 "Change of Control" means: 12.2.1 The consummation of a consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which the shares of the Company's common, voting equity are to be converted into cash, securities or other property. For the purposes of this Agreement, a consolidation or merger with a corporation which was a wholly-owned direct or indirect subsidiary of the Company immediately before the consolidation or merger is not a Change of Control; or 12.2.2 The sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the Company's assets; or 12.2.3 The approval by the Company's shareowners of any plan or proposal for the liquidation or dissolution of the Company; or 12.2.4 Any person, as that term is used in Section 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company, a direct or indirect wholly-owned subsidiary of the Company or any other company owned, directly or indirectly, by the shareowners of the Company in substantially the same proportions as their ownership of the Company's common, voting equity), is or becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or more of the Company's then outstanding common, voting equity; or 12.2.5 During any period of two consecutive years, individuals who at the beginning of such period constitute the Board, including for this purpose any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in this Section 12.2.5) whose election or nomination for election by the Company's shareowners was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period or whose election or nomination for election was previously so approved (the "Incumbent Board"), cease for any reason to constitute a majority of the Board. 12.3 "Disability" means: 12.3.1 Your absence from your duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness; or 13 12.3.2 A physical or mental condition which prevents you from satisfactorily performing your duties with the Company and such incapacity or condition is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to you and/or your legal representative. 12.4 "Good Reason" means: 12.4.1 Without your express written consent, after a Change of Control, a significant reduction in title and authority, or the assignment to you of duties with the Company or with a person, as that term is used in Section 13(d) and 14(d) of the Exchange Act, in control of the Company materially diminished from the duties assigned to you immediately prior to a Change of Control; or 12.4.2 Without your express written consent, after a Change of Control, any reduction by the Company or any person, as that term is used in Section 13(d) and 14(d) of the Exchange Act, in control of the Company in your annual base compensation or annual bonus at Standard (or equivalent) rating from the amounts of such compensation and/or bonus in effect immediately before and during the fiscal year in which the Change of Control occurred (except that this Section 12.4.2 shall not apply to across-the-board salary or bonus reductions similarly affecting all executives of the Company and all executives of any person in control of the Company); or 12.4.3 Without your express written consent, after a Change of Control, the failure by the Company or any person, as that term is used in Section 13(d) and 14(d) of the Exchange Act, in control of the Company to increase your annual base compensation or annual bonus at Standard (or equivalent) rating at the times and in comparable amounts as they are increased for similarly situated senior executive officers of the Company and of any person, as that term is used in Section 13(d) and 14(d) of the Exchange Act, in control of the Company; or 12.4.4 Without your express written consent, after a Change of Control, the failure by the Company or by any person, as that term is used in Section 13(d) and 14(d) of the Exchange Act, in control of the Company to continue in effect any benefit or incentive plan or arrangement (except any benefit plan or 14 arrangement which expires by its own terms then in effect upon the occurrence of a Change of Control) in which you are participating at the time of the Change of Control, unless a replacement plan or arrangement with at least substantially similar terms is provided to you; or 12.4.5 Without your express written consent, after a Change of Control, the taking of any action by the Company or by any person, as that term is used in Section 13(d) and 14(d) of the Exchange Act, in control of the Company which would adversely affect your participation in or materially reduce your benefits under any benefit plan or arrangement or deprive you of any other material benefit (including any miscellaneous benefit which is not represented and protected by a written plan document or trust) enjoyed by you at the time of a Change of Control; or 12.4.6 You terminate your employment (other than because of your death or Disability) by giving the Company a Notice of Termination with a Termination Date not later than the first anniversary of the Change of Control; or 12.4.7 Any failure by the Company to comply with any of its material obligations under this Agreement, after you have given notice of such failure to the Company and the Company has not cured such failure promptly after its receipt of such notice. 13. Notice. All notices and other communications required or permitted under ------ this Agreement shall be in writing and shall be deemed given when mailed by certified mail, return receipt requested, or by nationally recognized overnight courier, receipt requested, when addressed to you at your official business address when employed by the Company and at your home address as reflected in the Company's records from time to time and when addressed to the Company at its corporate headquarters, to the attention of the Board, with a required copy to the Company's general counsel. 14. Amendment and Assignment. This Agreement cannot be changed, modified or ------------------------ terminated except in a writing. You may not assign your duties with the Company to any other person. The Company may assign its obligations under this Agreement to one of its principal subsidiaries for administrative purposes. 15. Severability. If any provision of this Agreement or the application of ------------ this Agreement to anyone or under any circumstances is determined by a court to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be effective without the invalid or unenforceable provision or application, and such invalidity or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction. 15 16. Remedies Cumulative; No Waiver. No remedy conferred on you or on the ------------------------------ Company by this Agreement is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or later existing at law or in equity. No delay or omission by you or by the Company in exercising any right, remedy or power under this Agreement or existing at law or inequity shall be construed as a waiver of such right, remedy or power, and any such right, remedy or power may be exercised by you or the Company from time to time and as often as is expedient or necessary. 17. Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of New York, without regard to any applicable conflicts of laws. 18. Counterparts. This Agreement may be signed by you and on behalf of the ------------ Company in one or more counterparts, each of which shall be one original but all of which together will constitute one and the same instrument. If this Agreement correctly sets forth our agreement on its subject matter, please sign and return to me the enclosed copy of this Agreement. Please keep the other copy for your records. Sincerely, FRONTIER CORPORATION By: /s/ Joseph P. Clayton ----------------------------- Joseph P. Clayton Chief Executive Officer Agreed to this 22nd day of May, 1998: /s/ Rolla Huff - --------------------------------------- Rolla Huff 16 ADDENDUM TO LETTER AGREEMENT DATED AS OF MAY 22, 1998 The following provisions shall apply to the calculation and procedures relating to the Gross-Up Payment in accordance with Section 8 of the Agreement. 1. The Company's independent auditors in the fiscal year in which the Change of Control occurs (the "Accounting Firm") shall determine whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be used in making such determination. The Accounting Firm shall provide detailed supporting calculations, together with a written opinion with respect to the accuracy of such calculations, to you and the Company within 15 business days of the receipt of a written request from either you or the Company. If the Accounting Firm is serving (or has served within the three years preceding the Change in Control) as accountant or auditor for the person in control of the Company following the Change of Control or any affiliate thereof, you may appoint another nationally recognized accounting firm to make the determinations required in connection with the Gross-Up Payment and the substitute accounting firm shall then be referred to as the Accounting Firm). The Company shall pay you any Gross-Up Payment, determined in accordance with this Addendum, within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that you will not be liable for any Excise Tax, it shall furnish you with a written opinion that your failure to report the Excise Tax on the applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon you and the Company. 2. If there is uncertainty about how Section 4999 is to be applied when the Accounting Firm makes its initial determination, and as a result the Gross- Up Payment made to you by the Company is determined (after following the procedures set forth in this Addendum) to be less than it should have been made (an "Underpayment"), and you are thereafter required to pay any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment and any such Underpayment shall be promptly paid by the Company to you or for your benefit. 3. You shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the Company to pay you the Gross-Up Payment. Your notice shall be given as soon as practicable but no later than ten business days after you have been informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. You shall not pay such claim prior to the expiration of the 30 day period following the date on which you gave such notice to the Company (or any shorter period, if the taxes claimed are due sooner). If the Company notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall: (a) give the Company any information reasonably requested by it relating to such claim, (b) take such action in connection with contesting such claim as the Company shall 17 reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (c) cooperate with the Company in good faith in order effectively to contest such claim, and (d) permit the Company to participate in any proceedings relating to such claim. 4. The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in connection with the claim and may, at its sole option, either direct you to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and you agree to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts as the Company shall determine. 5. Any extension by the Company of the statute of limitations relating to payment of taxes for the taxable year for which such contested amount is claimed to be due shall be limited solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross- Up Payment would be payable under this Agreement and you shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 6. If the Company directs you to pay such claim and sue for a refund, the Company shall advance the amount of such payment to you, on an interest-free basis, and shall indemnify and hold you harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance. 7. If you receive a refund of any amount advanced to you by the Company, you will promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If the Company advanced to you any amounts and a determination is made that you will not be entitled to any refund with respect to such claim and the Company does not notify you in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and you will not be required to be repay it. The amount of such advance shall offset the amount of the Gross-Up Payment required to be paid. 8. The Company shall pay all fees and expenses of the Accounting Firm. The Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold you harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. 18 May 22, 1998 Mr. Rolla Huff 5604 Tanner Trail Plano, Texas 75093 Dear Mr. Huff: The purpose of this letter is to assure you that upon execution of the agreement ("Agreement") by which you will become an employee of Frontier Corporation ("Frontier") and an officer of Frontier, Frontier shall extend to you an agreement for options for 200,000 shares of common stock in Frontier, to be effective at the closing price of Frontier on the date the agreement is executed, and which shall be divided into three equal tranches, which shall vest annually on the first, second and third anniversary of the grant, respectively, pursuant to the applicable plan. Frontier shall also make a grant of 100,000 restricted shares of common stock of Frontier to you, which shall be offered under one of the Company's existing plans and which will include the following characteristics: they will vest in amounts of no more than one third in either of the first or second years, with the remainder that becomes vested in any of the first three years payable by the end of the third year, with defined one, two and three year timing gates, and performance criteria that anticipate stock price growth of 15% each year. Finally, Frontier shall provide to you, during the normal cycle of option grants that is planned for early in 1999, no less than 100,000 additional options for shares of common stock of Frontier at a price that reflects the price of Frontier shares on the date that the award becomes effective. Pursuant to the Agreement, in the event that your employment is terminated without Cause, or your employment is terminated for Good Reason or after a Change of Control, then in either case, any options awarded to you and that may not yet have vested shall be deemed to have vested as of the calendar day immediately prior to the last day upon which you work. The Company and you agree that, in full and final settlement of any claims you may have with respect to your outstanding options, whether or not vested, the Company will pay to you for each option the difference between the Company's share price at the end of the day upon which you last work and the price at which you may elect to exercise each option, if the share price is in excess of the option price (or facilitate their exercise without financial penalty to you), but will pay you nothing in the event that the share price is lower than the option price. Any amount due you 19 shall be paid within thirty (30) days or such additional time as is required to resolve any other financial obligation that you may have to the Company. Also, pursuant to the Agreement, in the event that your employment is terminated without Cause, or your employment is terminated for Good Reason or after a Change of Control, then in either case, the Company will waive or otherwise deem satisfied any timing condition that applies to you with respect to the restricted stock awarded to you, and the Company and you agree that if the Company has met the performance criteria for one or more tranches, the Company shall pay to you the value of such restricted stock in cash, in full and final settlement of all restricted stock obligations to you. No amount shall be payable if the performance criteria have not been met as of the date your employment is terminated. Very truly yours, /s/ Janet F. Sansone Janet F. Sansone 20 EX-12.1 4 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 Frontier Corporation Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividend Requirements (Dollars in thousand, except ratios)
1998 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- Earnings Pre-tax income from continuing operations 307,103 75,989 340,761 246,255 296,332 less: Income from equity investees (16,711) (12,019) (9,011) (3,676) (3,185) plus: Fixed charges: Interest expense, amortization of debt discount and issuance expense 55,318 48,239 43,312 54,492 51,532 Capitalized interest expense 18,152 13,393 6,197 307 -- One third of rental expense relating to operating leases 44,633 52,167 54,900 25,967 22,900 Preference security dividend requirements of consolidated subsidiaries 26 36 292 308 275 ------- ------- ------- ------- ------- Total fixed charges: 118,129 113,835 104,701 81,074 74,707 plus: Amortization of capitalized interest Integrated Services 743 238 11 -- -- Local Communications Services (1) 269 179 86 13 -- ------- ------- ------- ------- ------- Total Amortization of capitalized interest 1,012 417 97 13 -- less: Capitalized interest expense (18,152) (13,393) (6,197) (307) -- less: Preference security dividend requirements of consolidated subsidiaries (26) (36) (292) (308) (275) ------- ------- ------- ------- ------- Total earnings 391,356 164,793 430,059 323,051 367,579 ======= ======= ======= ======= ======= Total fixed charges 118,129 113,835 104,701 81,074 74,707 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 3.3 1.4 4.1 4.0 4.9 ======= ======= ======= ======= ======= Preferred dividend 1,005 1,019 1,182 1,191 1,187 Ratio of pretax income to net income Pretax 307,103 75,989 340,761 246,255 296,332 b/f extraordinary items Post tax 177,543 31,801 198,205 145,129 187,254 ------- ------- ------- ------- ------- extraordinary items 1.73 2.39 1.72 1.70 1.58 Preferred stock dividend requirements 1,739 2,435 2,033 2,025 1,875 ------- ------- ------- ------- ------- Total fixed charges and preferred stock dividend requirements 119,868 116,270 106,734 83,099 76,583 ======= ======= ======= ======= ======= Ratio of earnings to combined fixed charges and preferred stock dividend requirements 3.3 1.4 4.0 3.9 4.8 ======= ======= ======= ======= =======
(1) Amortization of capitalized interest for Local Communications Services assumes a one-half year convention and an average service life of 12 years. EX-23.1 5 CONSENT OF PRICEWATERHOUSE COOPERS Consent of Independent Accountants We hereby consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 of Frontier Corporation of our report dated January 25, 1999, which appears on page 20 of the Frontier Corporation Current Report on Form 8-K dated January 26, 1999. We also consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 of Frontier Corporation of our report dated January 26, 1998, which appears on page 25 of the 1997 Annual Report to Shareowners of Frontier Corporation, which is incorporated by reference in its Annual Report on Form 10-K for the year ended December 31, 1997. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 30 of such Annual Report on Form 10-K (the financial statements and financial statement schedule contained in the Annual Report on Form 10-K for the year ended December 31, 1997 have not been restated to reflect the pooling of interests acquisition of GlobalCenter, Inc.). We also consent to the incorporation by reference of our report, dated January 26, 1998, except as to the pooling of interests with GlobalCenter, Inc. which is as of February 27, 1998, which appears on page 19 of the Current Report on Form 8-K of Frontier Corporation dated June 17, 1998. We also consent to the reference to us under the heading "Experts" in such Prospectus. PricewaterhouseCoopers LLP Rochester, New York February 11, 1999 EX-23.2 6 CONSENT OF ERNST & YOUNG [LOGO OF ERNST & YOUNG LLP] Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" in the Registration Statement on Form S-3 of Frontier Corporation and to the incorporation by reference of our report dated January 17, 1996, with respect to the consolidated financial statements and schedule of ALC Communications Corporation incorporated by reference in the Annual Report on Form 10-K of Frontier Corporation for the year ended December 31, 1997 and the Current Report on Form 8-K of Frontier Corporation dated June 17, 1998 each filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP Detroit, Michigan February 10, 1999 EX-24.1 7 POWER OF ATTORNEY POWER OF ATTORNEY Each of the undersigned directors and/or officers of Frontier Corporation, a New York business corporation (the "Company"), hereby constitutes and appoints Joseph P. Clayton, Rolla P. Huff and Josephine S. Trubek, and each of them with full power to act without the others, true and lawful attorneys and agents, to do any and all acts and things and to execute any and all instruments which any of said attorneys and agents may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933, as amended, and with any regulations, rules or requirements of the Securities and Exchange Commission ("Commission") thereunder in connection with the Registration Statement filed under said Act relating to a public offering of shares of Common Stock, shares of Preferred Stock, debt securities and warrants exercisable for shares of Common Stock or Preferred Stock, and any and all amendments or supplements to the foregoing, including specifically, but without limiting the generality of the foregoing, full power and authority to sign the names of the undersigned to any Registration Statement on Form S-3 or other applicable form filed with the Commission under said Act in such connection, and any amendment or amendments thereto, the undersigned hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this instrument have signed and delivered these presence as of this 2nd day of August, 1998. - ----------------------------------- -------------------------------- Patricia C. Barron Raul E. Cesan /s/ Joseph P. Clayton - ----------------------------------- -------------------------------- Joseph P. Clayton Brenda E. Edgerton /s/ Jairo A. Estrada /s/ Michael E. Faherty - ----------------------------------- -------------------------------- Jairo A. Estrada Michael E. Faherty /s/ Alan C. Hasselwander - ----------------------------------- -------------------------------- Alan C. Hasselwander Robert Holland, Jr. /s/ Douglas H. McCorkindale /s/ Leo J. Thomas - ----------------------------------- -------------------------------- Douglas H. McCorkindale Leo J. Thomas EX-24.2 8 EXECUTIVE COMMITTEE RESOLUTION FURTHER RESOLVED: That each officer and director of this Corporation who may be required or permitted to execute the New Registration Statement or any amendment thereto be and he/she hereby is authorized to execute a power of attorney appointing Joseph P. Clayton, Rolla P. Huff and/or Josephine S. Trubek, and each of them severally, his/her true and lawful attorneys or attorney to execute in his/her name, place and stead in any such capacity the New Registration Statement and any and all amendments and supplements thereto, and to file the same with the Commission, each of said attorneys to have power to act with or without the others and to have full power and authority to do and perform in the name on behalf of each of the said officers and directors every act whatsoever necessary or advisable to be done as fully as, and to do the same extent that, each officer or director might or could do in person. -----END PRIVACY-ENHANCED MESSAGE-----