UNITED STATES SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, D.C.  20549

 

FORM 10-Q

(Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30 , 2015

 

or

 

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________to__________

 

Commission file number:  001-11001

 

FRONTIER COMMUNICATIONS CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

06-0619596

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

 

 

401 Merritt 7

 

 

Norwalk , Connecticut  

 

06851

(Address of principal executive offices)

 

(Zip Code)

 

 

 

 

(203) 614-5600

(Registrant's telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes  X       No ___

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web   site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes  X       No ___

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer            Accelerated filer            Non-accelerated filer          Smaller reporting company 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes           No X   

 

The number of shares outstanding of the registrant’s Common Stock as of   October 26 ,   201 5   was 1,168,212,000 .

 

 


 

 

 

 

 

 

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

Index

 

 

 

 

 

Page No.

Part I.  Financial Information (Unaudited)

 

 

 

Item 1.  Financial Statements

 

 

 

Consolidated Balance Sheets as of September 30 , 2015 and December 31, 201 4

2

 

 

Consolidated Statements of Operations for the three and nine   months ended September 30 , 2015 and 201 4

3

 

 

Consolidated Statements of Comprehensive Income (Loss) for the three   and nine   months ended

 

September 30 , 2015 and 201 4

3

 

 

Consolidated Statement of Equity for the nine   months ended September 30 , 2015

4

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30 , 2015 and 201 4

5

 

 

Notes to Consolidated Financial Statements

6

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

 

 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

41

 

 

Item 4.  Controls and Procedures

41

 

 

Part II.  Other Information

 

 

 

Item 1.  Legal Proceedings

42

 

 

Item 1A.  Risk Factors

42

 

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

43

 

 

Item 4.  Mine Safety Disclosure

43

 

 

Item 6.  Exhibits

44

 

 

Signature

45

 

 

 

 

 

 

1

 


 

 

 

PART I.  FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in million s and shares in thousands , except for per- share amounts )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

September 30, 2015

 

December 31, 2014

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,011 

 

$

682 

Accounts receivable, less allowances of $55 and $72 , respectively

 

 

554 

 

 

614 

Restricted cash

 

 

8,440 

 

 

 -

Prepaid expenses

 

 

86 

 

 

61 

Income taxes and other current assets

 

 

104 

 

 

129 

Total current assets

 

 

10,195 

 

 

1,486 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

8,439 

 

 

8,566 

Goodwill

 

 

7,166 

 

 

7,205 

Other intangibles, net

 

 

1,220 

 

 

1,500 

Other assets

 

 

345 

 

 

217 

Total assets

 

$

27,365 

 

$

18,974 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Long-term debt due within one year

 

$

97 

 

$

298 

Accounts payable

 

 

335 

 

 

379 

Advanced billings

 

 

165 

 

 

179 

Accrued taxes

 

 

106 

 

 

80 

Accrued interest

 

 

215 

 

 

214 

Pension and other postretirement benefits

 

 

97 

 

 

124 

Other current liabilities

 

 

413 

 

 

238 

Total current liabilities

 

 

1,428 

 

 

1,512 

 

 

 

 

 

 

 

Deferred income taxes

 

 

2,704 

 

 

2,939 

Pension and other postretirement benefits

 

 

1,146 

 

 

1,141 

Other liabilities

 

 

216 

 

 

238 

Long-term debt

 

 

16,016 

 

 

9,486 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value (50,000 authorized shares,

 

 

 

 

 

 

11.125% , Series A, 19,250 shares issued and outstanding

 

 

 

 

 

 

at September 30, 2015)

 

 

 -

 

 

 -

Common stock, $0.25 par value (1,750,000 authorized shares, 1,192,986

 

 

 

 

 

 

and 1,027,986 issued and 1,168,218 and 1,002,469 outstanding,

 

 

 

 

 

 

respectively, at September 30, 2015 and December 31, 2014)

 

 

298 

 

 

257 

Additional paid-in capital

 

 

6,210 

 

 

3,990 

Retained earnings

 

 

16 

 

 

109 

Accumulated other comprehensive loss, net of tax

 

 

(391)

 

 

(404)

Treasury stock

 

 

(278)

 

 

(294)

Total equity

 

 

5,855 

 

 

3,658 

Total liabilities and equity

 

$

27,365 

 

$

18,974 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

2

 


 

 

PART I.  FINANCIAL INFORMATION (Continued)

 

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE   AND NINE   MONTHS ENDED SEPTEMBER 30 , 2015 AND 201 4

($ in millions and shares in thousands , except for per-share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the nine months ended

 

 

September 30,

 

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

1,424 

 

$

1,141 

 

$

4,163 

 

$

3,442 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Network access expenses

 

 

159 

 

 

108 

 

 

475 

 

 

321 

Network related expenses

 

 

331 

 

 

276 

 

 

969 

 

 

798 

Selling, general and administrative expenses

 

 

344 

 

 

257 

 

 

1,005 

 

 

788 

Depreciation and amortization

 

 

325 

 

 

261 

 

 

1,001 

 

 

816 

Acquisition and integration costs

 

 

58 

 

 

42 

 

 

150 

 

 

72 

Total operating expenses

 

 

1,217 

 

 

944 

 

 

3,600 

 

 

2,795 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

207 

 

 

197 

 

 

563 

 

 

647 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income, net

 

 

 

 

25 

 

 

 

 

26 

Interest expense

 

 

246 

 

 

170 

 

 

751 

 

 

508 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

(38)

 

 

52 

 

 

(185)

 

 

165 

Income tax expense (benefit)

 

 

(24)

 

 

10 

 

 

(92)

 

 

46 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

(14)

 

 

42 

 

 

(93)

 

 

119 

Less: Dividends on preferred stock

 

 

67 

 

 

 -

 

 

67 

 

 

 -

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

Frontier common shareholders

 

$

(81)

 

$

42 

 

$

(160)

 

$

119 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

attributable to Frontier common shareholders

 

$

(0.07)

 

$

0.04 

 

$

(0.15)

 

$

0.12 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total weighted average shares outstanding - basic

 

 

1,161,207 

 

 

994,647 

 

 

1,061,644 

 

 

994,393 

Total weighted average shares outstanding - diluted

 

 

1,161,207 

 

 

997,855 

 

 

1,061,644 

 

 

997,744 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT S OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE   MONTHS ENDED SEPTEMBER 30 , 2015 AND 201 4

($ in millions )

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the nine months ended

 

 

September 30,

 

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(14)

 

$

42 

 

$

(93)

 

$

119 

Other comprehensive income, net of tax (see Note 13)

 

 

 

 

 

 

13 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

(9)

 

$

44 

 

$

(80)

 

$

127 

 

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

3

 


 

 

PART I.  FINANCIAL INFORMATION (Continued)

 

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30 , 2015

($ in millions and shares in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock

 

Paid-In

 

Retained

 

Comprehensive

 

Treasury Common Stock

 

Total

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Earnings

 

Loss

 

Shares

 

Amount

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance January 1, 2015

 

 -

 

$

 -

 

1,027,986 

 

$

257 

 

$

3,990 

 

$

109 

 

$

(404)

 

(25,517)

 

$

(294)

 

$

3,658 

Issuance of common stock

 

 -

 

 

 -

 

165,000 

 

 

41 

 

 

758 

 

 

 -

 

 

 -

 

 -

 

 

 -

 

 

799 

Issuance of preferred stock

 

19,250 

 

 

 -

 

 -

 

 

 -

 

 

1,866 

 

 

 -

 

 

 -

 

 -

 

 

 -

 

 

1,866 

Stock plans

 

 -

 

 

 -

 

 -

 

 

 -

 

 

(4)

 

 

 -

 

 

 -

 

749 

 

 

16 

 

 

12 

Dividends on common stock

 

 -

 

 

 -

 

 -

 

 

 -

 

 

(333)

 

 

 -

 

 

 -

 

 -

 

 

 -

 

 

(333)

Dividends on preferred stock

 

 -

 

 

 -

 

 -

 

 

 -

 

 

(67)

 

 

 -

 

 

 -

 

 -

 

 

 -

 

 

(67)

Net loss

 

 -

 

 

 -

 

 -

 

 

 -

 

 

 -

 

 

(93)

 

 

 -

 

 -

 

 

 -

 

 

(93)

Other comprehensive income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of tax

 

 -

 

 

 -

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

13 

 

 -

 

 

 -

 

 

13 

Balance September 30, 2015

 

19,250 

 

$

 -

 

1,192,986 

 

$

298 

 

$

6,210 

 

$

16 

 

$

(391)

 

(24,768)

 

$

(278)

 

$

5,855 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

4

 


 

PART I.  FINANCIAL INFORMATION (Continued)

 

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30 , 2015 AND 201 4

($ in millions )

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Cash flows provided from (used by) operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

(93)

 

$

119 

Adjustments to reconcile net income (loss) to net cash provided by

 

 

 

 

 

 

operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

1,001 

 

 

816 

Pension/OPEB costs

 

 

(3)

 

 

(21)

Stock based compensation expense

 

 

19 

 

 

18 

Gains on sale of assets

 

 

 -

 

 

(25)

Amortization of deferred financing costs

 

 

194 

 

 

30 

Deferred income taxes

 

 

(163)

 

 

(125)

Change in accounts receivable

 

 

59 

 

 

17 

Change in accounts payable and other liabilities

 

 

(46)

 

 

53 

Change in prepaid expenses, income taxes and other current assets

 

 

(7)

 

 

60 

Net cash provided from operating activities

 

 

961 

 

 

942 

 

 

 

 

 

 

 

Cash flows provided from (used by) investing activities:

 

 

 

 

 

 

Capital expenditures - Business operations

 

 

(525)

 

 

(413)

Capital expenditures - Integration activities

 

 

(101)

 

 

(82)

Network expansion funded by Connect America Fund - Phase I

 

 

(22)

 

 

(41)

Grant funds received for network expansion from Connect America Fund - Phase I

 

 

 -

 

 

Proceeds on sale of assets

 

 

 -

 

 

25 

Cash transferred (to)/from escrow

 

 

(8,440)

 

 

(1,508)

Cash paid for an acquisition, net of cash acquired

 

 

(17)

 

 

 -

Other

 

 

(2)

 

 

27 

Net cash used by investing activities

 

 

(9,107)

 

 

(1,988)

 

 

 

 

 

 

 

Cash flows provided from (used by) financing activities:

 

 

 

 

 

 

Proceeds from long-term debt borrowings

 

 

6,603 

 

 

1,561 

Financing costs paid

 

 

(119)

 

 

(39)

Long-term debt payments

 

 

(274)

 

 

(245)

Proceeds from issuance of common stock, net

 

 

799 

 

 

 -

Proceeds from issuance of preferred stock, net

 

 

1,866 

 

 

 -

Dividends paid on common stock

 

 

(333)

 

 

(301)

Dividends paid on preferred stock

 

 

(67)

 

 

 -

Other

 

 

 -

 

 

(2)

Net cash provided from (used by) financing activities

 

 

8,475 

 

 

974 

 

 

 

 

 

 

 

Increase/(Decrease) in cash and cash equivalents

 

 

329 

 

 

(72)

Cash and cash equivalents at January 1,

 

 

682 

 

 

880 

 

 

 

 

 

 

 

Cash and cash equivalents at September 30,

 

$

1,011 

 

$

808 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$

553 

 

$

464 

Income taxes, net

 

$

27 

 

$

36 

 

 

 

 

 

 

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements .

 

 

5

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

(1)   Summary of Significant Accounting Policies :

(a)   Basis of Presentation and Use of Estimates :

Frontier Communications Corporation and its subsidiaries are referred to as “we,” “us,” “our,” “Frontier,” or the “Company” in this report. Our interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2014. R eclassifications of amounts previously reported in our consolidat ed statement of operations as “O ther operating expenses” have been made to conform to the current presentation of “ Network related expenses” and “S elling, general and administrative expenses” .   All significant intercompany balances and transactions have been eliminated in consolidation. These interim unaudited consolidated financial statements include all adjustments (consisting of normal recurring accruals) considered necessary, in the opinion of Frontier’s management, to present fairly the results for the interim periods shown. Revenues, net income (loss) and cash flows for any interim periods are not necessarily indicative of results that may be expected for the full year. For our interim financial statements as of and for the period ended September 30 , 2015 , we evaluated subsequent events and transactions for potential recognition or disclosure through the date that we filed this Form 10-Q with the Securities and Exchange Commission (SEC).

 

Effective October 24, 2014, Frontier’s scope of operations and balance sheet capitalization changed materially as a result of the completion of the Connecticut Acquisition, as described in Note 3 - Acquisitions. F inancial data presented for Frontier for periods prior to that date is not indicative of the future financial position or operating results for Frontier

 

The preparation of our interim financial statements in conformity with G AAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the financial statements, (ii) the disclosure of contingent assets and liabilities, and (iii) the reported amounts of revenue and expense s during the reporting period. Actual results ma y differ from those estimates. Estimates and judgments are used when acco unting for the allowance for doubtful accounts ,   asset impairments, indefinite-lived intangible s , depreciation and amortization, income taxes, business combinations , and pension and other postretirement benefits, among others.

 

We operate in one reportable segment. Frontier provides both regulated and unregulated voice, data and video services to residential, business and wholesale customers and is typically the incumbent voice services provider in its service areas. We have combine d our six   geographic operating regions because all of these regional operations share similar characteristics, in that they provide the same products and services to similar customers using comparable technologies in all of the states in which we operate. The regulatory structure is generally similar. Differences in the regulatory regime of a particular state do not significantly impact the economic characteristics or operating results of a particular region .

 

(b)   Revenue Recognition :

Revenue is recognized when services are provided or when products are delivere d to customers. Revenue that is billed in advance includes monthly recurring network access services (including data services), special access services and monthly recurring voi ce, video and related charges. The unearned portion of these fees is initially deferred as a component of “Advanced billings” on our consolidated balance sheet and recognized as revenue over the period t hat the services are provided. Revenue that is billed in arrears includes non-recurring network access services (including data services), switched access services and non-recur ring voice and video services. The earned but unbilled portion of these fees is recognized as revenue in our consolidated statements of operations and accrued in “A ccounts receivable   on our consolidated balance sheet in the period that the services are provided. Excise taxes are recogniz ed as a liability when billed. Installation fees and their related direct and incremental costs are initially deferred and recognized as revenue and expense over the average te rm of a customer relationship. We recognize as current period expense the portion of installation costs that exceeds installation fee revenue.

 

Frontier collects various taxes from its customers and subsequently remits these taxes to governmental authorities. Substantially all of these taxes are recorded through the consolidated balance sheet and presented on a net basis in our

6

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

consolid ated statements of operations .   We also collect Universal Service Fund (USF) surcharges from customers (primarily federal USF) that we have recorded on a gross basis in our consolidated statements of operations and included within “Revenue” and “ Network related expenses” of  $ 38 million and $30 million, and   $ 114 million and $ 90 million ,   for the three and nine   months ended September 30 , 2015 and 201 4 , respectively .

 

In 2015 we accepted the FCC’s Connect America Fund (CAF) Phase II offer of support, which replaces the USF frozen high-cost support that we had been receiving pursuant to a 2011 FCC o rder.  CAF Phase II funding as well as USF frozen high-cost support are programs intended to subsidize the high-cost of delivering communications services to certain high-cost unserved or underserved areas .  We are recognizing these subsid ies into revenue   consistent with how the costs related to these subsidies are being and are e xpected to be incurred , which is on a straight line basis .  

 

We categorize our products, services and other revenues among the following four categories:

 

·

Voice services include traditional local and long distance wireline services, Voice over Internet Protocol (VoIP) services, as well as a number of unified messaging services offered to our residential and business customers. Voices services also include the long distance voice origination and termination services that we provide to our business customers and other carriers ;

 

·

Data and Internet services include broadband services for residential and business customers. We provide data transmission services to high volume business customers and other carriers with dedicated high capacity circuits (“nonswitched access”) including services to wireless providers (“wireless backhaul”);

 

·

Other customer revenue includes residential video services, our provision for bad debts, sales of customer premise equipment to our business customers and directory services; and

 

·

Switched Access and Subsidy revenues include revenues derived from allowing other carriers to use our network to originate and/or terminate their local and long distance voice traffic (“switched access”). These services are primarily billed on a minutes- of-use basis applying tariffed rates filed with the FCC or state agencies. We also receive cost subsidies from state and federal authorities, including the Connect America Fund.

 

 

The following table provides a summary of revenues from external customers by the categories of Frontier’s products and services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

( $ in millions )

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice services

 

$

500 

 

$

472 

 

$

1,540 

 

$

1,426 

 

Data and Internet services

 

 

589 

 

 

469 

 

 

1,748 

 

 

1,393 

 

Other

 

 

134 

 

 

76 

 

 

404 

 

 

232 

 

Customer revenue

 

 

1,223 

 

 

1,017 

 

 

3,692 

 

 

3,051 

 

Switched access and subsidy

 

 

201 

 

 

124 

 

 

471 

 

 

391 

 

Total revenue

 

$

1,424 

 

$

1,141 

 

$

4,163 

 

$

3,442 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

( c )   Goodwill and Other Intangibles :

Goodwill represent s the excess of purchase price over the fair value of identifiable tangible and intangible net assets acquired. We undertake studies to determine the fair values of assets and liabilities acquired and allocate purchase prices to assets and liabilities, including property, plant and equipment, goodwill and o ther identifiable intangibles . We examine the carrying value of our goodwill and trade name annually as of December 31, or more frequently, as circumstances warrant, to determine whether there are any impairment l osses. We test for goodwill impairment at the “operating segment” level, as that term is defined in GAAP. During the second quarter of 2015, Frontier reorganized into six regional operating segments, which are aggregated into one reportable segment.  In conjunction with the reorganization of our operating segments effective with the second quarter of 2015, we reassigned goodwill to our regional operating segments (reporting units) using a relative fair value allocation approach.  We tested for the impairment of goodwill and there was no indication of impairment at June 30, 2015.

 

Frontier amortizes finite-lived intangible assets over their estimated useful lives on the accelerated method of sum of the years digits. We review such intangible assets at least annually as of December 31 to assess whether any potential impairment exists and whether factors exist that would necessitate a change in useful life and a different amortization period. 

 

 

(2)   Recent Accounting Literature :

Debt Issuance Costs

In April, 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issue d ASU No. 2015-15, “Interest – Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”. This standard permits an entity to defer and present debt issuance costs related to line-of-credit arrangements as an asset and to subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement. These new standard s are effective for annual and interim reporting periods beginning after December 15, 2015. Early adoption is permitted and companies must apply th e requirements retrospectively. At this time, Frontier has not elected the early adoption method for this standard. D ebt issuance costs are included in “Other assets” and were $ 208 million at September 30 , 2015.

 

Revenue Recognition

In May 2014, the FASB is sued ASU   No. 2014-09 , “Revenu e from Contracts with Customers.”   This standard   requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchan ge for those goods or services. This new standard is effective for annual and interim reporting periods b eginning after December 15, 2017 . Companies are also permitted to voluntarily adopt the new standard as of the original effective date that was for annual reporting periods beginning after December 15, 2016.   Companies are permitted to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. Frontier is currently evaluating the impact of adopting the new standard ,   but has not yet selected a transition method or determined the impact of adoption on its consolidated financial statements.    

 

(3)   Acquisitions :

The Connecticut Acquisition  

On October 24, 2014, pursuant to the stock purchase agreement dated December 16, 2013, as amended, Frontier acquired the wireline properties of AT&T Inc. (AT&T) in Connecticut (the Connecticut Acquisition) for a purchase price of $2 ,018 million in cash , including adjustments for working capital . Following the Connecticut Acquisition, Frontier now owns and operates the wireline business and fiber optic network servicing residential, commercial and wholesale customers in Connecticut. Frontier also acquired the AT&T U-verse ® video and DISH ® satellite TV customers in Connecticut.

 

In connection with the Connecticut Acquisition, Frontier incurred $38   million of operating expenses, consisting of $1   million and $37   million of acquisition and integration costs, respectively, and $23   million in capital expenditures during the nine months ended September 30 , 2015. Frontier incurred $72 million of operating expenses, consisting of $3 million and $69  

8

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

million of acquisition and integration costs, respectively, and $82 million in capital expenditures during the nine months ended September 30 , 201 4 .

 

Our consolidated statement of operations for the nine months ended September 30 , 2015 includes $792 million of revenue and $74   million of operating income related to the results of the Connecticut operations.

 

The final allocation of the purchase price presented below represents the effect of recording the fair value of assets acquired, liabilities assumed and related deferred income taxes as of the date of the Connecticut Acquisition, based on the total transaction consideration of $2,018 million . An adjustment to the allocation of the purchase price for the Connecticut Acquisition during the third quarter of 2015 resulted in a $71 million decrease to Deferred income taxes and Goodwill

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

 

    

 

 

 

Current assets

 

69 

Property, plant & equipment

 

 

1,459 

Goodwill

 

 

815 

Other intangibles - customer list

 

 

570 

Current liabilities

 

 

(94)

Deferred income taxes

 

 

(576)

Other liabilities

 

 

(225)

Total net assets acquired

 

$

2,018 

 

 

 

 

 

The following unaudited pro forma financial information presents the combined results of operations of Frontier and the Connecticut operations as if the Connecticut Acquisition had occurred as of January 1, 2014. The pro forma information is not necessarily indicative of what the financial position or results of operations actually would have been had the Connecticut Acquisition been completed as of January 1, 2014. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the future financial position or operating results of Frontier. The unaudited pro forma financial information excludes acquisition and integration costs and does not give effect to any estimated and potential cost savings or other operating efficiencies that may result from the Connecticut Acquisition.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions, except per share amounts)

 

(Unaudited)

 

(Unaudited)

 

 

For the three months ended

 

For the nine months ended

 

 

September 30, 2014

 

September 30, 2014

    

 

 

 

 

 

 

Revenue

 

1,448 

 

4,366 

 

 

 

 

 

 

 

Operating income

 

250 

 

744 

 

 

 

 

 

 

 

Net income

 

62 

 

135 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net income per share

 

0.07 

 

0.14 

 

 

 

 

 

 

 

 

The Verizon Transaction

On February 5, 2015, we entered into an agreement with Verizon Communications Inc. (Verizon) to acquire Verizon’s wireline operations that provide services to residential, commercial and wholesale customers in California, Florida and Texas for a purchase price of $10,540   m illion in cash and assumed debt (the Verizon Transaction), with adjustments for working capital.  Upon completion of the pending Verizon Transaction, Frontier will operate Verizon properties that   included 3.5 million voice connections, 2.2 million broadband connections, and 1.2 million FiOS ® video connections as

9

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

of June 30, 2015.  The transaction is expected to close at the end of the first quarter of 2016 subject to regulatory approval and the completion of operational matters. 

 

In the third quarter of 2015, Frontier received regulatory approvals from the FCC and the Public Utilities Commission of Texas. The approval from the California Public Utilities Commission is pending. In the third quarter of 2015, Frontier reached agreement with the Communications Workers of America and the International Brotherhood of Electrical Workers, representing employees that support operations in California, Florida and Texas, to extend their existing collective bargaining agreements by two years.  In addition, Verizon has conditionally accepted $49 million in annual support in California and Texas under the CAF Phase II program.

 

Acquisition costs include legal, financial advisory, accounting, regulatory and other related costs.  Integration costs include expenses incurred to integrate the network and information technology platforms and to enable other integration initiatives. Frontier incurred $112 million of operating expenses, consisting of $37 million of acquisition costs and $75 million of integration costs, related to the pending Verizon Transaction during the nine months ended September 30, 2015. We also invested $78 million in capital expenditures related to the Verizon Transaction during the nine months ended September 30, 2015.

 

Frontier completed a private debt offering of $6,600 million of unsecured senior notes in September 2015 and entered into a credit agreement for a new $1,500 million senior secured delayed-draw term loan facility in August 2015, each for the purpose of financing the Verizon Transaction. Frontier issued $ 2,750 million in preferred and common stock in June 2015 for the purpose of financing the Verizon Transaction. Net proceeds from these debt and equity offerings in the amount of $8,440 million are included in “Restricted cash” in the consolidated balance sheet as of September 30, 2015. See Notes 8 and 9 for further discussion.

 

 

(4)   Accounts Receivable :

The components of accounts receivable, net are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    ($ in millions)

 

September 30, 2015

 

December 31, 2014

    

 

 

 

 

 

 

Retail and Wholesale

 

551 

 

$

630 

Other

 

 

58 

 

 

56 

Less: Allowance for doubtful accounts

 

 

(55)

 

 

(72)

Accounts receivable, net

 

$

554 

 

$

614 

 

We maintain an allowance for doubtful accounts based on our estimate of our ability to collect accounts receivable. Bad debt expense, which is recorded as a reduction to revenue,   was   $ 20  m illion   and $ 17 million for the three months ended September 30 , 2015 and 201 4 ,   respectively, and $ 46 million and $41 million   for the nine months ended September 30, 2015 and 2014 , respectively .   Our allowance for doubtful accounts declined in the first nine months of 2015, primarily as a result of the resolution of a principal carrier dispute during the first quarter .

 

(5)   Property, Plant and Equipment :

Property, plant and equipment, net is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

September 30, 2015

 

December 31, 2014

    

 

 

 

 

 

 

Property, plant and equipment

 

17,522 

 

$

16,946 

Less:  Accumulated depreciation

 

 

(9,083)

 

 

(8,380)

Property, plant and equipment, net

 

$

8,439 

 

$

8,566 

 

10

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Depreciation expense is principally based on the composite group method. Depreciation expense was $ 245 million and $ 195 million , and $ 741   million and $ 598 million,   for the three and nine   months ended September 30 , 2015 and 201 4 , respect ively.  W e adopted new estimated remaining useful lives for certain pl ant assets as of October 1, 2014 ,   as a result of our annual independent study of the estimated remaining useful lives of our plant assets, with an insignificant  i mpact to depreciation expense. In addition, we commissioned an independent study to determine the estimated useful lives for assets acquired during the Connecticut Acquisition. These new lives were adopted effective October 24, 2014.

 

(6)   Goodwill and Other Intangibles :

The activity in our goodwill from January 1, 2015 through   September 30 , 2015 is as follows :  

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

Goodwill

    

 

 

 

Balance at January 1, 2015

 

$

7,205 

Connecticut Acquisition (Note 3)

 

 

(53)

Other Acquisition

 

 

14 

Balance at September 30, 2015

 

$

7,166 

 

 

 

 

 

The components of other intangibles are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

September 30, 2015

 

December 31, 2014

 

 

Gross Carrying

 

Accumulated

 

Net Carrying

 

Gross Carrying

 

Accumulated

 

Net Carrying

 

 

Amount

 

Amortization

 

Amount

 

Amount

 

Amortization

 

Amount

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Intangibles:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer list

 

2,998 

 

(1,900)

 

1,098 

 

3,018 

 

(1,640)

 

1,378 

Trade name

 

 

122 

 

 

 -

 

 

122 

 

 

122 

 

 

 -

 

 

122 

Total other intangibles

 

$

3,120 

 

$

(1,900)

 

$

1,220 

 

$

3,140 

 

$

(1,640)

 

$

1,500 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization expense was $ 80   million and $ 66   million , and $ 260 million and $ 218 million,   for the three and nine   months ended September 30 , 2015 and 201 4 , respectively. Amor tization expense represents the amortization of our customer list s acquired as a result of the Connecticut Acquisition and the acquisition of certain Verizon properties in 2010 ( the 2010 Acquisition)   with each based on a useful life of 9   to   12 years on an accelerated method .    

 

(7)   Fair Value of Financial Instruments :

The following table summarizes the carrying amounts and estimated fair values for long-term debt at September 30 , 2015 and December 31, 201 4 .   For the other financial instruments including cash, accounts receivable, long-term debt due within one year, accounts payable and other current liabilities, the carrying amounts approximate fair value due to the relatively short ma turities of those instruments.

 

The fair value of our long-term debt is estimated based upon quoted market prices at the reporting date for those financial instruments.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

September 30, 2015

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying Amount

 

 

Fair Value

 

 

Carrying Amount

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

16,016 

 

$

14,779 

 

$

9,486 

 

$

10,034 

 

 

 

 

 

 

 

11

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

(8)   Long-Term Debt :

The activity in our long-term debt from January 1, 2015 through   September 30 , 2015 is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

  

 

Nine months ended

  

  

  

  

 

  

 

  

  

 

September 30, 2015

  

  

  

 

Interest

  

 

  

  

  

  

  

  

  

  

  

  

  

 

Rate at

  

 

January 1,

  

Payments

  

New

  

September 30,

 

September 30,

($ in millions)

 

2015

 

and Retirements

 

Borrowings

 

2015

 

2015 *

  

 

  

  

  

  

  

  

  

  

  

  

  

  

 

Senior Unsecured Debt

 

$

9,750 

 

$

(272)

 

 $

6,600 

  

 $

16,078 

 

8.98%

Secured Debt

 

 

23 

  

 

(2)

  

 

  

 

24 

 

3.64%

Rural Utilities Service Loan Contracts

 

 

 

 

 -

 

 

 -

  

 

 

6.15%

Total Long-Term Debt

 

$

9,781 

 

 $

(274)

 

 $

6,603 

  

$

16,110 

 

8.97%

  

 

  

  

  

  

  

  

  

  

  

  

  

  

 

  Less: Debt (Discount)/Premium

 

 

  

  

  

  

  

  

  

 

  

 

  Less: Current Portion

 

 

(298)

  

  

  

  

  

  

  

 

(97)

  

 

 

 

$

9,486 

  

  

  

  

  

  

  

$

16,016 

  

 

 

* Interest rate includes amortization of debt issuance costs a nd debt premiums or discounts. The interest rates at September 30 , 2015 represent a weighted average of multiple issuances .

12

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Additi onal information regarding our senior unsecured d ebt and subsidiary debentures is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

September 30, 2015

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal

 

Interest

 

Principal

 

Interest

 

 

Outstanding

 

Rate

 

Outstanding

 

Rate

 

 

 

 

 

 

 

 

 

 

 

Senior Unsecured Debt Due:

 

 

 

 

 

 

 

 

 

 

3/15/2015

 

 

 -

 

-

 

 

105 

 

6.625%

4/15/2015

 

 

 -

 

-

 

 

97 

 

7.875%

10/14/2016 *

 

 

359 

 

2.575% (Variable)

 

 

402 

 

3.045% (Variable)

4/15/2017

 

 

607 

 

8.250%

 

 

607 

 

8.250%

10/1/2018

 

 

583 

 

8.125%

 

 

583 

 

8.125%

3/15/2019

 

 

434 

 

7.125%

 

 

434 

 

7.125%

10/24/2019 **

 

 

323 

 

3.575% (Variable)

 

 

350 

 

3.545% (Variable)

4/15/2020

 

 

1,022 

 

8.500%

 

 

1,022 

 

8.500%

9/15/2020

 

 

1,000 

 

8.875%

 

 

 -

 

-

7/1/2021

 

 

500 

 

9.250%

 

 

500 

 

9.250%

9/15/2021

 

 

775 

 

6.250%

 

 

775 

 

6.250%

4/15/2022

 

 

500 

 

8.750%

 

 

500 

 

8.750%

9/15/2022

 

 

2,000 

 

10.500%

 

 

 -

 

-

1/15/2023

 

 

850 

 

7.125%

 

 

850 

 

7.125%

4/15/2024

 

 

750 

 

7.625%

 

 

750 

 

7.625%

1/15/2025

 

 

775 

 

6.875%

 

 

775 

 

6.875%

9/15/2025

 

 

3,600 

 

11.000%

 

 

 -

 

-

11/1/2025

 

 

138 

 

7.000%

 

 

138 

 

7.000%

8/15/2026

 

 

 

6.800%

 

 

 

6.800%

1/15/2027

 

 

346 

 

7.875%

 

 

346 

 

7.875%

8/15/2031

 

 

945 

 

9.000%

 

 

945 

 

9.000%

10/1/2034

 

 

 

7.680%

 

 

 

7.680%

7/1/2035

 

 

125 

 

7.450%

 

 

125 

 

7.450%

10/1/2046

 

 

193 

 

7.050%

 

 

193 

 

7.050%

 

 

 

15,828 

 

 

 

 

9,500 

 

 

Subsidiary Debentures Due:

 

 

 

 

 

 

 

 

 

 

  2/15/2028

 

 

200 

 

6.730%

 

 

200 

 

6.730%

  10/15/2029

 

 

50 

 

8.400%

 

 

50 

 

8.400%

Total

 

$

16,078 

 

8.72% ***

 

$

9,750 

 

7.45% ***

 

*      Represents borrowings under the 2011 CoBank Credit Agreement, as defined below .

**    Represents borrowings under the 2014 CoBank Credit Agreement, as defined below.

** *  Interest rate represents a weighted average of the stated interest rates of multiple issuances.

13

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

On September 25 , 2015, Frontier completed a private offering of $6, 6 00   m illion aggregate principal amount of unsecured Senior Notes, as follows: $1 , 0 00   m illion of 8.875% Senior Notes due 2020; $2 , 0 00   m illion of 10.500 % Senior Notes due 2022; and $3, 6 00   m illion of 11.000% Senior Notes due 2025. Each was issued at a price equal to 100% of its principal amount. Frontier intends to use the proceeds from the offering to finance a portion of the cash consideration payable in connection with the Verizon Transaction and to pay related fees and expenses. T he net proceeds of the debt offering ( after deducting underwriting fees ) of $ 6,485 million are included in “Restricted cash” in the consolidated balance sheet as of September 30, 2015.  These funds were deposited in an escrow account to partially fund the acquisition or, if the acquisition is terminated or otherwise not consummated on or before August 6, 2016, to redeem the new Senior Notes at par plus accrued interest.

 

On August 12, 2015, Frontier entered into a credit agreement with JPMorgan Chase Bank, N.A., as the administrative agent, and the lenders party thereto, for a $1, 5 00   m illion senior secured delayed-draw term loan facility (the 2015 Credit Agreement).  The term loan will be drawn at the closing of the Verizon Transaction.  The final maturity date is the earlier of the fifth anniversary of the draw date or March 31, 2021.  Repayment of the outstanding principal balance will be made in quarterly installments, initially in the amount of $19 million per installment, commencing one full fiscal quarter after the draw date.  The quarterly installments will increase to $38 million, beginning with the 13th quarterly installment.  The remaining outstanding principal balance will be repaid on the final maturity date.  Borrowings under the term loan will bear interest based on margins over the Base Rate (as defined in the 2015 Credit Agreement) or LIBOR, at the election of Frontier.  Interest rate margins under the facility (ranging from 0.75% to 1.75% for Base Rate borrowings and 1.75% to 2.75% for LIBOR borrowings) are subject to adjustment based on Frontier’s Total Leverage Ratio (as defined in the 2015 Credit Agreement).  Borrowings under the 2015 Credit Agreement will be secured by a pledge of the stock of Frontier North Inc., a wholly owned subsidiary.

 

On February 5, 2015, we entered into a commitment for a bridge loan facility (the Verizon Bridge Facility) and recognized related interest expense of $52 million and $184 million during the three and nine months ended September 30, 2015, respectively. The accrued liabilities related to the Verizon Bridge Facility of $173 million are included in “Other current liabilities” in the consolidated balance sheet as of September 30, 2015.  The Verizon Bridge Facility terminated, in accordance with its terms, on September 25, 2015.

 

During the first nine months of 2015, we entered into secured financings totaling $ 3 million with four year terms and no stated interest rate for certain equipment purchases.

 

Frontier has a credit agreement with CoBank, ACB, as administrative agent, lead arranger and a lender, and the other lenders party thereto, for a $350 million senior unsecured delayed draw term loan facility (the 2014 CoBank Credit Agreement). The facility was drawn upon closing of the Connecticut Acquisition   with proceeds used to partially finance the acquisition. The maturity date is October 24 , 2019 . Repayment of the outstanding principal balance will be made in quarterly installments of $ 9 million, which commenced   on March 31 , 2015 , with the remaining outstanding principal balance to be repaid on the maturity date. Borrowings under the 2014 CoBank Credit Agreement bear interest based on the margins over the Base Rate (as defined in the 2014 CoBank Credit Agreement) or LIBOR, at the election of Frontier . Interest rate margins under the facility (ranging from 0.875% to 2.875% for Base Rate borrowings and 1.875% to 3.875% for LIBOR borrowings) are subject to adjustments based on our Total Leverage Ratio, as such term is defined in the 2014 CoBank Credit Agreement. The interest rate on this facility at September 30 , 2015 was LIBOR plus 3. 3 75 % .

 

Frontier has a credit agreement with CoBank, ACB, as administrative agent, lead arranger and a lender, and the other lenders party thereto, for a $575 million senior unsecured term loan facility with a final maturity of October 14, 2016 (the 2011 CoBank Credit Agreement). The entire facility was drawn upon execution of the 2011 CoBank Credit Agreement in October 2011. Repayment of the outstanding principal balance is made in quarterly installments of $14 million, which commenced on March 31, 2012, with the remaining outstanding principal balance to be repaid on the final maturity date. Borrowings under the 2011 CoBank Credit Agreement bear interest based on the margins over the Base Rate (as defined in the 2011 CoBank Credit Agreement) or LIBOR, at the election of Frontier . Interest rate margins under the facility (ranging from 0.875% to 2.875% for Base Rate borrowings and 1.875% to 3.875% for LIBOR borrowings) are subject to adjustments based on our Total Leverage Ratio, as such term is defined in the 2011 CoBank Credit Agreement. The interest rate on this facility at September 30 , 2015 was LIBOR plus 2.3 75 %

14

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

Frontier has a   revolving credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, the lenders party thereto and the other parties named therein (the Revolving Credit Agreement), for a $750 million revolving credit facility (the Revolving Credit Facility) with a scheduled termination date of May 31, 2018 .   As of September 30 , 2015 ,   the Revolving Credit Facility was fully available and no borrowings had been made thereunder .   Associated commitment fees under the Revolving Credit Facility will vary from time to time depending on our debt rating (as defined in the Revolving Credit Agreement) and were 0.450 % per annum as of September 30 , 2015 . During the term of the Revolving Credit Facility, Frontier may borrow, repay and reborrow funds, and may obtain letters of credit, subject to customary borrowing conditions. Loans under the Revolving Credit Facility will bear interest based on the alternate base rate or the adjusted LIBO R ate (each as determined in the Revolving Credit Agreement), at our election, plus a margin based on our debt rating (ranging from 0.50% to 1.50% for alternate base rate borrowings and 1.50% to 2.50% for adjusted LIBO   R ate borrowings). The interest rate on this facility at September 30 , 2015 would have been the alternate base rate plus 1.50 % or the adjusted LIBO Rate plus 2.50 % , respectively . Letters of credit issued under the Revolving Credit Facility will also be subject to fees that vary depending on our debt rating. The Revolving Credit Facility is available for general corporate purposes but may not be u sed to fund dividend payments.

 

Upon the drawdown of the term loan under the 2015 Credit Agreement in connection with the closing of the Verizon Transaction, borrowings under the 2014 CoBank Credit Agreement, the 2011 CoBank Credit Agreement and the Revolving Credit Facility will become secured debt. These borrowings will be secured , equally and ratably with borrowings under the 2015 Credit Agreement, by a pledge of the stock of Frontier North Inc., a wholly owned subsidiary.

 

As of September 30 , 2015 , we were in compliance with all of our debt and credit facility financial covenants .

 

Our scheduled principal payments are as follows as of September 30 , 2015 :  

 

 

 

 

 

 

 

 

 

 

 

 

Principal

($ in millions)

 

Payments

    

 

 

 

2015 (remaining three months)

 

$

24 

2016

 

$

384 

2017

 

$

646 

2018

 

$

620 

2019

 

$

645 

2020

 

$

2,022 

Thereafter

 

$

11,769 

 

15

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

(9)   Capital Stock :

 

Common Stock Offering

On June 10 , 2015, we completed a registered offering of 150,000,000 shares of our common stock, par value $0.25 per share, at a n   offering price of $5   per share. On June 24 , 2015, Frontier issued an additional 15,000,000 shares of common stock in connection with the over-allotment option that was exercised in full by the underwriters . Aggregate net proceeds were approximately $7 99 million after deducting commissions and estimated expenses. We intend to use the net proceeds from this offering to fund a portion of the acquisition price of the Verizon Transaction and related fees and expenses .  

 

Mandatory Convertible Preferred Stock (Series A) Offering

On June 10 , 2015, we   also completed a registered offering of 17,500,000 shares of our   11.125% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share (the “ Series A Preferred Stock”) , at a n offering price of $100 per share . On June 24 , 2015, Frontier issued an additional 1,750,000 shares of Series A Preferred Stock in connection with the over-allotment option that was exercised in full by the underwriters . Aggregate net proceeds of the offering were $1 ,866   m illion after deducting commissions and estimated expenses. We intend to use the net proceeds from this offering to fund a portion of the acquisition price of the Verizon Transaction and related fees and expenses .

 

Unless converted earlier, each share of the Series A Preferred Stock will automatically convert on June 29, 2018 into between 17.0213 and 20.0000 shares of common stock, depending on the applicable market value of our common stock , subject to anti-dilution adjustments. Subject to certain restrictions, at any time prior to June 29, 2018, holders of the Series A Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate then in effect.

 

Dividends on shares of the Series A Preferred Stock are payable on a cumulative basis when, as and if declared by our Board of Directors (or an authorized committee thereof) at an annual rate of 11.125% on the liquidation preference of $100.00 per share, on the last business day of March, June, September and December of each year, commencing on September 30, 2015 to, and including, the mandatory conversion date.     Series A Preferred S tock d ividends of $ 67 million were paid on September 30, 2015.

 

Pursuant to the terms of the Verizon Transaction, $1, 955 million of the $2,665 million in net proceeds from the equity offerings were deposited into escrow and are included in “Restricted cash” in the consolidated balance sheet as of September 30, 2015 .  Upon closing of the Verizon Transaction , the funds will be released and used to fund a portion of the purchase price.  If the Verizon Transaction is terminated, the funds will be released and become unrestricted cash of Frontier .

16

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

( 10 )   Income Taxes:  

The following is a reconciliation of income taxes computed at the federal statutory rate to income taxes computed at the effective rate:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the nine months ended

 

 

September 30,

 

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated tax provision at federal statutory rate

 

35.0 

%

 

35.0 

%

 

35.0 

%

 

35.0 

%

State income tax provisions, net of federal income

 

 

 

 

 

 

 

 

 

 

 

 

tax benefit

 

31.4 

 

 

1.1 

 

 

7.8 

 

 

1.1 

 

Tax reserve adjustment

 

(15.9)

 

 

5.5 

 

 

(3.7)

 

 

0.6 

 

Domestic production activities deduction

 

15.8 

 

 

(16.9)

 

 

3.6 

 

 

(5.3)

 

Changes in certain deferred tax balances

 

(9.5)

 

 

 -

 

 

6.2 

 

 

(1.7)

 

Federal research and development credit

 

5.4 

 

 

(7.8)

 

 

1.1 

 

 

(2.4)

 

All other, net

 

0.9 

 

 

2.0 

 

 

(0.3)

 

 

0.6 

 

Effective tax rate

 

63.1 

%

 

18.9 

%

 

49.7 

%

 

27.9 

%

 

Income taxes for the nine months ended September 30, 2015 include the impact of a n   $ 1 1 million benefit primarily resulting from the adjustment of deferred tax balances due to state tax law changes .     Income taxes for the three and nine months ended September 30, 2015 also include the impact of a $2 million benefit from the adjustment of federal research and development credits and a $7 million benefit from the domestic production activities deductions.

 

Income taxes for the nine months ended September 30, 2014 include the impact of a $4 million benefit from federal research and development credits, a $9 million benefit from the domestic production activities deduction and a $3 million benefit arising from state tax law changes, partially offset by a net increase in reserves for uncertain tax positions of $1 million.

 

Amounts pertaining to income tax related accounts of $ 71 million and $97 million are included in “Income taxes and other current assets” in the consolidated balance sheets as of September 30, 2015 and December 31, 2014, respectively.

 

17

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

(11 )   Net Income (Loss) Per Share :

The reconciliation of the net income (loss) per share calculation is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the nine months ended

( $ in millions and shares in thousands, except per share amounts )

September 30,

 

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2015

 

2014

Net income (loss) used for basic and diluted earnings  

 

 

 

 

 

 

 

 

 

 

 

per share:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Frontier common shareholders

$

(81)

 

$

42 

 

$

(160)

 

$

119 

Less:  Dividends paid on unvested restricted stock awards

 

(1)

 

 

(1)

 

 

(2)

 

 

(2)

Total basic and diluted net income (loss)

 

 

 

 

 

 

 

 

 

 

 

attributable to Frontier common shareholders

$

(82)

 

$

41 

 

$

(162)

 

$

117 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Total weighted average shares and unvested restricted stock

 

 

 

 

 

 

 

 

 

 

 

awards outstanding - basic

 

1,168,272 

 

 

1,002,092 

 

 

1,068,877 

 

 

1,001,656 

Less:  Weighted average unvested restricted stock awards

 

(7,065)

 

 

(7,445)

 

 

(7,233)

 

 

(7,263)

Total weighted average shares outstanding - basic

 

1,161,207 

 

 

994,647 

 

 

1,061,644 

 

 

994,393 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

attributable to Frontier common shareholders

$

(0.07)

 

$

0.04 

 

$

(0.15)

 

$

0.12 

  

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Total weighted average shares outstanding - basic

 

1,161,207 

 

 

994,647 

 

 

1,061,644 

 

 

994,393 

Effect of dilutive shares

 

 -

 

 

3,208 

 

 

 -

 

 

3,351 

Total weighted average shares outstanding - diluted

 

1,161,207 

 

 

997,855 

 

 

1,061,644 

 

 

997,744 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

attributable to Frontier common shareholders

$

(0.07)

 

$

0.04 

 

$

(0.15)

 

$

0.12 

 

Stock Options

For the three and nine months ended September 30 , 2015 and 2014 , options to purchase 68 ,000 and 83,000   shares ,   respectively, issuable under employee compensation plans were excluded from the computation of diluted earnings per share (EPS) for those periods because the exercise prices were greater than the average market price of our common stock and, therefore, the effect wou ld be antidilutive. In calculating diluted EPS, we apply the treasury stock method and include future unearned compensation as part of the assumed proceeds.

 

Stock Units

At September 30 , 2015 and 201 4 , we had 1,334,633 and 1,050 , 568   stock units, respectively, issued under our Non-Employee Directors’ Deferred Fee Equity Plan (Deferred Fee Plan) and the Non-Employee Directors’ Equity Incentive Plan (Directors’ Equity Plan). These securities have not been included in the diluted income per share of common stock cal culation because their inclusion would have an antidilutive effect. C ompensation costs associated with the issuance of stock units were $ (1)   million and $ 3 million for the nine   months ended September 30 , 2015 and 2014, respectively .

 

18

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Mandatory Convertible Preferred Stock

The impact of the common share equivalents associated with the   19,250,000 shares of Series A P referred stock   described above were not included in the calculation of diluted EPS as of September 30, 2015, as their impact was anti-dilutive.

 

In calculating diluted net loss per share for the three and nine months ended September 30, 2015, the effect of all common stock equivalents is excluded from the computation as the effect would be antidilutive .  

 

(12 )   Stock Plans :

At September 30 , 2015 , we ha d   six  s tock-based compensation plans under which grants were made and awards remained outstanding.   No further awards may be granted under four of the plans: the 1996 Equity Incentive Plan (the 1996 EIP), the Amended and Restated 2000 Equity Incentive Plan (the 2000 EIP), the 2009 Equity Incentive Plan (the 2009 E IP) and the Deferred Fee Plan. At September 30 , 2015 , there were 22,541,000 shares authorized for grant and 12,629,000 shares available for grant under the 2013 Equity Incentive Plan (the 2013 EIP and together with the 1996 EIP, the 2000 EIP and the 2009 EIP, the EIPs ) and the Directors’ Equity Plan. Our general policy is to issue shares from treasury upon the grant of restricted shares and the exercise of options.

 

Performance Shares

On February 25 , 201 5 , the Compensation Committee of our Board of Directors granted approximately 665,000 performance shares under the Frontier   Long Term Incentive Plan ( the LTIP ) and set the operating cash flow performance goal for 2015 , which applies to the first year in the 201 5 -201 7  m easurement p eriod, the second year of the 201 4 -201 6 measurement p eriod and the third year of the 201 3 -201 5 measurement p eriod.

 

The following summary presents information regarding LTIP target performance shares as of September 30 , 2015 and changes during the nine months then ended with regard to LTIP shares awarded under the 2009 EIP and the 2013 EIP :

 

 

 

 

 

 

 

 

  

 

 Number of

 

 

Shares

 

 

(in thousands)

Balance at January 1, 2015

 

2,682 

LTIP target performance shares granted

 

738 

LTIP target performance shares earned

 

(743)

LTIP target performance shares forfeited

 

(152)

Balance at September 30, 2015

 

2,525 

 

For purposes of determining compensation expense, the fair value of each performance share is measured at the end of each reporting period and, therefore, will fluctuate based on the price of Frontier common stock as well as performance relative to the targets. For the nine months ended September 30 , 2015 and 201 4 ,   we recognized an expense of $ 6   million and $ 3 million, respectively, for the LTIP.

19

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

Restricted Stock

The following summary presents information regarding unvested restricted stock as of September 30 , 2015 and changes during the nine months then ended with regard to restricted stock under the 2009 EIP and the 2013 EIP:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

 

 

Number of 

 

Grant Date

 

Aggregate

 

 

Shares

 

Fair Value

 

Fair Value

 

 

(in thousands)

 

(per share)

 

(in millions)

Balance at January 1, 2015

 

7,807 

 

$

4.75

 

$

52 

Restricted stock granted

 

2,814 

 

$

7.92

 

$

13 

Restricted stock vested

 

(3,209)

 

$

4.89

 

$

15 

Restricted stock forfeited

 

(345)

 

$

5.08

 

 

 

Balance at September 30, 2015

 

7,067 

 

$

5.93

 

$

34 

 

For purposes of determining compensation expense, the fair value of each restricted stock grant is estimated based on the average of the high and low market price of a share of our common stock on the date of grant. Total remaining unrecognized compensation cost associated with unvested restricted stock awards at September 30 , 2015 was $ 29 million and the weighted average period over which this cost is expected to be recognized is approximately 1 .5 years.

 

Shares granted during the first nine months of 201 4   totaled 3,836 ,000 . The total fair value of shares of restricted stock granted and vested at September 30 , 2014 was approximately $ 25 million and $ 15   million, respectively. The total fair value of unvested restricted stock at September 30 , 2014 was $ 48 million .   The weighted average grant date fair value of restricted shares granted during the nine month s ended September 30 , 2014   was $ 4. 74 per share .

 

We have granted restricted stock awards to employees in the form of our common stock. None of the restricted stock awards may be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, by the employees until the restrictions lapse, subject to limited exceptions. The restrictions are time-based. Compensation expense, recognized in “ Selling, general and administrative expenses”, of $13   million and $ 12 million for the nine months ended September 30 , 2015 and 201 4 , respectively, has been recorded in connection with these grants.

 

 

20

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

(1 3 )   Comprehensive Income (Loss) :

Comprehensive income consists of net income (loss) and other gains and losses affecting shareholders’ investment and pension/postretirement benefit (OPEB) liabilities that, under GAAP, are excluded from net income (loss) .

 

The components of accumulated other comprehensive loss, net of tax at September 30 , 2015 and 201 4 , and changes for the nine months then ended, are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

Pension Costs

 

OPEB Costs

 

Deferred taxes on pension and OPEB costs

 

Total

Balance at January 1, 2015

 

$

(532)

 

$

(119)

 

$

247 

 

$

(404)

Other comprehensive loss before reclassifications

 

 

 -

 

 

 -

 

 

(2)

 

 

(2)

Amounts reclassified from accumulated other comprehensive loss

 

 

22 

 

 

 

 

(10)

 

 

15 

Net current-period other comprehensive income (loss)

 

 

22 

 

 

 

 

(12)

 

 

13 

Balance at September 30, 2015

 

$

(510)

 

$

(116)

 

$

235 

 

$

(391)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Costs

 

OPEB Costs

 

Deferred taxes on pension and OPEB costs

 

Total

Balance at January 1, 2014

 

$

(411)

 

$

(5)

 

$

156 

 

$

(260)

Amounts reclassified from accumulated other comprehensive loss

 

 

14 

 

 

(1)

 

 

(5)

 

 

Net current-period other comprehensive income (loss)

 

 

14 

 

 

(1)

 

 

(5)

 

 

Balance at September 30, 2014

 

$

(397)

 

$

(6)

 

$

151 

 

$

(252)

 

The significant items reclassified from each component of accumulated other comprehensive loss for the three and nine   months ended September 30 , 2015 and 201 4 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

Amount Reclassified from

 

 

 

 

Accumulated Other Comprehensive Loss (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Details about Accumulated Other

 

For the three months ended
September 30,

 

For the nine months ended
September 30,

 

Affected Line Item in the Statement Where

Comprehensive Loss Components

 

2015

 

2014

 

2015

 

2014

 

Net Income (Loss) is Presented

Amortization of Pension Cost Items (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial gains (losses)

 

$

(9)

 

$

(5)

 

$

(22)

 

$

(14)

 

Income (loss) before income taxes

Tax impact

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

 

$

(6)

 

$

(3)

 

$

(14)

 

$

(9)

 

Net income (loss)

Amortization of OPEB Cost Items (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior-service costs

 

$

 

$

 

$

 

$

 

 

Actuarial gains (losses)

 

 

(1)

 

 

(1)

 

 

(6)

 

 

(2)

 

 

 

 

 

 -

 

 

 -

 

 

(3)

 

 

 

Income (loss) before income taxes

Tax impact

 

 

 -

 

 

 -

 

 

 

 

 -

 

Income tax (expense) benefit

 

 

$

 -

 

$

 -

 

$

(2)

 

$

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Amounts in parentheses indicate losses.

(b) These accumulated other comprehensive loss components are included in the computation of net periodic pension and OPEB cost s (see Note 1 4 - Retirement Plans for additional details).

 

 

 

 

21

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

(1 4 )   Retirement Plans

The following tables provide the components of net periodic benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

Pension Benefits

 

 

For the three months ended

 

For the nine months ended

 

 

September 30,

 

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2015

 

2014

( $ in millions )

 

 

 

 

 

 

 

 

 

 

 

 

Components of net periodic pension benefit cost

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

14 

 

$

 

$

41 

 

$

29 

Interest cost on projected benefit obligation

 

 

22 

 

 

19 

 

 

66 

 

 

59 

Expected return on plan assets

 

 

(32)

 

 

(23)

 

 

(96)

 

 

(70)

Amortization of unrecognized loss

 

 

 

 

 

 

22 

 

 

14 

Net periodic pension benefit cost

 

$

13 

 

$

10 

 

$

33 

 

$

32 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Postretirement Benefits

 

 

   Other Than Pensions (OPEB)

 

 

For the three months ended

 

For the nine months ended

 

 

September 30,

 

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2015

 

2014

( $ in millions )

 

 

 

 

 

 

 

 

 

 

 

 

Components of net periodic postretirement benefit cost

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

 

$

 

$

14 

 

$

Interest cost on projected benefit obligation

 

 

 

 

 

 

22 

 

 

15 

Amortization of prior service cost/(credit)

 

 

(1)

 

 

(1)

 

 

(3)

 

 

(3)

Amortization of unrecognized loss

 

 

 

 

 

 

 

 

Net periodic postretirement benefit cost

 

$

12 

 

$

 

$

39 

 

$

22 

 

During the first nine   months of 201 5 and 201 4 , we capitalized $ 15   million and $ 11 million, respectively, of pension and OPEB expense into the cost of our capital expenditures, as the costs relate to our engineering and plant construction activities. Based on current assumptions and plan asset values, we estimate that our 201 5 pension and OPEB expenses will be approximately $90 million to $ 1 0 0 million before   amounts capitalized into the cost of capital expenditures and the impact of pension settlement costs, if any , as compared to   $ 74 million in 201 4 . We made total cash contributions to our pension plan during the nine   months ended September 30 , 2015 of $ 62 million   and e stimate that there are no further contributions required in 2015.

 

Our pension plan assets de creased from $ 1,673 million at December 31, 201 4 to  $ 1,576   million at September 30 , 2015 , a de crease of $ 97   million, or 6 % .   This de crease is a result of benefit payments of $ 104   million and   negative investment returns of $ 6 0   mi llion ,   offset by asset transfers from the AT&T pension plan trust of $5 million related to the Connecticut Acquisition and cash contributions of   $ 62   million during the first nine months of 201 5 .  

 

(1 5 )   Commitments and Contingencies :  

We anticipate total capital expenditures for our current business operations of approximately $700 million to $7 5 0 million for 2015, excluding the expenditure of funds previously received from the Connect America Fund Phase I program and capital expenditures related to our integration activities . Although f rom time to time we make short-term purchasing commitments to vendors with respect to these capital expenditures, we generally do not enter into firm, written contracts for such activities. 

 

In connection with the Verizon Transaction, we   will incur additional operating expenses and capital expenditures in 2015 related to integration activities.    

 

22

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

On April 29, 2015, the Federal Communications Commission (FCC) released its right of first refusal offer of support to price cap carriers under the Connect America Fund (CAF) Phase II program, which is intended to provide long-term support for broadband in high-cost unserved or underserved areas.  In June 2015, Frontier accepted the CAF Phase II offer, which provides for $283 million in annual support from 2015 through 2020 to deliver 10 M bps/1 M bps broadband service to approximately 660,000 households across the 28 states where we operate.

 

To the extent we do not enable the required number of households with 10  M bps/1  M bps broadband service by the end of the CAF Phase II term, we will be required to return a portion of the funds previously received.  While we have accepted the CAF Phase II offer of support, we have until December 31, 2015 to make modifications t o the amount of households we ultimatel y accept and return a pro-rata share of the funding without penalty. 

 

On October 16, 2015, the FCC announced that the Wireline Competition Bureau is conducting an inquiry into whether certain terms and conditions contained in specifically identified special access tariff pricing plans offered by four carriers, including Frontier, are just and reasonable.  The focus of the inquiry is term and volume discounts under pricing plans for business data TDM services, specifically DS1s and DS3s, and exclude pricing for IP-based services.  At the conclusion of this inquiry, FCC staff will make recommendations to the FCC Commissioners regarding the reasonableness of certain terms and conditions.  The Commissioners will then determine whether the tariffs under review may need to be revised prospectively.  The final pleadings for parties in the proceeding are due February 22, 2016.   When and how the FCC will address the issues subject to this inquiry is unknown, but we do not anticipate that any proposed revisions to the specific tariffs under review would have a material impact on our results or operations.  

 

In our normal course of business, we have obligations under non-cancela ble arrangements for services. During 2012, we entered into a “take or pay” arrangement for the purchase of future long distance and carrier services. Our remaining commit ment under the arr angement is   $14 1 million for the year ending December 31, 2015 .   As of September 30 , 2015 , we expect to utilize the services included within the arrangement and no liability for the “take or pay” provision has been recorded.

 

We are party to various legal proceedings (including individual, class and putative class actions) arising in the normal course of our business covering a wide range of matters and types of claims including, but not limited to, general contracts, billing disputes, rights of access, taxes and surcharges, consumer protection, trademark and patent infringement, employment, regulatory, tort, claims of competitors and disputes with other carriers. 

 

We accrue an expense for pending litigation when we determine that an unfavorable outcome is probable and the amount of the los s can be reasonably estimated. Legal defense costs are expensed as incurred.  None of our existing accruals for pending matters , after considering insurance coverage,   is material .   We monitor our pending litigation for the purpose of adjusting our accruals and revisi ng our disclosures accordingly, when required. Litigation is, however, subject to uncertainty, and the outcome of any particu lar matter is not predictable. We will vigorously defend our interests in pending litigation, and as of this date, we believe that the ultimate resolution of all such matters, after considering insurance coverage or other indemnities to which we are entitled, will not have a material adverse effect on our consolidated financial position, results of operations, or our cash flows. 

 

We sold all of our utility b usinesses as of April 1, 2004. However, we have retained a potential payment obligation associated with our previous electric utility activ ities in the State of Vermont. The Vermont Joint Owners (VJO), a consortium of 14 Vermont utilities, including us, entered into a purchase power agree ment with Hydro-Quebec in 1987. The agreement contains “step-up” provisions that state if any VJO member defaults on its purchase obligation under the contract to purchase power from Hydro-Quebec, then the other VJO participants will assume responsibility for the defaulting part y’s share on a pro-rata basis for the remainder of the agreement (which runs through 2015).   Our pro-rata share of the purchase power obligation is 10% .   GAAP rules require that we disclose “the maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee.” GAAP rules also state that we must make such disclosure “… even if the likelihood of the guarantor’s having to make any payments u nder the guarantee is remote…” As noted above, our obligation would only arise as a result of default by another VJO me mber, such as upon bankruptcy. Therefore, to satisfy the “maximum potential amount” disclosure requirement we must assume

23

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

that all other members of the VJO simultaneously default, an unlikely scenario given that all VJO members are regulated utility providers with regulated cost recovery. Despite the remote chance that such an event could occur, or that the State of Vermont could or would allow such an event, assuming that all the other members of the VJO defaulted on November 1, 201 5 and remained in default for the duration of the contract (another 2 months ), we estimate that our undiscounted purchase obligation through 2015 would be approximately $ 24   million. In such a scenario, Frontier would then own the power and could seek to recover its costs.  We would do this by seeking to recover our costs from the defaulting members and/or reselling the power to other utility provider s or the northeast power grid. There is an active market for the sale of power.  We could potentially lose money if we were una ble to sell the power at cost. We caution that we cannot predict with any degree of certainty any potential outcome.

 

 

 

24

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

This Form 10-Q contains "forward-looking statements," related to future, not past, events. Forward-looking statements address our expected future business and financial performance and financial condition, and contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," or "target." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:

 

·

risks related to the pending Verizon Transaction , including our ability to complete the Verizon Transaction , our ability to successfully integrate operations, our ability to realize anticipated cost savings, sufficiency of the assets to be acquired from Verizon, our ability to migrate Verizon’s operations from Verizon owned and operated systems and processes to our owned and operated systems and processes successfully, failure to enter into or obtain, or delays in entering into or obtaining, certain agreements and consents necessary to operate the acquired business as planned, failure to obtain, delays in obtaining or adverse conditions contained in any required regulatory approvals for the acquisition, and increased expenses incurred due to activities related to the Verizon T ransaction;

 

·

the ability of the lenders to the 2015 Credit Agreement (as defined below ) to meet their obligations to fund such facility in connection with the closing of the Verizon Transaction;

 

·

our ability to meet our debt and debt service obligations;

 

·

competition from cable, wireless and other wireline carriers and the risk that we will not respond on a timely or profitable basis;

 

·

our ability to successfully adjust to changes in the communications industry, including the effects of technological changes and competition on our capital expenditures, products and service offerings;

 

·

reductions in revenue from our voice customers that we cannot offset with increases in revenue from broadband and video subscribers and sales of other products and services;

 

·

our ability to maintain relationships with customers, employees or suppliers;

 

·

the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks;

 

·

continued reductions in switched access revenues as a result of regulation, competition or technology substitutions;

 

·

the effects of changes in the availability of federal and state universal service funding or other subsidies to us and our competitors;

 

·

our ability to effectively manage service quality in our territories and meet mandated service quality metrics;

 

·

our ability to successfully introduce new product offerings;

 

·

the effects of changes in accounting policies or practices, including potential future impairment charges with respect to our intangible assets;

 

·

our ability to effectively manage our operations, operating expenses, capital expenditures, debt service requirements and cash paid for income taxes and liquidity, which may affect payment of dividends on our common and preferred shares;

 

·

the effects of changes in both general and local economic conditions on the markets that we serve;

 

25

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

·

the effects of increased medical expenses and pension and postemployment expenses;

 

·

the effects of changes in income tax rates, tax laws, regulations or rulings, or federal or state tax assessments;

 

·

our ability to successfully renegotiate union contracts;

 

·

changes in pension plan assumptions, interest rates, regulatory rules and/or the value of our pension plan assets, which could require us to make increased contributions to the pension plan in 2015 and beyond;

 

·

adverse changes in the credit markets or in the ratings given to our debt securities by nationally accredited ratings organizations, which could limit or restrict the ability, or increase the cost, of financing to us;

 

·

the effects of state regulatory cash management practices that could limit our ability to transfer cash among our subsidiaries or dividend funds up to the parent company;

 

·

the effects of severe weather events or other natural or man-made disasters, which may increase our operating expenses or adversely impact customer revenue; and

 

·

the impact of potential information technology or data security breaches or other disruptions.

 

Any of the foregoing events, or other events, could cause financial information to vary from management’s forward-looking statemen ts included in this report. You should c onsider these important factors in evaluating any statement in this report or otherwis e made by us or on our behalf. The following information is unaudited and should be read in conjunction with the consolidated financial statements and related notes included in this report.  We have no obligation to update or revise these forward-looking statements and do not undertake to do so.

 

Investors should also be aware that while we do, at various times, communicate with securities analysts, it is against our policy to disclose to them selectively any material non-public information or other confidential information. Accordingly, investors should not assume that we agree with any statement or report issued by an analyst irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

 

 

 

26

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

Overview

 

F rontier is the nation’s fourth largest Incumbent Local Exchange Carrier (ILEC ).  Frontier has operations in 28 states with 3.4 million customers, 2.4 million broadband subscribers and 18,600 employees as of September 30, 2015.

 

See Note 3 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for a discussion of the Connecticut Acquisition and the Verizon Transaction.

 

Quarterly Highlights:

 

Verizon Transaction: During the third quarter , we completed our financing efforts to fund the Verizon Transaction, which is currently expected to close at the end of the first quarter of 2016.  In August we entered into a $1, 5 00   m illion senior secured term loan facility, which will be drawn at closing.  In September we completed a $6 , 6 00   m illion private debt offering.  The net proceeds of these debt issuances , combined with the net proceeds from the equity offerings completed in the second quarter , will be sufficient to finance the Verizon T ransaction and pay related fees and expenses .

 

We have received regulatory approvals from the FCC and the Public Utilities Commission of Texas.  The approval from the California Public Utilities Commission is pending.

 

Connect America Fund Phase II :   The $283 million in CAF Phase II support replaces the $156 million in annual USF frozen high-cost support that Frontier has been receiving pursuant to the 2011 FCC Order.   Frontier received one-time true-up payments of $ 85 million for CAF Phase II support in the third quarter   bringing our total CAF Phase II related funding for 2015 to $2 14 million .  This true-up payment was deferred and is being recognized ratably through the remainder of 2015 as the corresponding costs are being incurred .  In addition to the $283 million in CAF Phase II support , we will also receive frozen support phasedown payments through 2018 for certain states where the CAF Phase II funding is less than the previous frozen high-cost support.  Phasedown support is estimated to be approximately $35 million in 2015, $25 million in 2016, $16 million in 2017, and $ 6 million in 2018.  At September 30, 201 5 , $ 51   m illion in CAF Phase II funds were deferred   and are expected to be recognized by the end of 2015.    

 

Lead with Broadband:  A key element of our strategy is to enable and strengthen the broadband capabilities of our network.    As of September 30, 2015, we were able to offer broadband to approximately 7.9 million households, or 93 % of the 8.6 million households in our markets. During the three and nine months ended September 30, 2015, we added approximately 27,200 and 73,500 net broadband subscribers, respectively. The increase in broadband subscribers contributed to our improved data services revenue performance. We continue to invest in network speed and capacity to support our goal of increasing broadband penetration and market share. We expect to continue to increase broadband subscribers during the remainder of 2015.     At September 30, 2015, 27 % of our residential broadband customers subscribed to speeds in excess of our 6   M bp s basic speed tier, up from 24 % at December 31, 2014.  

 

Customer trends and revenue performance: We provide   service and product options in our residential and business offerings to the customer base in each of our m arkets. We believe this strategy results in a better customer experience, allows us to maximize retention of existing customers, and to attract new customers . At September 30 ,   2015, 65 % of our residential broadband customers were subscribed to at least one other service offering. Similar to other wireline providers, we have experienced declines in the number of traditional voice customers, switched access minutes of use and rates per minute of use as a result of competition and the availability of substitut es , a trend which we expect will continue.

 

Residential customer revenues for the three months ended September 30, 2015 , which include $ 13 2 million for our Connecticut operations, increased $ 10 8 million from the third quarter of 2014. Our residential customer monthly churn was 1.97 % and 1.84 % for the three and nine months ended September 30, 2015, compared to 1.86 % and 1.76 % for the comparable periods in 2014.  Through September 30, 2015, we had a net reduction of 58, 5 00 residential customers from the beginning of the year . These residential customer reductions were principally voice customers.   The monthly average revenue per customer (ARPC) for our residential customers was $ 63.83 and $ 64.18 for the three and nine months ended September 30, 2015 compared to $ 60.34 and $ 59.68 for the three and nine months ended September 30, 2014. The overall increase in residential ARPC is a result of an increased percentag e of our residential customers who subscribe to our broadband services , the increase in our linear video customers which is primarily attributable to our Connecticut operations and the increase in customers subscribed to multiple services. We expect continuing increases in data services revenue, primarily driven by an increased number of broadband subscribers , and continuing declines in voice services revenue .

27

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

 

Total business revenue for the three and nine months ended September 30, 2015   increased $ 98 million, or 19 %, and $294 million, or 19%, as compared with the three and nine months ended September 30, 2014 . Total business revenue for the three and nine months ended September 30 , 2015 included $ 121 million and $356 million of revenue attributable to the Connecticut operations , respectively . Total business revenue for our Frontier legacy operations declined $ 22 million, or 4 %, and $62 million, or 4%, as compared with the three and nine months ended September 30 , 2014, respectively, principally as a result of decreases in our voice services revenue and wireless backhaul revenue .   We had approximately 294,000 and 261,000 total business customers as of September 30 , 2015 and 2014, respectively. We incurred a reduction of approximately 2% and   1% of our business customers, net, during the three months   ended September 30 , 2015 and 2014, respectively , and 3% and   4% of our business customers, net, during the nine months   ended September 30 , 2015 and 2014, respectively. ARPC for our business customers increased $ 35.02 , or 5 %   and $ 34. 88 , or 5 % during the three and nine months ended September 30, 2015 as compared with the three and nine months ended September 30, 2014, respectively. The overall increase in business ARPC is primarily due to declining customer counts for our small business customers that carry a lower ARPC. We expect the declines in voice   services revenues and wireless backhaul revenues from business customers to continue in 2015, mitigated, in part, by increases in data services revenues. We have seen modest increases in our revenues from small/medium/enterprise (SME) customers throughout 2015, and our Ethernet product revenues from our SME and c arrier customers has grown by 16 %   for the Frontier legacy operations in the first nine months of 2015 , partially offsetting the decline in wireless backhaul revenue.

 

Total s witched access and subs idy revenue of $ 471 million represented 11 % of our revenues for the nine months ended September 30 , 2015. Switched access revenue was $ 135 million for the nine months ended September 30 , 2015, or 3 % of our revenues, as compared to $ 154 million, or 4 % of our revenues, for the nine months ended September 30 , 2014. The Report and Order released by the FCC on November 18, 2011 (the 2011 Order) provided for the gradual elimination of terminating traffic charges by 2017. We have been able to recover a significant portion of these lost revenues through end user rates and other replacement support mechanisms, a trend we expect will continue throughout the remainder of 2015 .   We expect declining revenue trends in switched access revenue to continue during the remainder of 2015. Subsidy revenue, including CAF Phase II subsidies, was $336 million, or 8% of our revenues, for the nine months ended September 30, 2015, as compared   to $ 237 million, or 7 %, of our revenues, for the nine months ended September 30, 2014.    

 

In the section Revenue and Customer Related Metrics ” below is a table that presents customer counts, ARPC and customer churn.  It also categorizes revenue into customer revenue ( residential and business) and regulatory revenue (switched access a nd subsidy revenue). The decline in the number of customers was partially offset by increased penetration of additional higher revenue generating products and services sold to both residential and business customers, which has increased our ARPC for the three and nine months ended September 30, 2015 as compared to 2014

 

The following should be re ad in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2014 .

 

 

 

 

 

 

28

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

(a Results of Operations

 

 

 

REVENUE AND CUSTOMER RELATED METRICS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

( $ in millions )

 

For the three months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice services

 

$

500 

 

$

86 

 

$

414 

 

$

(58)

 

(12)

%

 

 

$

472 

Data and Internet services

 

 

589 

 

 

105 

 

 

484 

 

 

15 

 

%

 

 

 

469 

Other

 

 

134 

 

 

62 

 

 

72 

 

 

(4)

 

(5)

%

 

 

 

76 

Customer revenue

 

 

1,223 

 

 

253 

 

 

970 

 

 

(47)

 

(5)

%

 

 

 

1,017 

Switched access and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

subsidy

 

 

201 

 

 

11 

 

 

190 

 

 

66 

 

53 

%

 

 

 

124 

Total revenue

 

$

1,424 

 

$

264 

 

$

1,160 

 

$

19 

 

%

 

 

$

1,141 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

606 

 

$

132 

 

$

474 

 

$

(24)

 

(5)

%

 

 

$

498 

Business

 

 

617 

 

 

121 

 

 

496 

 

 

(23)

 

(4)

%

 

 

 

519 

Customer revenue

 

 

1,223 

 

 

253 

 

 

970 

 

 

(47)

 

(5)

%

 

 

 

1,017 

Switched access and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

subsidy

 

 

201 

 

 

11 

 

 

190 

 

 

66 

 

53 

%

 

 

 

124 

Total revenue

 

$

1,424 

 

$

264 

 

$

1,160 

 

$

19 

 

%

 

 

$

1,141 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice services

 

$

1,540 

 

$

271 

 

$

1,269 

 

$

(157)

 

(11)

%

 

 

$

1,426 

Data and Internet services

 

 

1,748 

 

 

318 

 

 

1,430 

 

 

37 

 

%

 

 

 

1,393 

Other

 

 

404 

 

 

170 

 

 

234 

 

 

 

%

 

 

 

232 

Customer revenue

 

 

3,692 

 

 

759 

 

 

2,933 

 

 

(118)

 

(4)

%

 

 

 

3,051 

Switched access and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

subsidy

 

 

471 

 

 

33 

 

 

438 

 

 

47 

 

12 

%

 

 

 

391 

Total revenue

 

$

4,163 

 

$

792 

 

$

3,371 

 

$

(71)

 

(2)

%

 

 

$

3,442 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

1,838 

 

$

403 

 

$

1,435 

 

$

(56)

 

(4)

%

 

 

$

1,491 

Business

 

 

1,854 

 

 

356 

 

 

1,498 

 

 

(62)

 

(4)

%

 

 

 

1,560 

Customer revenue

 

 

3,692 

 

 

759 

 

 

2,933 

 

 

(118)

 

(4)

%

 

 

 

3,051 

Switched access and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

subsidy

 

 

471 

 

 

33 

 

 

438 

 

 

47 

 

12 

%

 

 

 

391 

Total revenue

 

$

4,163 

 

$

792 

 

$

3,371 

 

$

(71)

 

(2)

%

 

 

$

3,442 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of or for the three months ended

 

 

September 30, 2015

 

December 31, 2014

 

% Increase (Decrease)

 

September 30, 2014

 

% Increase (Decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customers (in thousands) (1)

 

 

3,441 

 

 

3,510 

 

(2)

%

 

 

 

3,001 

 

15 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential customer metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customers (in thousands) (1)

 

 

3,147 

 

 

3,205 

 

(2)

%

 

 

 

2,740 

 

15 

%

 

Average monthly residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   revenue per customer

 

$

63.83 

 

$

65.67 

 

(3)

%

 

 

$

60.34 

 

%

 

Customer monthly churn

 

 

1.97% 

 

 

1.62% 

 

22 

%

 

 

 

1.86% 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business customer metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customers (in thousands) (1)

 

 

294 

 

 

305 

 

(4)

%

 

 

 

261 

 

13 

%

 

Average monthly business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    revenue per customer

 

$

693.58 

 

$

688.31 

 

%

 

 

$

658.56 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broadband subscribers (in thousands) (2)

 

 

2,434 

 

 

2,360 

 

%

 

 

 

1,953 

 

25 

%

 

Video subscribers (in thousands) (2)

 

 

560 

 

 

582 

 

(4)

%

 

 

 

396 

 

41 

%

 

Switched access minutes of use (in millions)

 

 

3,755 

 

 

3,853 

 

(3)

%

 

 

 

3,637 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended

 

 

 

 

 

 

 

 

 

September 30, 2015

 

September 30, 2014

 

% Increase (Decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential customer metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average monthly residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   revenue per customer

 

$

64.18 

 

$

59.68 

 

%

 

 

 

 

 

 

 

 

Customer monthly churn

 

 

1.84% 

 

 

1.76% 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business customer metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average monthly business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    revenue per customer

 

$

687.63 

 

$

652.75 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Switched access minutes of use (in millions)

 

 

11,566 

 

 

11,340 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Reflects 4 68,200 residential customers, 48,800 business customers and 5 1 7 , 0 00 total customers attributable to the October 2014 Connecticut A cquisition.

(2)

Reflects 38 4 , 800 broadband subscribers and 191,600 video subscribers attributable to the October 2014 Connecticut Acquisition.

 

Effective October 24, 2014, Frontier’s scope of operations and balance sheet capitalization changed materially as a result of the completion of the Connecticut Acquisition. F inancial and operating data presented for Frontier for periods prior to that date are not indicative of future results which include the results of our Connecticut operations . The financial discussion below includes a comparative analysis of our results of operations on a historical basis for our Frontier operations as of and for the three and nine   months ended September 30 , 2015 and 2014. Unless otherwise noted, the variance explanations discussed below are based upon an analysis of the 2015 financial data for Frontier legacy operations in comparison to 2014 .

 

Prior period amounts for other operating expenses have been revised from the previously disclosed amounts to reflect the disaggregation of other operating expenses into network related expenses and selling, general and administrative expenses.  There has been no change to total operating expense as a result of this reclassification.

 

REVENUE

 

We generate revenues primarily through either a monthly recurring fee or a fee based on usage , and revenue recognition is not dependent upon significant judgments by management, with the exception of a determination of a provision for uncollectible amounts. We categorize our revenues as follows:

30

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

 

Voice Services

Voice services include traditional local and long distance wireline services ,   Voice over Internet Protocol (VoIP) services, as well as a number of unified messaging services including call forwarding, conference calling, caller identification, voice mail and call waiting offered to our residential and business customers. Voice services also include the long distance voice origination and termination services that we provide to our business customers and other carriers.

 

Voice services revenue for the three and nine   months ended September 30 , 2015 decreased $ 5 8   million, or 12 %, and $ 157   million, or 11 %, primarily due to the continued loss of voice cus tomers and, to a lesser extent, decreases in individual feature packages, partially offset by increased local voice charges to residential and business end users.  

 

Data and Internet Services  

Data and internet services include broadband services for res idential and business customers . We provide data transmission services to high volume business customers and other carriers with dedicated high capacity circuits (“nonswitched access”) including services to wireless providers (“wireless backhaul”). We also offer a host of data services to our residential customers marketed under our Frontier Secure brand, includin g computer security, cloud back- up and sharing, identi t y protection and technical support. Frontier Secure also provides technical su pport services for businesses.

 

Data and Internet services revenue for the three and nine months ended September 30 , 2015   in creased $ 15   million, or 3 % ,   and $ 37 million, or 3 %, respectively .   Data services revenue for the three and nine months ended September 30, 2015 increased $30 million, or 11%, to $290 million, and $91 million, or 12%, to $843 million, respectively .  These increases are primarily due to a 5 % increase in the total number of broadband subscribers   since September 30, 2014, and higher Frontier Secure revenues .   N onswitched access revenues for the three and nine months ended September 30, 2015 decreased $ 15 million, or 7 %, to $194 million, and $ 54 million, or 8 %, to $587 million, respectively . These decreases are   primarily due to lower monthly recurring revenues for wireless backhaul and other carrier services .   In the near term, we anticipate that our overall wireless backhaul revenues (which comprise approximately 4% of our total revenue) will continue to be challenged as a result of our carrier customers migrat ing to Ethernet solutions at lower price points or migration of customers to our competitors.

 

Other  

Other customer revenue includes residential video services, our provision for bad debts, sales of customer premise equipment to our business customers and directory services. 

 

Other revenue for the three and nine   months ended September 30 , 2015   de creased $ 4 million, or 5 %, and increased $ 2 million,   or 1%, respectively, primarily due to changes in our   provision for bad debt s and increased customer premise equipment revenues, partially offset by lower directory services revenue.

 

Switched Access and Subsidy

Switched access and subsidy revenues include revenue s derived from allowing other carriers to use our network to originate and/or terminate their local and long distance voice traffic (“switched access”).   These services are primarily billed on a   minutes-of-use basis applying tariffed rates filed with the FCC or state agencies. We also receive cost subsidies from state and federal authorities, including the Connect America Fund.

 

Switched access and subsidy r e venue for the three and nine   months ended September 30 , 2015   in creased $ 6 6 million, or 5 3 % , and $ 47 million, or 12 %, respectively, as compared to the three and nine months ended September 30, 2014 .   Subsidy revenues increased $7 6 million and $8 3 million for the third quarter and first nine months of 2015, respectively. The increase in subsidy revenue was primarily attributable to CAF Phase I I funding related to true-up payments and phasedown support .   Switched access revenue decreased $ 10 million and $ 36 million for the third quarter and first nine months of 2015, respectively ,   primarily due to the impact of the decline in minutes of use related to access line losses and the displacement of minutes of use by wireless an d other communications services , combined with the lower rates enacted by the FCC’s intercarrier compensation reform .   We expect that th e se trends underlying the reduction in switched access revenue will continue through 2015.

31

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

 

OPERATING EXPENSES

 

NETWORK ACCESS EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

( $ in millions )

 

For the three months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network access expenses

 

$

159 

 

$

55 

 

$

104 

 

$

(4)

 

(4)

%

 

 

$

108 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network access expenses

 

$

475 

 

$

166 

 

$

309 

 

$

(12)

 

(4)

%

 

 

$

321 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network access expenses include access charges and other third-party costs directly attributable to connecting customer locations to our network , and video content costs. Such access charges and other third-party costs exclude network related expenses, depreciation and amortization, and employee related expenses.

 

Network access expenses for the three and nine months ended September 30 , 2015   de creased $ 4 million, or 4 %, and $ 12 million, or 4 %, respectively, primarily due to   lower long distance costs   as a result of decrease d minutes of use and lower join t pole costs , partially offset by an increase in network access expenses related to high er broadband subscriber counts and costs for providing new circuits to our markets .

 

NETWORK RELATED EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

( $ in millions )

 

For the three months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network related expenses

 

$

331 

 

$

45 

 

$

286 

 

$

10 

 

%

 

 

$

276 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network related expenses

 

$

969 

 

$

136 

 

$

833 

 

$

35 

 

%

 

 

$

798 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network related expenses include certain expenses associated with the delivery of services to customers and the operation and maintenance of our network, such as facility rent, utilities, maintenance and other costs, as well as salaries, wages and related benefits associated with personnel who are responsible for the delivery of services, operation and maintenance of our network.

 

Network related expenses for the three and nine   months ended September 30 , 2015 in creased   $ 10 million ,   or 4 %, and $ 35 million, or 4 %,   respectively, due to   higher costs for compensation, primarily due to storm-related costs, and certain benefits, including pension and OPEB expense (as discussed below), and increased fleet and facilities costs, partially offset by reduced installation and repair costs.

32

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

( $ in millions )

 

For the three months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

administrative expenses

 

$

344 

 

$

61 

 

$

283 

 

$

26 

 

10 

%

 

 

$

257 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

administrative expenses

 

$

1,005 

 

$

187 

 

$

818 

 

$

30 

 

%

 

 

$

788 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses (SG&A expenses) include the salaries, wages and related benefits and the related costs of corporate and sales personnel, travel, insurance, non-network related rent, advertising and other administrative expenses.

 

SG&A expenses for the three and nine   months ended September 30 , 2015 in creased   $ 26 million , or 10%,   and $ 30 million, or 4%, respectively, due to   higher costs for compensation, primarily related to increased employee headcount due to additional services provided by Frontier Secure, and certain benefits, including pension and OPEB expense (as discussed below) ,   partially offset by certain litigation costs incurred in the first quarter of 2014 and lower facilities costs .  

 

Pension and OPEB costs

Pension and OPEB costs are included in our network related expenses and SG&A expenses. Total p ension and OPEB costs   for the three months ended September 30 , 2015 and 201 4 were approx imately $ 1 9 million and $ 13 million ,   respectively. Total pension and OPEB costs for the nine months ended September 30, 2015 and 2014 were approximately $5 7 million and $42 million, respectively.  Pension and OPEB costs include pension and OPEB expense of $ 24 million and $ 1 7 million, less amounts capitalized into the cost of capital expenditures of $ 5 million and $ 4   million, for the three months ended September 30, 2015 and 2014, respectively , and pension and OPEB expense of $ 72 million and $ 53 million, less amounts capitalized into the cost of capital expenditures of $ 15 million and $ 11 million, for the nine months ended September 30, 2015 and 2014, respectively

 

Based on current assumptions and plan asset values, we estimate that our 201 5 pension and OPEB costs (which were $74 million in 2014, excluding the impact of amounts capitalized into the cost of capital expenditures) will be approximately $ 90 million to $10 0 million, excluding the impact of   amounts capitalized into the cost of capital expenditures .

 

33

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

DEPRECIATION AND AMORTIZATION EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

( $ in millions )

 

For the three months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

$

245 

 

$

50 

 

$

195 

 

$

 -

 

 -

%

 

 

$

195 

Amortization expense

 

 

80 

 

 

26 

 

 

54 

 

 

(12)

 

(18)

%

 

 

 

66 

 

 

$

325 

 

$

76 

 

$

249 

 

$

(12)

 

(5)

%

 

 

$

261 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Frontier Legacy

 

 

 

 

 

Consolidated

 

Connecticut

 

 

 

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

Operations

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

$

741 

 

$

153 

 

$

588 

 

$

(10)

 

(2)

%

 

 

$

598 

Amortization expense

 

 

260 

 

 

76 

 

 

184 

 

 

(34)

 

(16)

%

 

 

 

218 

 

 

$

1,001 

 

$

229 

 

$

772 

 

$

(44)

 

(5)

%

 

 

$

816 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense for the three and nine months ended September 30 , 2015 decreased $12 million, or 5%, and   $ 44   mi llion, or 5 %, primarily due to the accelerated method of amortization related to the customer list that was acqui red in our 2010 transaction with Verizon , changes in the remaining useful lives of certain plant assets and a lower net asset base .   We anticipate depreciat ion expense of approximately $960 million to $98 0 million   and amortization expense of approximately $345 million in 201 5 ,   including a full year associated with the Connecticut operations.

 

ACQUISITION AND INTEGRATION COSTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

For the three months ended September 30,

 

 

2015

 

2014

 

 

Consolidated

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and integration costs

 

$

58 

 

 

16 

 

38 

%

 

 

$

42 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

2015

 

2014

 

 

Consolidated

 

$ Increase

 

% Increase

 

 

 

 

 

Amount

 

(Decrease)

 

(Decrease)

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and integration costs

 

$

150 

 

 

78 

 

108 

%

 

 

$

72 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs include legal, financial advisory, accounting, regulatory and other related costs. Integration costs include expenses incurred to integrate the network and information technology platforms and to enable other integration initiatives.

 

During the three months ended September 30, 2015, we   incurred $ 12 million of integration costs related to the Connecticut Acquisition. We also invested $ 4 million in capital expenditures related to the Connecticut Acquisition during the three months ended September 30, 2015. During the nine months ended September 30 , 2015, we   incurred $ 1 million of acquisition costs and $ 37 million of integration costs related to the Connecticut Acquisition .   We also invested  $ 23 million in capital expenditures related to the Connecticut Acquisition during the nine months ended September 30 , 2015 .  

 

During the first quarter of 2015, we began to incur acquisition and integration costs in connection with the pending Verizon Transaction. During the three months ended September 30, 2015, we   incurred $ 3 million of acquisition costs and $ 43 millio n  

34

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

of integration costs related to the Verizon Transaction. We also invested $ 59 million in capital expenditures related to the Verizon Transaction during the three months ended September 30, 2015. During the nine months ended September 30 , 2015, we   incurred $ 37 million of acquisition costs and $ 75 millio n of integration costs related to the Verizon Transaction. We also invested $ 78 million in capital expenditures related to the Verizon Transaction during the nine months ended September 30, 2015.

 

INVESTMENT AND OTHER INCOME , NET / INTER EST EXPENSE / INCOME TAX EXPENSE (BENEFIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

( $ in millions )

 

For the three months ended September 30,

 

 

 

2015

 

2014

 

 

 

Consolidated

 

 

$ Increase

 

% Increase

 

 

 

 

 

 

Amount

 

 

(Decrease)

 

(Decrease)

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income, net

 

$

 

$

(24)

 

(96)

%

 

 

$

25 

 

Interest expense

 

$

246 

 

$

76 

 

45 

%

 

 

$

170 

 

Income tax expense (benefit)

 

$

(24)

 

$

(34)

 

NM

 

 

 

$

10 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

 

2015

 

2014

 

 

 

Consolidated

 

 

$ Increase

 

% Increase

 

 

 

 

 

 

Amount

 

 

(Decrease)

 

(Decrease)

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income, net

 

$

 

$

(23)

 

(88)

%

 

 

$

26 

 

Interest expense

 

$

751 

 

$

243 

 

48 

%

 

 

$

508 

 

Income tax expense (benefit)

 

$

(92)

 

$

(138)

 

NM

 

 

 

$

46 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NM - Not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income, net

Investment and other income, net for the three and nine months ended September 30, 2014 included a $25 million gain associated with the sale of our interest in Fairmount Cellular LLC.

 

Interest expense

Interest expense for the three   and nine   months ended September 30 , 2015   increased $ 76 million, or 45 % , and $ 243 million, or 48 %, respectively, as compared with the three and nine months ended September 30, 2014 .   We incurred commitment fees of $ 184 million on the Verizon Bridge Loan Facility (as defined below) related to the Verizon Transaction during the first nine months of 2015 ,   as compared to the commitment fees of $ 23 million on the bridge loan f acility related to the Connecticut Acquisition during the first nine months of 2014 . We also incurred additional intere st in 2015 on the $1, 9 00   m illion debt financing related to   the Connecticut Acquisition .   Our composite average borrowing rate as of September 30 , 2015 and 201 4   was 8.97 % and 7. 76 %, respectively .

 

Income tax expense (benefit)

Income tax expense (benefit)   for the three and nine   months ended September 30 , 2015   de creased $ 3 4 million and $ 1 38 million, as compared to the three and nine months ended September 30, 2014, respectively. O ur effective tax rate on our pretax income (loss) for the nine months ended September 30, 2015 was 5 0 %   as compared with 28 % for the nine   mon ths ended September 30 , 2014. The de crease in income tax expense (benefit)   was primarily due to the   change from pretax income in the first nine months of 2014 to pretax loss in the first nine months of 2015.  Income taxes for the nine months ended September 30, 2015 include the impact of a n  $ 1 1 million benefit resulting from the adjustment of deferred tax balances due to state tax law changes.    

 

Net income (l oss)

Net income   (loss) for the third quarter of 201 5   was a net loss of  $ 1 4 million, or ( $ 0. 07 ) per share , as compared to   net income of  $ 42 million, or $ 0.04 per share, in the third quarter of 201 4 , and net loss of $ 93 million, or ( $ 0. 15 ) per share, for the first nine months of 2015, as compared to net income of $ 119 million, or $ 0.12 per share, for the nine months ended September 30, 2014

35

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

 

(b Liquidity and Capital Resources  

 

Analysis of Cash Flows

As of September 30 , 2015 , we had unrestricted cash and cash equivalents aggregating to  $ 1,0 1 1 million ,   which includes $710 million of unrestricted net proceeds from the June 2015 equity offerings . The restricted cash   of $8,440 million represent s funds escrowed from the September 2015 debt offering and the June 2015 equity offerings .   Our primary source of funds continued to be c ash generated from operations , along with the unrestricted cash raised from the equity offerings .   For the nine   months ended September 30 , 2015 , we used cash flow from operations and cash on hand to principally fund all of our cash investing and financing activities, primarily capital expenditures, dividends and debt repayments.

 

 

At September 30 , 2015 , we had a working capital surplus of $ 8, 767   million . Excluding the restricted cash, we had a working capital surplus of $3 27 million ,   as compared to a working capital deficit of $26 million at December 31, 2014. We intend to use the restricted cash balance in connection with the Verizon Transaction.

 

Cash Flows provided by Operating Activities

 

Cash flows provided by operating activities increased  $ 19 million, or 2 %, for the   nine months ended September 30 , 2015 , as compar ed with the prior year period. The in crease was primarily the result of changes in working capital and higher   adjusted net income before depreciation and amortization.

 

We paid $ 27 million and $ 3 6 million in net cash taxes during the nine months ended September 30 , 2015 and 201 4 , respectively. Our 201 5 cash taxes paid reflected the continued impact of bonus depreciation in accordance with the Tax Increase Prevention Act of 2014 . Absent any legislative changes in 2015, we expect that our cash tax payments will be approximately $ 40 million to $ 50 million for 2015.        

 

In connection with the Verizon Transaction ,   Frontier   recognized acquisition and integration costs of $ 112 million during the first nine months of 201 5. Interest expense of $ 184 million was incurred   during the first nine months of 2015 related to the Verizon Bridge Facility (as defined below).

 

In connection with the Connecticut Acquisition ,   Frontier   recognized acquisition and integration costs of $ 38 million   during the first nine months of 2015 compared to  $ 72 million during the first nine months of 2014. Interest expense of $ 23   million   was incurred   during the first nine months of 2014 on the b ridge loan f acility related to the Connecticut Acquisition.

 

Cash Flows used by Investing Activities

 

Capital Expenditures

For the nine months ended September 30 , 2015 and 201 4 , our capital expenditures were   $ 626 million and $ 495 million , respectively,  ( including $ 101 million and $ 82 million of integration-related capital expenditures for the nine months ended September 30, 2015 and 2014, respectively ) .   Since 2012, Frontier received a total of $ 133 million from the Connect America Fund (CAF) Phase I to support broadband deployment in unserved and underserved high-cost areas. In addition to the capital expenditures mentioned above, n etwork expansion funded by previously received CAF Phase I funds amounted to $ 2 2   million and $ 4 1   million for the nine months ended September 30 , 2015 and 201 4 , respectively. Capital expenditures related to CAF Phase II will be included in our reported a mounts for capital expenditures .   We anticipate capital expenditu res for business operations to increase in 2015 as a result of the Connecticut Acquisition and expenditures related to the CAF Phase II program to approximately $ 70 0 million to $7 5 0 million , as compared to $ 572 million in 2014.  

 

Cash Flows used by and provided from Financing Activities

 

Debt Financings  

On September 25, 2015, Frontier completed a private debt offering of $6, 6 00   m illion aggregate principal amount of unsecured Senior Notes, as follows: $1 ,000   m illion of 8.875% Senior Notes due 2020; $2 , 0 00   m illion of 10.500 % Senior Notes due 2022; and $3, 6 00   m illion of 11.000% Senior Notes due 2025. Each was issued at a price equal to 100% of its principal amount. Frontier intends to use the proceeds from the offering to finance a portion of the cash consideration payable in connection with the Verizon Transaction and to pay related fees and expenses. The net proceeds of the debt offering ( after deducting underwriting

36

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

fees ) of $ 6,485 million are included in “Restricted cash” in the consolidated balance sheet as of September 30, 2015.  These funds were deposited in an escrow account to partially fund the acquisition or, if the acquisition is terminated or otherwise not consummated on or before August 6, 2016, to redeem the new Senior Notes at par plus accrued interest.

 

During the first nine months of 201 5 , we also entered into secured financings totaling $ 3 million with four year terms and no stated interest rate for certain equipment purchases.

 

Debt Reduction

During the first nine months of 201 5 and 201 4 , we re tired an aggregate principal amount of $ 274 million and $ 2 45 million, respectively, of debt consisting of $ 272 million and $ 243 million, respectively , of senior un secured debt . Additionally, we retired $ 2 million of secured debt during the first nine months of 201 5 and 2014 .

 

Subject to limitations contained in our indentures and credit facilities, we may from time to time make repurchase s   of our debt in the open market, through tender offers, exchanges of debt securities, by exercising rights to call or in privately negotiated transactions. We may also refinance existing debt or exchange existing debt for newly issued debt obligations.

 

Common Stock Offering

On June 10, 2015, we completed a registered offering of 150,000,000 shares of our common stock, par value $0.25 per share, at a n offering price of $5 per share. On June 24 , 2015, Frontier issued an additional 15,000,000 shares of common stock in connection with the over-allotment option that was exercised in full by the underwriters. Aggregate net proceeds were approximately $7 99 million after deducting commissions and estimated expenses. We intend to use the net proceeds from this offering to fund a portion of the acquisition price of the Verizon Transaction and for related fees and expenses .  

 

Mandatory Convertible Preferred Stock (Series A) Offering  

On June 10 , 2015, we   also completed a registered offering of 17,500,000 shares of our 11.125% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share (the “ Series A Preferred Stock”) , at a n offering price of $ 100 per share . On June 24 , 2015, Frontier issued an additional 1,750,000 shares of Series A Preferred Stock in connection with the over-allotment option that was exercised in full by the underwriters . Aggregate net proceeds of the offering were $1, 866 million after deducting commissions and estimated expenses. We intend to use the net proceeds from this offering to fund a portion of the acquisition price of the Verizon Transaction and for related fees and expenses .

 

Pursuant to the terms of the Verizon Transaction, $1, 955 million of the $2,665 million in net proceeds from the equity offerings were deposited into escrow and are included in “Restricted cash” in the consolidated balance sheet as of September 30, 2015 .  Upon closing of the acquisition, the funds would be released and used to fund a portion of the purchase price.  If the Verizon Transaction is terminated, the funds would be released and become unrestricted cash of Frontier .

 

Capital Resources

We believe our operating cash flows, existing cash balances, and existing revolving credit facility will be adequate to finance our working capital requirements, fund capital expenditures, make required debt and interest   payments , pay taxes, pay dividends to our stockholders, and support our short-term and long-term operating strategies for the next twelve months . A number of factors, including but not limited to, losses of customers, pricing pressure from increased competition, lower subsidy and switched access revenues, and the impact of economic conditions   may negatively affect our cash generated from operations. As of September 30 , 2015 , we had $ 24 million of debt maturing during the last three months of 201 5 ; $38 4 million and $64 6 millio n of debt will matur e in 201 6 and 201 7 , respectively.

 

Our private debt offering completed in September 2015, the 2015 Credit Agreement entered into in August 2015 and our common stock and Series A Preferred Stock offerings completed in June 2015 will be adequate to finance the Verizon Transaction and to pay related fees and expenses.

 

Bridge Facilit ies

On February 5, 2015, we signed a commitment letter for a bridge loan facility (the Verizon Bridge Facility) and recognized related interest expense of $ 52 million and $ 184 million during the three and nine   months ended September 30 , 2015 , respectively .   The Verizon Bridge Facility terminated, in accordance with its terms, on September 25, 2015.

37

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

 

Term Loan Agreement

On August 12, 2015, Frontier entered into a credit agreement with JPMorgan Chase Bank, N.A., as the administrative agent, and the lenders par ty thereto, for a $1, 5 00   m illion senior secured delayed-draw term loan facility (the 2015 Credit Agreement).  The term loan will be drawn at the closing of the Verizon Transaction.  The final maturity date is the earlier of the fifth anniversary of the draw date or March 31, 2021.  Repayment of the outstanding principal balance will be made in quarterly installments, initially in the amount of $19 million per installment, commencing one full fiscal quarter after the draw date.  The quarterly installments will increase to $38 million, beginning with the 13th quarterly installment.  The remaining outstanding principal balance will be repaid on the final maturity date.  Borrowings under the term loan will bear interest based on margins over the Base Rate (as defined in the 2015 Credit Agreement) or LIBOR, at the election of Frontier.  Interest rate margins under the facility (ranging from 0.75% to 1.75% for Base Rate borrowings and 1.75% to 2.75% for LIBOR borrowings) are subject to adjustment based on Frontier’s Total Leverage Ratio (as defined in the 2015 Credit Agreement).  Borrowings under the 2015 Credit Agreement will be secured by a pledge of the stock of Frontier North Inc., a wholly owned subsidiary.

 

Bank Financing

Frontier has a credit agreement with CoBank, ACB, as administrative agent, lead arranger and a lender, and the other lenders party thereto, for a $350 million senior unsecured delayed draw term loan facility (the 2014 CoBank Credit Agreement). The facility was drawn upon closing of the Connecticut Acquisition   with proceeds used to partially finance the acquisition. The maturity date is October 24, 2019 . Repayment of the outstanding principal balance will be made in quarterly installments of $9 million, commencing on March 31 , 2015 , with the remaining outstanding principal balance to be repaid on the maturity date. Borrowings under the 2014 CoBank Credit Agreement bear interest based on the margins over the Base Rate ( as defined in the 2014 CoBank Credit Agreement) or LIBOR, at the election of Frontier . Interest rate margins under the facility (ranging from 0.875% to 2.875% for Base Rate borrowings and 1.875% to 3.875% for LIBOR borrowings) are subject to adjustments based on our Total Leverage Ratio , as such term is defined in the 2014 CoBank Credit Agreement. The interest rate on this facility at September 30 , 2015 was LIBOR plus 3. 3 75 %.

 

Frontier has a credit agreement with CoBank, ACB, as administrative agent, lead arranger and a lender, and the other lenders party thereto, for a $575 mil lion senior unsecured term loan facility with a final maturity of October 14, 2016 (the 2011 CoBank Credit Agreement). The entire facility was drawn upon execution of the 2011 CoBank Cre dit Agreement in October 2011. Repayment of the outstanding principal balance is made in quarterl y installments of $14 million, which commenced on March 31 , 2012, with the remaining outstanding principal balance to be repa id on the final maturity date. Borrowings under the 2011 CoBank Credit Agreement bear interest based on the margins over the Base Rate (as defined in the 2011 CoBank Credit Agreement) or LIBOR, a t the election of Frontier .   Interest rate margins under the facility (ranging from 0.875% to 2.875% for Base Rate borrowings and 1.875% to 3.875% for LIBOR borrowings) are subject to adjustments based on our Total Leverage Ratio, as such term is defined in the 2011 CoBank Credit Agreement.  The interest rate on this facility at September 30 , 2015 was LIBOR   plus 2 . 3 75 %.    

 

Revolving Credit Facility

Frontier has a   revolving credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, the lenders party thereto and the other parties named therein (the Revolving Credit Agreement), for a $750   million revolving credit facility (the Revolving Credit Facility) with a scheduled termination date of May 31, 2018. As of September 30 , 2015 ,   the Revolving Credit Facility was fully available and no borrowin gs had been made thereunder .   Associated commitment fees under the Revolving Credit Facility will vary from time to time depending on our debt rating (as defined in the Revolving Credit Agreement) and were 0.450 % per annum as of September 30 , 2015 . During the term of the Revolving Credit Facility, Frontier may borrow, repay and reborrow funds, and may obtain letters of credit, subject to customary borrowing conditions. Loans under the Revolving Credit Facility will bear interest based on the alternate base rate or the adjusted LIBO Rate (each as determined in the Revolving Credit Agreement), at our election, plus a margin based on our debt rating (ranging from 0.50% to 1.50% for alternate base rate borrowings and 1.50% to 2.50% for adjusted LIBO Rate borrowings). The interest   rate on th is facility at September 30 , 2015 would have been the alternative base rate plus 1.50 % or the adjusted LIBO Rate plus 2.50 %, respectively . Letters of credit issued under the Revolving Credit Facility will also be subject to fees that vary depending on our debt rating. The Revolving Credit Facility is available for general corporate purposes but may not be u sed to fund dividend payments.

 

Upon the drawdown of the term loan under the 2015 Credit Agreement in connection with the closing of the Verizon Transaction, borrowings under the 2014 CoBank Credit Agreement, the 2011 CoBank Credit Agreement and the Revolving

38

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

Credit Facility will become secured debt. These borrowings will be secured , equally and ratably with borrowings under the 2015 Credit Agreement , by a pledge of the stock of Frontier North Inc., a wholly owned subsidiary.

 

Covenants

The terms and conditions contained in our indentures, the 2011 CoBank Credit Agreement ,   the 2014 CoBank Credit Agreement , the 2015 Credit Agreement and   the Revolving Credit Agreement include the timely payment of principal and interest when due, the maintenance of our corporate existence, keeping proper books and records in accordance with GAAP, restrictions on the incurrence of liens on our assets securing indebtedness and our subsidiaries’ assets ,   restrictions on the incurrence of indebtedness by our subsidiaries and restrictions on asset sales and transfers, mergers and other changes in corporate control subject to important qualifications and exceptions .   W e would be restricted from declaring dividends under the 2011 CoBank Credit Agreement ,   the 2014 CoBank Credit Agreement , the 2015 Credit Agreement and the Revolving Credit Agreement if an event of default occurred and was continuing at the time or would result from the dividend declaration. In addition, under the Certificate of Designations of our 11.125% Mandatory Convertible Preferred Stock , Series A, we would be restricted from paying dividends on our common stock , if we failed to declare and pay dividends on our Series A Preferred Stock .

 

The 2011 CoBank Credit Agreement , the 2014 CoBank Credit Agreement , the 2015 Credit Agreement and the Revolving Credit Agreement each contain a maximum leverage ratio covenant. Under those covenants, we are required to maintain a ratio of (i) total indebtedness minus cash and cash equivalents in excess of $50 million to (ii) consolidated adjusted EBITDA (as defined in the agreements) over the last four quarters not to exceed 4.50 to 1. 

 

I ndentures for our senior unsecured debt obligations limit our ability to create liens on our assets securing indebtedness and our subsidiaries’ assets or merge or consolidate with other companies , our subsidiaries’ ability to borrow funds and to engage in change of control transactions , subject to important exceptions and qualifications. The indentures for our 8.875% senior notes due 2020, our 10.5 00 % senior notes due 2022, and our 11 .000 % senior notes due 2025 (See Exhibits 4.1, 4.2, 4.3 and 4.4 to this Form 10-Q) contain covenants that are customary for similarly rated issuers . A mong other things, t hese covenants limit our ability to incur additional indebtedness if our leverage ratio exceeds 4.5 to 1 (as defined in the indentures), limits liens and subsidiary debt to 1.25 times EBITDA (as defined in the indentures), limits cumulative restricted payments, including dividends, to cumulative EBITDA less 1.4 times cumulative interest expense (as defined in the indenture), and restricts our ability to divest substantially all of the assets of the company.

 

As of September 30 , 2015 , we were in compliance with all of our indenture and credit facility covenants.

 

Dividends

We intend to continue to pa y regular quarterly dividends on our common and preferred stock .   Our ability to fund a regular quarterly dividend will be impacted by our ability to generate cash from operations.   Holders of the Series A Preferred Stock are entitled to receive cumulative dividends at an annual rate of 11.125% of the initial liquidation preference of $100.00 per share, or $11.125 per year per share. Series A Preferred Stock d ividends of $ 67 million were paid on September 30, 2015. The declaration and payment of future dividends on our common stock is at the discretion of our Board of Directors, and will depend upon many factors, including our financial condition, results of operations, growth prospects, funding requirements, pay ment   of cumulative dividends on Series A Preferred Stock, applicable law, restrictions in agreements governing our indebtedness and other factors our Board of Directors deem s relevant.

 

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial statements.

 

Future Commitments

In our normal course of business we have obligations under non-cancela ble arrangements for services. During 2012, we entered into a “take or pay” arrangement for the purchase of future long distance and carrier services. Our remaining commitment under the arrangement is $14 1 million for the year ending December 31, 2015 .   As of September 30 , 2015 , we expect to utilize the services included within the arrangement and no liability for the “take or pay” provision has been recorded.

 

To the extent we do not enable the requir ed number of households with 10 Mbps/1 M bps broadband service by the end of the CAF Phase II term, we will be required to return a portion of the funds previously received.  While we have accepted the CAF

39

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

Phase II offer of support, we have until December 31, 2015 to make modifications to the amount of households we ultimately accept without penalty.

 

Critical Accounting Policies and Estimates

The preparation of our financial statements requires management to m ake estimates and assumptions. There are inherent uncertainties with respect to such estimates and assumptions; accordingly, it is possible that actual results could differ from those estimates and changes to estimates could occur in the near term.

 

These critical accounting estimates have been reviewed with the Audit Committee of our Board of Directors.

 

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2014 .   

 

Recent Accounting Pronouncements

See Note 2 of the Notes to C onsolidated F inancial S tatements included in Part I of this report for additional information related to recent accounting literature .

 

Regulatory Developments    

On February 26, 2015, the FCC issued an Order adopting rules to “Preserve a Free and Open Internet” (i.e., net neutrality). In the Order, the FCC asserted jurisdiction over broadband service utilizing its jurisdictional authority under Title II of the Communications Act. It adopted specific obligations for fixed and mobile providers of broadband Internet access services and specifically prohibited the following: blocking access to legal content, applications, services, or non-harmful devices; impairing or degrading lawful Internet traffic on the basis of content, applications, services, or non-harmful devices; favoring some lawful Internet traffic over other lawful traffic in exchange for consideration; and otherwise unreasonably harming consumers or edge providers. These obligations are largely consistent with the practices Frontier already has in place today. The FCC also announced additional transparency requirements intended to provide consumers more information about a provider’s network management practices, performance, speed, price, and data caps. More details regarding an FCC “safe harbor” disclosure framework for the enhanced transparency requirements will be released by the FCC at a later, yet-to-be-determined date. The future state of this framework and its effect on us is unknown.

 

On April 29, 2015, the FCC released its right of first refusal offer of support to price cap carriers under the Connect America Fund (CAF) Phase II program, which is intended to provide long-term support for broadband in high-cost unserved or underserved areas.  In June 2015, Frontier accepted the CAF Phase II offer, which provides for $283 million in annual support from 2015 thr ough 2020 to deliver 10  M bps/1  M bps broadband service to approximately 660,000 households across the 28 states where we operate.

 

CAF Phase II support replaces the $156 million in annual Universal Service Fund frozen high-cost support that Frontier has been receiving pursuant to a 2011 FCC Order. When combined with the frozen high-cost phasedown payment discussed below, CAF Phase II funding increases support by more than $ 162 million in 2015. Since CAF Phase II funding is based on a calendar year and Frontier accepted the funding in June, Frontier received one-time third quarter true-up payment s of $85 million for the first half of 2015 In addition to the CAF Phase II annual support, Frontier will also receive frozen support phasedown payments for 2015 through 2018. The FCC adopted phasedown payments to help compensate carriers in those limited circumstances in which CAF II funding results in a decrease in high-cost support when compared to prior frozen high-cost support payments.

 

Frontier was required under CAF Phase I to enable approximately 196,000 households with broadband service. T hrough September 30, 2015, we met all of the CAF Phase I requirements.  In 2015 and in the aggregate, we have spent $ 24 million and $ 117 million, respectively, related to CAF Phase I.  

 

40

 


 

 

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

We are exposed to market risk in the normal course of our business operations due to ongoing investing and funding activities , including those associated with our pension plan assets . Market risk refers to the potential change in fair value of a financial instrument as a result of fluctuations in int erest rates and equity prices. We do not hold or issue derivative instruments, derivative commodity instruments or other financial ins truments for trading purposes. As a result, we do not undertake any specific actions to cover our exposure to market risks , and we are not party to any market risk management agreements other than in the normal course of business .   Our primary market risk exposures from interest rate risk and equity price risk are as follows:

 

Interest Rate Exposure

Our exposure to market risk for changes in interest rates relates primarily to the interest-bearing portion of our pension investment portfolio   and related obligations, as well as our floating rate indebtedness. As of September 30 ,   2015 ,   96 %   of our long-term debt had fixed interest rate s .   We had no interest rate swap agreements related to our fixed rate debt in effect at September 30 , 2015. Upon consummation of the Verizon Transaction, and in conj unction with the drawdown of $1, 5 00   m illion from the 2015 Credit Agreement, as defined herein, 88 % of our long-term debt would have fixed interest rates. We believe that our   currently outstanding obligation exposure to interest rate changes is minimal.  

 

Our objectives in managing our interest rate risk are to limit the impact of interest rate changes on earnings and cash flows and to lowe r our overall borrowing costs. To achieve these objectives ,   only $ 682   million of our outstanding borrowings at September  3 0 , 2015   have floating interest rates. In addition, our undrawn  $ 750 million revolving credit facility has interest rates that float with the LIBO Rate , as defined. Consequently, we have limited material future earnings or cash flow exposures from changes in interes t rates on our debt. A n adverse change in interest rates would increase the amount that we pay on our variable rate obligations and could result in fluctuations in the fair value of our fix ed rate obligations. Based upon our overal l interest rate exposure at September 30 , 2015 , a near-term change in interest rates would not material ly affect our consolidated financial position, results of operations or cash flows.

 

At September 30 , 2015 , the fair value of our long-term debt was estimated to be approximately $ 14, 779   m illion, based on our overall weighted average   borrowing rate of 8.97 % and our overall weighted average maturity of approximately eight   years.   As of September 30 , 2015 ,   there has been no significant change in the weighted average maturity applicable to our obligations since December 31, 2014 .  

 

Equity Price Exposure

Our exposure to market risks for changes in equity security prices as of September 30 , 2015 is limited to our pension plan assets.  We have no other security investments of any significant amount.

 

Our pension plan assets de creased from $ 1,673 million at December 31, 201 4   to $ 1,576 million at September 30 , 2015 ,   a de crease of $ 97 million, or 6 %. This de crease is a result of   benefit payments of $ 104 million and   nega tive investment returns   of   $ 60   million ,   offset by   asset transfers from the AT&T pension plan trust of $5 million related to the Connecticut Acquisition and cash contributions   of $ 62 million during the first nine months of 2015 .   Frontier estimates that no further contributions to the pension plan are required in 2015 .  

 

Item 4.   Controls and Procedures

 

(a)

Evaluation of disclosure controls and procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, regarding the effectiveness of our disclosure controls and procedures (as defined in Rule s 13a-15(e) and 15d - 15(e) under the Securities Exchange Act of 1934, as amended) .  Based upon this evaluation, our principal executive officer and principal financial officer concluded, as of the end of the period covered by this report, September 30 , 2015 ,   that our disclosure controls and procedures were effective.    

 

(b)

Changes in internal control over financial reporting

We reviewed our internal control over financial reporting at September 30 , 2015 .   There have been no changes in our internal control over financial reporting identified in an evaluation thereof that occurred during the third   fiscal quarter of 201 5   that material ly affected, or is reasonably likely to material ly affect, our internal control over financial reporting.

 

 

41

 


 

 

PART II.  OTHER INFORMATION

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

I tem 1.      Legal Proceedings

 

See Note 1 5 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report.  There have been no material changes to our legal proceedings from the information provided in Item 3.  Legal Proceedings included in our Annual Report on Form 10-K for the year ended December 31, 2014 .    

 

We are party to various legal proceedings (including individual, class and putative class actions) arising in the normal course of our business covering a wide range of matters and types of claims including , but not limited to, general contract s ,   billing disputes, rights of access,   taxes and surcharges , consumer protection, trademark and patent infringement, employment, regulatory , tort ,   claims of competitors and disputes with other carriers .  Litigation is subject to uncertainty and the outcome of individual matters is not predictable.  However, we believe that the ultimate resolution of all such matters, after considering insurance coverage or other indemnities to which we are entitled, will not have a material   adverse effect on our financial position, results of operations, or our cash flows.  

 

Item 1A.  Risk Factors

 

Other than as set forth below, t here have been no other material changes to the Risk Factors described in Part 1 ,   Item 1A.  Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 201 4 .    

 

Risks Related to the Verizon Transaction

 

We may not consummate the Verizon Transaction on the terms or timeline currently contemplated or at all.

 

The consummation of the Verizon Transaction is subject to certain conditions, including (i) the absence of a court or other governmental order prohibiting consummation of the transaction, (ii) the receipt of applicable regulatory consents, (iii) the absence of a material adverse effect on the business to be acquired from Verizon and (iv) other customary closing conditions.  We can make no assurances that the Verizon Transaction will be consummated on the terms or timeline currently contemplated, or at all.  We have expended and will continue to expend a significant amount of capital and management’s time and resources on the Verizon Transaction, and a failure to consummate the Verizon Transaction as currently contemplated could have an adverse effect on our business, our results of operations and our cash flows and could adversely affect the trading price of our securities.  

 

We have incurred and expect to continue to incur significant costs related to the Verizon Transaction, such as legal, accounting, filing, financial advisory, and integration costs. While we currently expect to incur approximately $450 million of operating expenses and capital expenditures in total related to acquisition and integration activities in 2015 and 2016 associated with the Verizon Transaction, the amount of such operating expenses and capital expenditures may increase based on a variety of factors. In addition, we consummated the financing for the Verizon Transaction prior to the closing of such transaction. If the Verizon Transaction is ultimately not consummated or is delayed for a significant period of time, we will have paid additional dividends, significant interest expense and other costs in connection with the financings, and we will be obligat ed to repurchase the unsecured senior n otes issue d in September 2015 , without achieving the expected benefits of the Verizon Transaction.  

 

Our effort to combine our business and the business to be acquired from Verizon may not be successful.

 

We are devoting a significant amount of time and attention to the process of integrating the operations of our business and the business to be acquired from Verizon, which may decrease the time that management will have to serve existing customers, attract new customers and develop new services or strategies. The size and complexity of the acquired business and the process of using our existing common support functions and systems to manage the acquired business after the acquisition, if not managed and completed successfully by management, may result in interruptions of our business activities of Frontier that could have an adverse effect on our business, financial condition and results of operations. In addition, following the consummation of the Verizon Transaction we will be assuming certain known and currently unknown liabilities and obligations of the business we are acquiring from Verizon, including with respect to certain litigation and regulatory matters, the outcome of which could have an adverse impact on our business, financial condition and results of operations if determined adversely to us following the consummation of the Verizon Transaction.

 

42

 


 

 

PART II.  OTHER INFORMATION

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

 

 

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

 

There were no unregistered sales of equity securities during the quarter ended September 30 , 2015 .

 

ISSUER PURCHASES OF EQUITY SECURITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period

 

 

Total Number
of Shares Purchased

 

 

Average Price
Paid per Share

 

 

 

 

 

 

 

 

July 1, 2015 to July 31, 2015

 

 

 

 

 

 

 

Employee Transactions (1)

 

 

2,959 

 

 

$

4.78 

 

 

 

 

 

 

 

 

August 1, 2015 to August 31, 2015

 

 

 

 

 

 

 

Employee Transactions (1)

 

 

711 

 

 

$

5.37 

 

 

 

 

 

 

 

 

September 1, 2015 to September 30, 2015

 

 

 

 

 

 

 

Employee Transactions (1)

 

 

39 

 

 

$

5.23 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals July 1, 2015 to September 30, 2015

 

 

 

 

 

 

 

Employee Transactions (1)

 

 

3,709 

 

 

$

4.90 

 

 

 

 

 

 

 

 

 

(1)

Includes restricted shares withheld (under the terms of grants under employee stock compensation plans) to offset minimum tax withholding obligations that occur upon the vesting of restricted shares. Frontier’s stock compensation plans provide that the value of shares withheld shall be the average of the high and low price of our common stock on the date the relevant transaction occurs.

 

Item 4.   Mine Safety Disclosure

 

Not applicable.

43

 


 

 

PART II.  OTHER INFORMATION

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

 

 

Item 6.     Exhibits

 

 

 

 

(a)

Exhibits:

 

 

 

 

 

4.1

Base Indenture, dated as of September 25, 2015 (the “2015 Base Indenture”), between Frontier Communications Corporation and The Bank of New York Mellon, as trustee.

 

4.2

First Supplemental Indenture to the 2015 Base Indenture, dated as of September 25, 2015, between Frontier Communications Corporation and The Bank of New York Mellon, as trustee, with respect to 8.875% Senior Notes due 2020 (including the forms of notes attached thereto).

 

4.3

Second Supplemental Indenture to the 2015 Base Indenture, dated as of September 25, 2015, between Frontier Communications Corporation and The Bank of New York Mellon, as trustee, with respect to 10.500% Senior Notes due 2022 (including the forms of notes attached thereto).

 

4.4

Third Supplemental Indenture to the 2015 Base Indenture, dated as of September 25, 2015, between Frontier Communications Corporation and The Bank of New York Mellon, as trustee, with respect to 11.000% Senior Notes due 2025 (including the forms of notes attached thereto).

 

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

32.1

Certification s of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS    

XBRL Instance Document.

 

101.SCH   

XBRL Taxonomy Extension Schema Document.

 

101.PRE   

XBRL Taxonomy Presentation Linkbase Document.

 

101.CAL   

XBRL Taxonomy Calculation Linkbase Document.

 

101.LAB   

XBRL Taxonomy Label Linkbase Document.

 

101.DEF   

XBRL Taxonomy Extension Definition Linkbase Document.

 

 

 

 

 

 

 

 

 

44

 


 

 

 

SIGNATURE

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the R egistrant has duly caused this report to be signed on its behalf by the undersigned , thereunto duly authorized.

 

 

 

 

 

FRONTIER COMMUNICATIONS CORPORATION

 

(Registrant)

 

 

 

 

 

By:  /s/ Donald Daniels

 

Donald Daniels

 

Senior   Vice President and   Controller

 

(Principal Accounting Officer)

 

 

Date: November 5 , 201 5

 

 

 

 

 

 

 

45

 


Exhibit 4.1

EXECUTION VERSION

BASE INDENTURE

Dated as of

September 25, 2015

between

FRONTIER COMMUNICATIONS CORPORATION

as Company

and

THE BANK OF NEW YORK MELLON

as Trustee

__________________

DEBT SECURITIES

 

 


 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

Page

 

 

 

 

 

ARTICLE I

 

 

 

 

 

 

DEFINITIONS

 

 

 

 

 

 

Section 1.01

Definitions

 

Section 1.02

Other Definitions

22 

 

Section 1.03

Rules of Construction

23 

 

Section 1.04

Incorporation by Reference of the Trust Indenture Act

24 

 

 

 

 

 

ARTICLE II

 

 

 

 

 

 

FORMS OF SECURITIES

 

 

 

 

 

 

Section 2.01

Form Generally

24 

 

Section 2.02

Form of Trustee’s Certificate of Authentication

24 

 

Section 2.03

Form of Trustee’s Certificate of Authentication by an Authenticating Agent

24 

 

 

 

 

 

ARTICLE III

 

 

 

 

 

 

THE DEBT SECURITIES

 

 

 

 

 

 

Section 3.01

Amount Unlimited; Issuable in Series

25 

 

Section 3.02

Denominations

27 

 

Section 3.03

Execution, Authentication, Delivery and Dating

27 

 

Section 3.04

Temporary Securities

29 

 

Section 3.05

Registrar

30 

 

Section 3.06

Transfer and Exchange

30 

 

Section 3.07

Mutilated, Destroyed, Lost and Stolen Securities

31 

 

Section 3.08

Payment of Interest; Interest Rights Preserved

32 

 

Section 3.09

Cancellation

32 

 

Section 3.10

Computation of Interest

33 

 

Section 3.11

CUSIP Numbers

33 

 

 

 

 

 

ARTICLE IV

 

 

 

 

 

 

REDEMPTION OF SECURITIES

 

 

1

 


 

 

 

 

 

Section 4.01

Applicability of Right of Redemption

33 

 

Section 4.02

Selection of Securities to be Redeemed

33 

 

Section 4.03

Notice of Redemption

33 

 

Section 4.04

Deposit of Redemption Price

34 

 

Section 4.05

Securities Payable on Redemption Date

34 

 

Section 4.06

Securities Redeemed in Part

35 

 

Section 4.07

Offers to Repurchase by Application of Proceeds

35 

 

 

 

 

 

ARTICLE V

 

 

 

 

 

 

MERGER, CONSOLIDATION OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS

 

 

 

 

 

 

Section 5.01

Company May Consolidate, Etc., Only on Certain Terms

37 

 

Section 5.02

Successor Substituted

37 

 

Section 5.03

Documents to be Given to the Trustee

37 

 

 

 

 

 

ARTICLE VI

 

 

 

 

 

 

COVENANTS

 

 

 

 

 

 

Section 6.01

Payment of Principal, Premium, if Any, and Interest

38 

 

Section 6.02

Maintenance of Office or Agency

38 

 

Section 6.03

Money for Securities Payments To Be Held in Trust

38 

 

Section 6.04

Existence

39 

 

Section 6.05

Payment of Taxes

39 

 

Section 6.07

Statement by Officers as to Default

39 

 

Section 6.08

SEC Reports and Reports to Holders

40 

 

Section 6.09

Limitation on Restricted Payments

40 

 

Section 6.10

Limitation on Incurrence of Indebtedness

43 

 

Section 6.11

Limitation on Liens

47 

 

Section 6.12

Limitations on Transactions with Affiliates

47 

 

Section 6.13

Limitations on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

49 

 

Section 6.14

Repurchase of Securities upon a Change of Control Triggering Event

50 

 

Section 6.15

Asset Sales

51 

 

Section 6.16

Suspension of Covenants

53 

 

Section 6.17

Designation of Restricted and Unrestricted Subsidiaries

54 

 

 

 

 

 

ARTICLE VII

 

 

 

 

 

 

REMEDIES OF TRUSTEE AND SECURITYHOLDERS

 

 

 

 

 

 

Section 7.01

Events of Default

55 

 

2

 


 

Section 7.02

Acceleration of Maturity; Rescission and Annulment

56 

 

Section 7.03

Collection of Indebtedness by Trustee; Trustee May Prove Debt.

57 

 

Section 7.04

Application of Proceeds.

58 

 

Section 7.05

Suits for Enforcements.

59 

 

Section 7.06

Restoration of Rights on Abandonment of Proceedings.

59 

 

Section 7.07

Limitation on Suits by Noteholders.

59 

 

Section 7.08

Right of Securityholders To Institute Certain Suits.

60 

 

Section 7.09

Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default.

60 

 

Section 7.10

Control by Holders of Securities.

60 

 

Section 7.11

Waiver of Past Defaults.

60 

 

Section 7.12

Right of Court To Require Filing of Undertaking To Pay Costs.

61 

 

 

 

 

 

ARTICLE VIII

 

 

 

 

 

 

CONCERNING THE SECURITYHOLDERS

 

 

 

 

 

 

Section 8.01

Evidence of Action of Securityholders

61 

 

Section 8.02

Proof of Execution or Holding of Securities

61 

 

Section 8.03

Persons Deemed Owners

62 

 

Section 8.04

Effect of Consents

62 

 

 

 

 

 

ARTICLE IX

 

 

 

 

 

 

[RESERVED]

 

 

 

 

 

 

ARTICLE X

 

 

 

 

 

 

REPORTS BY THE TRUSTEE

 

 

AND SECURITYHOLDERS’ LISTS

 

 

 

 

 

 

Section 10.01

Reports by Trustee

62 

 

Section 10.02

Securityholders’ Lists

63 

 

 

 

 

 

ARTICLE XI

 

 

 

 

 

 

CONCERNING THE TRUSTEE

 

 

 

 

 

 

Section 11.01

Rights of Trustees; Compensation and Indemnity

63 

 

Section 11.02

Duties of Trustee

65 

 

Section 11.03

Notice of Defaults

66 

 

Section 11.04

Eligibility; Disqualification

66 

 

Section 11.05

Resignation and Notice; Removal

67 

 

Section 11.06

Successor Trustee by Appointment

67 

 

3

 


 

Section 11.07

Successor Trustee by Merger

68 

 

Section 11.08

Right to Rely on Officer’s Certificate

69 

 

Section 11.09

Appointment of Authenticating Agent

69 

 

Section 11.10

Communications by Securityholders with Other Securityholders

70 

 

Section 11.11

Not Responsible for Recitals of Issuance of Securities

70 

 

 

 

 

 

ARTICLE XII

 

 

 

 

 

 

SATISFACTION AND DISCHARGE; DEFEASANCE

 

 

 

 

 

 

Section 12.01

Applicability of Article

70 

 

Section 12.02

Satisfaction and Discharge of Indenture

70 

 

Section 12.03

Defeasance upon Deposit of Moneys or Government Securities

71 

 

Section 12.04

Repayment to Company

73 

 

Section 12.05

Indemnity for Government Securities

73 

 

Section 12.06

Deposits to Be Held in Escrow

73 

 

Section 12.07

Application of Trust Money

74 

 

 

 

 

 

ARTICLE XIII

 

 

 

 

 

 

IMMUNITY OF CERTAIN PERSONS

 

 

 

 

 

 

Section 13.01

No Personal Liability of Directors, Officers, Employees and Stockholders

74 

 

 

 

 

 

ARTICLE XIV

 

 

 

 

 

 

AMENDMENTS, SUPPLEMENTS AND WAIVERS

 

 

 

 

 

 

Section 14.01

Without Consent of Securityholders

74 

 

Section 14.02

With Consent of Securityholders; Limitations

75 

 

Section 14.03

Trustee Protected

76 

 

Section 14.04

Effect of Execution of Supplemental Indenture

77 

 

Section 14.05

Notation on or Exchange of Securities

77 

 

Section 14.06

Conformity with TIA

77 

 

 

 

 

 

ARTICLE XV

 

 

 

 

 

 

MISCELLANEOUS PROVISIONS

 

 

 

 

 

 

Section 15.01

Certificates and Opinions as to Conditions Precedent

77 

 

Section 15.02

Trust Indenture Act Controls

78 

 

Section 15.03

Notices to the Company and Trustee

78 

 

Section 15.04

Notices to Securityholders; Waiver

79 

 

4

 


 

Section 15.05

Legal Holiday

79 

 

Section 15.06

Effects of Headings and Table of Contents

79 

 

Section 15.07

Successors and Assigns

79 

 

Section 15.08

Severability

79 

 

Section 15.09

Benefits of Indenture

79 

 

Section 15.10

Counterparts

79 

 

Section 15.11

Governing Law; Waiver of Trial by Jury

80 

 

Section 15.12

Submission to Jurisdiction

80 

 

Section 15.13

U.S.A. PATRIOT Act

80 

 

Section 15.14

Force Majeure

80 

 

Section 15.15

No Adverse Interpretation of Other Agreements

80 

 

 

 

 

 

 

 

 

 

 

 

 

 

APPENDICES

 

 

 

Appendix A

Provisions Relating to Initial Securities and Exchange Securities

 

 

 

 

 

 

 

 

 

 

 

 

5

 


 

BASE INDENTURE, dated as of September 25, 2015, between Frontier Communications Corporation, a Delaware corporation (the “ Company ”), and The Bank of New York Mellon, as trustee (the “ Trustee ”).

WITNESSETH:

WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of debentures, notes, bonds or other evidences of indebtedness (the “ Securities ”) in an unlimited aggr e gate principal amount to be issued from time to time in one or more series as provided in this Indenture; and

WHEREAS, all things necessary to make this Indenture a valid and legally binding agreement of the Co m pany, in accordance with its terms, have been done.

NOW, THEREFORE:

In consideration of the premises and the purchase of the Securities by the Holders (as defined below) ther e of for the equal and proportionate benefit of all of the present and future Holders of the Securities, each party agrees and covenants as follows:

ARTICLE I

DEFINITIONS

         Section 1.01     Definitions

 

(a) Unless otherwise defined in this Indenture or the context otherwise requires, all terms used herein shall have the meanings assigned to them in the Trust Indenture Act.

(b) Unless the context otherwise requires, the terms defined in this Section 1.01(b) shall for all purposes of this Indenture have the meanings hereinafter set forth:

Acquired Indebtedness ” means, with respect to any specified Person,

(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Pe r son.

Additional Interest ” means all additional interest then owing pursuant to any applicable Registration Rights Agreement. For all purposes of this Indenture, the term “ interest ,” with respect to Securities of a series, shall include Additional Interest, if any, with respect to the Securities of such series.

 

Additional Notes ” with respect to a series of Securities shall have the meaning assigned to such term in the supplemental indenture, Company Order or Officer’s Certificate pursuant to which such series of Securities are issued.

Agent ” means any Registrar, Paying Agent or any Authenticating Agent or transfer agent.

Affiliate ” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause

 

 


 

the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

Applicable Amount ” means the sum of (A)(x) cumulative Consolidated EBITDA from and after October 1, 2015 to the most recently ended fiscal quarter for which internal financial statements are available preceding the date of the proposed action (for the avoidance of doubt, such cumulative Consolidated EBITDA shall include the Consolidated EBITDA for any such quarters, whether negative or positive) minus (y) 1.4 times Cumulative Interest Expense plus (without duplication) (B):

(1) 100% of the aggregate net cash proceeds, and the Fair Market Value of marketable sec u rities or other property or assets other than cash, received by the Company from the issue or sale (other than to a Subsidiary) of any class of Equity Interests in the Company after the Issue Date, other than (A) Di s qualified Stock, (B) Equity Interests to the extent the net cash proceeds therefrom are applied as provided for in clause (4) of Section 6.09(B) and (C) Refunding Capital Stock to the extent the net cash proceeds therefrom are applied as provided for in clause (2) of Section 6.09(B); plus

(2) 100% of any cash and the Fair Market Value of marketable securities or other property or assets other than cash received by the Company as a capital contribution from its shareholders subsequent to the Issue Date; plus

(3) 100% of the principal amount (or accreted amount (determined in accordance with GAAP), if less) of any Indebtedness, or the liquidation preference or maximum fixed repurchase price, as the case may be, of any Disqualified Stock, of the Company or any Restricted Subsidiary of the Company issued after the Issue Date (other than any such Indebtedness or Disqualified Stock to the extent issued to a Subsidiary of the Company), which has been converted into or exchanged for Equity Interests in the Co m pany (other than Disqualified Stock); plus

(4) to the extent not already included in Consolidated EBITDA, 100% of the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries since the Issue Date from Inves t ments, whether through interest payments, principal payments, returns, profits, distributions, income and similar amounts, dividends or other distributions and payments, or the sale or other disposition (other than to the Company or a Restricted Subsidiary of the Company) thereof made by the Company and its Restric t ed Subsidiaries; plus

(5) to the extent that any Unrestricted Subsidiary of the Company is redesignated as a R e stricted Subsidiary after the Escrow Release Date, the lesser of (i) the Fair Market Value of the Company’s Investment in such Subsidiary as of the date of such redesignation and (ii) such Fair Market Value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary.

less the amount of any Applicable Amount previously applied pursuant to clause (3)(B)(ii) of Section 6.09(B) and clause (l)(ii) of the definition of “Permitted Debt.”

 “ Asset Sale ” means

(1) the sale, conveyance, transfer or other disposition, whether in a single transaction or a s e ries of related transactions, of property or assets (including by way of a Sale and Lease-Back Transaction) of the Company or any Restricted Subsidiary (each referred to in this definition as a “disposition”) or

(2) the issuance or sale of Equity Interests of any Restricted Subsidiary (other than preferred stock issued pursuant to Section 6.10), whether in a single transaction or a series of related transactions, in each case, other than:

(a) a disposition of cash or Cash Equivalents, obsolete, uneconomical, surplus or worn out property or equipment, inventory or other assets;

2

 


 

(b) the disposition of all or substantially all of the assets of the Company and its R e stricted Subsidiaries in a manner permitted pursuant to the provisions described under Article V  or any disposition that constitutes a Change of Control pursuant to this Indenture;

(c) the making of any Restricted Payment or Permitted Investment that is permitted to be made under Section 6.09;

(d) any disposition of property or assets or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of related transactions with an aggregate Fair Market Value for any such transaction or series of related transactions not exceeding the greater of (x) $100.0 million and (y) 0.30% of Total Assets;

(e) any disposition of property or assets between or among the Company and its R e stricted Subsidiaries and any issuance of Equity Interests by a Restricted Subsidiary to the Co m pany or another Restricted Subsidiary of the Company;

(f) to the extent allowable under Section 1031 of the Code, any exchange of like property (excluding any boot thereon) for use in a Similar Business;

(g) the lease, assignment or sub-lease of any real or personal property in the ord i nary course of business and the license or sublicense of intellectual property or other general i n tangibles and licenses in the ordinary course of business;

(h) foreclosures on, or expropriations or condemnation of, assets and the settlement, release, waiver or surrender of contract, tort and other claims;

(i) any financing transaction with respect to property built, repaired, improved or acquired by the Company or any Subsidiary after the Escrow Release Date, including Sale and Lease-Back Transactions and asset securitizations, permitted by this Indenture;

(j) dispositions of accounts receivable in connection with the collection or co m promise thereof in the ordinary course of business;

(k) the granting of a Lien permitted under Section 6.11;

(l) contractual arrangements under long-term contracts with customers entered into by the Company and its Restricted Subsidiaries which are treated as sales for accounting purposes; provided that there is no transfer of title in connection with such contractual arrangement;

(m) any Plan Contribution; and

(n) additional dispositions of assets (taken together with all such dispositions made pursuant to this clause (n)) since the Escrow Release Date with an aggregate Fair Market Value not exceeding the greater of (x) $250.0 million and (y) 1.0% of Total Assets.

Bankruptcy Code ” means Title 11 of the United States Code.

Beneficial Owner ” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the E x change Act, except that in calculating the beneficial ownership of any particular “person” as such term is used in Section 13(d)(3) of the Exchange Act, such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is cu r rently exercisable or is exercisable only upon the occurrence of a subsequent condition.  The terms “ Beneficially Owns ,” “ Beneficially Owned ” and “ Beneficial Ownership ” have a corresponding meaning.

3

 


 

Board of Directors ” means, with respect to any Person, (i) in the case of any corporation, the board of d i rectors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the Board of Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing or, in each case, other than for purposes of the definitions of “Change of Control” and “Continuing Directors,” any duly authorized committee of such body.

Board Resolution ” means one or more resolutions, certified by the secretary or an assistant secretary of the Company to have been duly adopted or consented to by the Board of Directors and to be in full force and effect, and delivered to the Trustee.

Business Day ” means each day which is not a Legal Holiday.

Capital Lease Obligations ” means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.  The amount of Indebtedness will be the capitalized amount of the obligations determined in accordance with GAAP consistently applied.

Capital Stock ” means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all shares, interests, particip a tions, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership or membership inte r ests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

Cash Equivalents ” means:

(1) securities or obligations issued or unconditionally guaranteed by the United States go v ernment or any agency or instrumentality thereof, in each case having maturities of not more than 24 months from the date of acquisition thereof;

(2) securities or obligations issued by any state of the United States of America, or any poli t ical subdivision of any such state, or any public instrumentality thereof, having maturities of not more than 24 months from the date of acquisition thereof and, at the time of acquisition, having an investment grade rating generally obtainable from either S&P or Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, then from another nationally recognized rating service);

(3) commercial paper issued by any lender under the Senior Credit Facilities or any bank holding company owning any lender under the Senior Credit Facilities;

(4) commercial paper maturing no more than 12 months after the date of creation thereof and, at the time of acquisition, having a rating of at least A-2 or P-2 from either S&P or Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another n a tionally recognized rating service);

(5) domestic and LIBOR certificates of deposit or bankers’ acceptances maturing no more than two years after the date of acquisition thereof issued by any lender under the Senior Credit Facilities or any other bank having combined capital and surplus of not less than $250.0 million in the case of domestic banks and $100.0 million in the case of foreign banks;

4

 


 

(6) auction rate securities rated at least Aa3 by Moody’s and AA- by S&P (or, if at any time either S&P or Moody’s shall not be rating such obligations, an equivalent rating from another nationally recognized rating service);

(7) repurchase agreements with a term of not more than 30 days for underlying securities of the type described in clauses (1), (2) and (5) above entered into with any bank meeting the qualifications specified in clause (5) above or securities dealers of recognized national standing;

(8) repurchase obligations with respect to any security that is a direct obligation or fully guaranteed as to both credit and timeliness by the Government of the United States or any agency or i n strumentality thereof, the obligations of which are backed by the full faith and credit of the Government of the United States;

(9) marketable short-term money market and similar funds (x) either having assets in excess of $250.0 million or (y) having a rating of at least A-2 or P-2 from either S&P or Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationa l ly recognized rating service in the United States);

(10) shares of investment companies that are registered under the Investment Company Act of 1940 and 95% the investments of which are one or more of the types of securities described in clauses (1) through (9) above;

(11) any other investments used by the Company and its Subsidiaries as temporary inves t ments permitted by the Trustee in writing in its sole discretion; and

(12) in the case of investments by the Company or any Subsidiary organized or located in a j u risdiction other than the United States (or any political subdivision or territory thereof), or in the case of i n vestments made in a country outside the United States of America, other customarily utilized high-quality investments in the country where such Subsidiary is organized or located or in which such investment is made, all as reasonably determined in good faith by the Company.

 “ Change of Control ” means the occurrence of any of the following:

(1) the adoption of a plan relating to the liquidation or dissolution of the Company;

(2) any “person,” as such term is used in Section 13(d)(3) of the Exchange Act, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the voting power of the outstanding Voting Stock of the Company; provided that a transaction in which the Company becomes a Subsidiary of another Person shall not constitute a Change of Control if (a) the stockholders of the Company immediately prior to such transaction Beneficially Own, directly or indirectly through one or more intermediaries, 50% or more of the voting power of the Voting Stock of such other Person of whom the Company is then a Subsidiary and (b) immediately following such transaction no person (as defined above) other than such other Person, Beneficially Owns, directly or indirectly, more than 50% of the voting power of the Voting Stock of the Company; or

(3) the first day on which a majority of the members of the Board of Directors of the Co m pany are not Continuing Directors.

Change of Control Triggering Event ” means the occurrence of both a Change of Control and a Ratings Decline.

Code ” means the U.S. Internal Revenue Code of 1986, as amended.

Commodity Agreement ” means any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement.

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Company ” means the Person named as the “ Company ” in the recitals, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “ Company ” shall mean such su c cessor Person.

Company Order ” means a written request or order signed in the name of the Company by an Officer of the Company and delivered to the Trustee.

 “ Consolidated EBITDA ” means, with respect to the Company and its Restricted Subsidiaries on a consol i dated basis, for any period, the sum of (i) operating income for such period, plus (ii) to the extent resulting in redu c tions in such operating income for such period, (a) depreciation and amortization expense for such period and (b) the amount of non-cash charges for such period, plus (iii) charges for severance, restructuring and acquisition (including acquisition integration) costs, plus (iv) cost savings, operating expense reductions, other operating improvements and initiatives and synergies related to any Material Transaction that are (a) permitted under Regulation S-X pro m ulgated pursuant to the Securities Act or (b) projected by a financial Officer of the Company in good faith to be re a sonably anticipated to be realizable within eighteen (18) months of the date of such Material Transaction (which will be added to Consolidated EBITDA as so projected until fully realized, and calculated on a pro forma basis, as though such cost savings, operating expense reductions, other operating improvements and initiatives and synergies had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions; provided that with respect to this clause (iv)(b) such cost savings, operating expense reductions, other operating improvements and initiatives or synergies are reasonably identifiable and factually supportable (in the good faith determination of a financial Officer of the Company); provided ,   further , that, the aggregate amount of cost savings, operating expense reductions, other operating improvements and initiatives and synergies related to any Material Transaction added back pursuant to this clause (iv)(b) or the definition of Pro Forma Basis (that are not permitted under Regulation S-X promulgated pursuant to the Securities Act) in any period of four consecutive fiscal quarters shall not exceed 15% of Consolidated EBITDA with respect to add-backs in connection with Material Transactions other than the Verizon Acquisition and shall not exceed 20% of Consolidated EBITDA with respect to add-backs in connection with the Verizon Acquisition provided, for the avoidance of doubt, the aggregate amount of all such add-backs in any period of four consecutive fiscal quarters shall not exceed 20% of Consolidated EBITDA, in each case for this clause (iv)(b) calculated prior to giving effect to such add-backs added back pursuant to this clause (iv)(b) for such period, minus (v) to the extent resulting in increases in such operating income for such period, the non-cash gains for such period, all determined on a consolidated basis in accordance with GAAP.  For any per i od of calculation, “Consolidated EBITDA” shall be calculated on a Pro Forma Basis to give effect to any Material Transaction; provided ,   however , that solely for purposes of the calculation of the “Applicable Amount,” historical results of the entity, divisions or lines or assets so acquired will not be included for periods prior to the date such Material Transaction has been consummated.

Consolidated Interest Expense ” means, for any period, the cash interest expense (including that attribut a ble to Capital Lease Obligations in accordance with GAAP), net of cash interest income, of the Company and its Restricted Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of the Company and its Restricted Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and all income or costs under Swap Agreements (other than currency swap agreements, currency future or option contracts and other similar agreements unrelated to interest expense) and any cash dividends paid on any Disqualified Stock, but excluding any Additional Interest, amortization of deferred financing costs and any other amounts of noncash interest, all as calculated on a consolidated basis in accordance with GAAP and excluding, for avoidance of any doubt, any interest in respect of items excluded from Indebtedness in the proviso to the definition thereof; provided that, for purposes of Article V , there shall be included in determi n ing Consolidated Interest Expense for any period the cash interest expense (or income) of any acquired Person or business acquired during such period, based on the cash interest expense (or income) of such acquired Person or business for such period (including the portion thereof occurring prior to such acquisition or conversion) assuming any Indebtedness incurred or repaid in connection with any such acquisition or conversion had been incurred or r e paid on the first day of such period.  Notwithstanding the foregoing, if any lease or other liability is reclassified as Indebtedness or as a Capital Lease Obligation due to a change in accounting principles or the application thereof after the Issue Date, the interest component of all payments associated with such lease or other liability shall be e x cluded from Consolidated Interest Expense to the extent excluded prior to such change.  Consolidated Interest E x pense shall exclude all interest accrued on each series of Securities (whether or not paid) during the period from the Issue Date to, and including, the Escrow Release Date.

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Consolidated Total Indebtedness ” means, as of any date of determination, the aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries outstanding as of such date, in the amount and only to the extent that such Indebtedness would be reflected on a balance sheet prepared as of such date, on a consolida t ed basis in accordance with GAAP, minus the amount of the cash and Cash Equivalents of the Company and its R e stricted Subsidiaries in excess of $50,000,000 that would be reflected on such balance sheet.

Continuing Director ” means, as of any date of determination, any member of the Board of Directors of the Company who:

(1) was a member of such Board of Directors on the Issue Date; or

(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

Corporate Trust Office ,” means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of the execution of this instrument is located at 101 Barclay Street, 7W, New York, New York 10286, Attention:  Corporate Trust Division - Corporate Finance Unit, or such other address as the Trustee may designate from time to time by notice to the Company, or the princ i pal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Company).

 “ Credit Facilities ” means, with respect to the Company or any of its Restricted Subsidiaries, one or more debt facilities, including the Senior Credit Facilities, or commercial paper facilities, credit agreements, indentures or other agreements, in each case with banks or other institutional lenders, investors, purchasers, trustees or agents providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against receivables), letters of credit or other extensions of credit or other Indebtedness, including any notes, guarantees, collateral documents, instr u ments and agreements executed in connection therewith, and any amendments, waivers, supplements, modifications, extensions, renewals, restatements or refundings thereof and any agreement or instrument (and related documents) governing Indebtedness incurred to replace, refund, refinance or otherwise restructure all or any part of the loans, notes, other credit facilities, borrowings or commitments outstanding or permitted to be outstanding thereunder or any successor or replacement loans, notes, other credit facilities, borrowings or commitments outstanding or permi t ted to be outstanding thereunder, including any such replacement, refunding, refinancing or other restructuring faci l ity or indenture that increases the amount borrowable thereunder or alters the maturity thereof, in each case whether by the same or any other bank, institutional lender, investor, purchaser, trustee or agent or group thereof.

Cumulative Interest Expense ” means, in respect of any Restricted Payment, the sum of the aggregate amount of Consolidated Interest Expense of the Company and its Restricted Subsidiaries for the period from and after October 1, 2015, to the most recently ended fiscal quarter for which internal financial statements are available preceding the proposed Restricted Payment.

CUSIP ” means the identification number provided by the Committee on Uniform Securities Identification Procedures.

Currency Agreement ” means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement.

 “ Default ” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

Depository ” means, with respect to the Securities of any series issuable in whole or in part in the form of one or more Global Securities, the Person designated as Depository by the Company pursuant to Section 3.01 until a successor Depository shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “ Depository ” shall mean or include each Person who is then a Depository hereunder, and if at any time there is more

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than one such Person, “ Depository ” as used with respect to the Securities of any such series shall mean the Depos i tory with respect to the Securities of that series.  The “ Depository ” shall initially be DTC, its nominees and its su c cessors.

Designated Noncash Consideration ” means the Fair Market Value of noncash consideration received by the Company or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated No n cash Consideration pursuant to an Officer’s Certificate, setting forth the basis of such valuation, executed by a f i nancial or accounting Officer of the Company, less the amount of cash, Cash Equivalents or Replacement Assets received in connection with a subsequent sale of such Designated Noncash Consideration.

Disqualified Stock ” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is puttable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than for Capital Stock that is not Disqual i fied Stock), other than as a result of a change of control or asset sale, pursuant to a sinking fund obligation or othe r wise, or is redeemable at the option of the holder thereof (other than for Capital Stock that is not Disqualified Stock) other than as a result of a change of control or asset sale, in whole or in part, in each case prior to the date that is 91 days after the earlier of the maturity date of the applicable series of Securities or the date such Securities are no longer outstanding; provided ,   however , that if such Capital Stock is issued to any plan for the benefit of employees of the Company or its Restricted Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company or its Restricted Subsidiaries in order to satisfy applicable statutory or regulatory obligations.

 “ DTC ” means The Depository Trust Company.

Equity Interests ” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

Escrow Agreement ” means the escrow agreement among the Company, MUFG Union Bank, N.A., in its capacity as escrow agent, and The Bank of New York Mellon, as trustee, dated the date hereof.

Escrow Release Date ” means the date of the Release.

 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

 “ Exchange Securities ” means the Securities of any series issued pursuant to this Indenture in connection with a Registered Exchange Offer.

Existing Indebtedness ” means Indebtedness of the Company or its Restricted Subsidiaries in existence on the Issue Date, plus interest accruing thereon.

Fair Market Value ” means the price that would be paid in an arm’s length transaction between an i n formed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by (i) a responsible financial or accounting Officer of the Company with respect to valuations not in excess of $250.0 million and (ii) the Board of Directors of the Company with respect to valuations equal to or in excess of $250.0 million, whose determination, unless otherwise specified, shall be conclusive if ev i denced by a Board Resolution.

FCC ” means the United States Federal Communications Commission and any successor agency that is r e sponsible for regulating the United States telecommunications industry.

Fitch ” means Fitch Ratings, Inc., or any successor to its rating agency business.

 “ GAAP ” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and in the statements and

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pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, as in effect from time to time; provided ,   however , that if any operating lease would be recharacterized as a capital lease due to changes in the accounting treatment of such operating leases under GAAP since the Issue Date, then solely with respect to the accounting treatment of any such lease, GAAP shall be interpreted as it was in effect on the Issue Date.  All ratios and comput a tions contained or referred to in each Indenture shall be computed in conformity with GAAP applied on a consistent basis.

Global Security ” means a Security in the form established pursuant to Section 3.01 or 3.03 evidencing all or part of a series of Securities, issued to the Depository for such series or its nominee, and registered in the name of such Depository or nominee.

Governmental Authority ” means any federal, state, provincial, local or foreign court or tribunal or go v ernmental agency, authority, instrumentality or regulatory or legislative body.

Government Securities ” means securities that are

(1) direct obligations of the United States of America for the timely 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 instrume n tality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or r e deemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government S e curities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such 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 d e pository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository r e ceipt.

guarantee ” means any obligation, contingent or otherwise, of any Person directly or indirectly guarante e ing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the pu r chase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm’s-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the o b ligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “guarantee” shall not include endorsements for collection or deposit in the ord i nary course of business.  The term “guarantee” used as a verb has a corresponding meaning.

Holder ,” “ Holder of Securities ,” or “ Securityholder ” mean the Person in whose name Securities are regi s tered in the Register.

incur ” means, with respect to any Indebtedness, to incur, create, issue, assume, guarantee or otherwise b e come liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such I n debtedness; provided that (1) any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary will be deemed to be incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsid i ary and (2) neither the accrual of interest nor the accretion or amortization of original issue discount nor the payment of interest or dividend in the form of additional Indebtedness shall be considered an incurrence of Indebtedness.

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Indebtedness ” means, with respect to any Person at any date of determination (without duplication):

(1) all indebtedness of such Person for borrowed money;

(2) all obligations of such Person evidenced by bonds, debentures, notes or other similar i n struments;

(3) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto, but excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations entered into in the ordinary course of bus i ness of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the fifth Business Day following receipt by such Person of a d e mand for reimbursement);

(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than one year after the date of placing such property in se r vice or taking delivery and title thereto or the completion of such services, except Trade Payables;

(5) all Capital Lease Obligations of such Person;

(6) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the Fair Market Value of such asset at such date of determination and (B) the amount of such Indebtedness;

(7) all Indebtedness of other Persons guaranteed by such Person to the extent such Indebte d ness is guaranteed by such Person;

(8) to the extent not otherwise included in this definition, obligations under Interest Rate Agreements, Commodity Agreements and Currency Agreements, except for Interest Rate Agreements, Commodity Agreements and Currency Agreements entered into for the purpose of fixing, hedging or swapping interest rate, commodity price or foreign currency exchange rate risk; and

(9) all Disqualified Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any.

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability u p on the occurrence of the contingency giving rise to the obligation, provided :

(A) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original i s sue discount of such Indebtedness at such time as determined in conformity with GAAP;

(B) that money borrowed and set aside at the time of the incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be “Indebtedness” so long as such money is held to secure the payment of such interest; and

(C) that Indebtedness shall not include:

(I) any liability for federal, state, local or other taxes;

(II) workers’ compensation claims, self-insurance obligations, performance, surety, appeal and similar bonds and completion guarantees provided in the ordinary course of business;

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(III) obligations arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of bus i ness, provided that such Indebtedness is extinguished within five business days of its incurrence; or

(IV) any Indebtedness defeased or called for redemption.

Notwithstanding the foregoing, in connection with the purchase by a Person or any of its Restricted Subsi d iaries of any business, the term “Indebtedness” will exclude indemnification or post-closing payment adjustments or earn-out or similar obligations to which the seller may become entitled to the extent such payment is determined by a final closing balance sheet, working capital calculation or other similar method or such payment depends on the performance of such business after the closing; provided ,   however , that, at the time of closing, the amount of any such payment is not determinable or is of a contingent nature and, to the extent such payment thereafter becomes fixed and finally determined, the amount is paid within 60 days thereafter. For the avoidance of doubt, no Indebte d ness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of a Person sol e ly by virtue of being unsecured or by virtue of being secured on a junior priority basis.

Indenture ” means, with respect to any s eries of Securities , this instrument , as amended or supplemented from time to time in respect of such s eries of Securities and will include the form and terms of such s eries of Secur i ties established in accordance with Section 3.01 . For the avoidance of doubt, for purposes of determining the rights of Holders of any s eries of Securities , and the terms applicable to such s eries of Securities , references herein to “this Indenture” shall mean the Indenture with respect to such s eries .

 

Interest Payment Date ” means, with respect to any Security, the Stated Maturity of an installment of interest on such Security .

 

Interest Rate Agreement ” means any interest rate protection agreement, interest rate future agreement, i n terest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement.

 “ Investment Grade Rating ” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s, BBB- (or the equivalent) by S&P and BBB- (or the equivalent) by Fitch, or an equivalent rating by any other Rating Agency.

Investments ” means, with respect to any Person, all investments by such Person in other Persons (inclu d ing Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit, advances to customers, commission, travel and similar advances to officers and employees, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebte d ness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of the Company in the same manner as the other inves t ments included in this definition to the extent such transactions involve the transfer of cash or other property.

ISIN ” means the International Securities Identification Number.

Issue Date ” means, with respect to any Security, the date on which such Security is first issued under this Indenture.

Legal Holiday ” means a Saturday, a Sunday or a day on which banking institutions in New York City are authorized or required by law to remain closed.

Lien ” means, with respect to any property or assets, including Capital Stock, any mortgage or deed of trust, pledge, lien, hypothecation, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof).

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Mandatory Redemption ” with respect to a series of Securities shall have the meaning assigned to such term in the supplemental indenture, Company Order or Officer’s Certificate pursuant to which such series of Secur i ties are issued.

Material Transaction ” means any acquisition or disposition outside the ordinary course of business of any property or assets that (x) constitute assets comprising all or substantially all of an operating unit of a business or equity interests of a Person representing a majority of the ordinary voting power or economic interests in such Pe r son that are represented by all its outstanding capital stock and (y) involves aggregate consideration in excess of $50.0 million.

Maturity ” means, with respect to any Security, the date on which the principal of such Security, or any installment of principal, shall become due and payable as therein and herein provided, whether at the Stated Maturity or by declaration, call for redemption or otherwise.

Moody’s ” means Moody’s Investors Service, Inc. and any successor to its rating agency business.

Nationally Recognized Independent Financial Advisor ” means an accounting, appraisal, investment ban k ing firm or consultant of nationally recognized standing that is, in the good faith judgment of the Company, qual i fied to perform the task for which it has been engaged.

Net Proceeds ” means, with respect to any Asset Sale, (a) the gross cash proceeds (including payments from time to time in respect of installment obligations, if applicable) received by or on behalf of the Company or any of its Restricted Subsidiaries in respect of such Asset Sale less (b) the sum of:

(1) the amount, if any, of all Taxes paid or estimated to be payable by the Company or any of its Restricted Subsidiaries in connection with such Asset Sale;

(2) the amount of any reasonable reserve established in accordance with GAAP against any liabilities (other than any Taxes deducted pursuant to clause (1) above) (x) associated with the assets that are the subject of such Asset Sale and (y) retained by the Company or any of its Restricted Subsidiaries; provided that the amount of any subsequent reduction of such reserve (other than in connection with a payment in respect of any such liability) shall be deemed to be Net Proceeds of such an Asset Sale occu r ring on the date of such reduction;

(3) the amount of any Indebtedness (other than Indebtedness described in clause (1) of the second paragraph of Section 6.15(a)) secured by a Lien on the assets that are the subject of such Asset Sale to the extent that the instrument creating or evidencing such Indebtedness requires that such Indebtedness be repaid upon consummation of such Asset Sale; and

(4) reasonable and customary fees, commissions, expenses, issuance costs, discounts and other costs paid by the Company or any of its Restricted Subsidiaries, as applicable, in connection with such Asset Sale (other than those payable to the Company or any Subsidiary of the Company), in each case only to the extent not already deducted in arriving at the amount of gross cash proceeds referred to in clause (a) above.

Obligations ” means any principal, interest, penalties, fees, indemnifications, reimbursements (including reimbursement obligations with respect to letters of credit and banker’s acceptances), damages and other liabilities, and guarantees of payment of such principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness.

Offering Memorandum ” means, (i) with respect to the Securities of the series issued as of the date hereof, the offering memorandum dated September 11, 2015 and (ii) with respect to any other series of Securities issued under this Indenture, the final offering document relating to such series of Securities.

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Officer ” means the chairman of the Board of Directors, the chief executive officer, the president, the chief financial officer, any vice president, the treasurer, any assistant treasurer, the controller, any assistant controller, the secretary or any assistant secretary of such Person in accordance with the applicable provisions of this Indenture.

Officer’s Certificate ” means a certificate signed by an Officer of the Company that meets the requirements set forth in this Indenture and is delivered to the Trustee.

Opinion of Counsel ” means a written opinion from legal counsel, who may be an employee of or counsel to the Company or the Trustee.  Such opinion may refer to prior Opinions of Counsel, may contain customary a s sumptions, qualifications and exceptions and, with respect to factual matters, may reasonably rely on an Officer’s Certificate of the Company or certificates of public officials.

Original Issue Discount Security ” means any Security that is issued with “original issue discount” within the meaning of Section 1273(a) of the Code and the regulations thereunder and any other Security designated by the Company as issued with original issue discount for United States federal income tax purposes.

Outstanding ” means, when used with respect to Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:

(1) Securities theretofore canceled by the Paying Agent or delivered to the Paying Agent for cancellation;

(2) Securities or portions thereof for which payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities or Securities as to which the Company’s Obligations have been Discharged; provided ,   however , that if such Securities or portions thereof are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture; and

(3) Securities that have been paid pursuant to Section 3.07(b) or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to a Responsible Officer of the Trustee proof satisfactory to it that such Securities are held by a protected purchaser in whose hands such Securities are valid obligations of the Company;

(4) Securities to which defeasance has been effected pursuant to Section 12.03;

provided ,   however , that in determining whether the Holders of the requisite principal amount of Securities of a series Outstanding have performed any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) hereunder, Securities owned by the Company or any other obl i gor upon the Securities of such series or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding unless the Company, such Affiliate or such other obligor owns all of such Secur i ties, except that, in determining whether the Trustee shall be protected in relying upon any such action, only Secur i ties of such series for which the Trustee has received written notice to be so owned shall be so disregarded.  Secur i ties so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes its right to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon such Securities or any Affiliate of the Company or of such other obligor.  Upon request of the Trustee, the Company shall furnish to the Trustee promptly an Officer’s Certificate listing and identifying all such Securities, if any, known by the Company to be owned or held by or for the account of any of the above described Persons; and, subject to the provisions of Section 10.01, the Trustee shall be entitled to accept such Officer’s Certificate as conclusive evidence of the facts therein set forth and of the fact that all such Securities not listed therein are Outstanding for the purpose of any such determination.  In determining whether the Holders of the requisite principal amount of Outstanding Securities of a series have performed any action hereunder, the principal amount of an Original Issue Discount Sec u rity that shall be deemed to be Outstanding for such purpose shall be the amount of the principal thereof that would

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be due and payable as of the date of such determination upon a declaration of acceleration of the Maturity thereof pursuant to Section 7.02.

Pari Passu Indebtedness ” means with respect to any Person:

(1) Indebtedness of such Person, whether outstanding on the Escrow Release Date or therea f ter incurred; and

(2) all other Obligations of such Person (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person whether or not post-filing interest is allowed in such proceeding) in respect of Indebtedness described in clause (1) above

unless, in the case of clauses (1) and (2), in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such Indebtedness or other Obligations are subordinate in right of payment to the Securities of any series, as the case may be; provided ,   however , that Pari Passu Indebtedness shall not include:

(A) any obligation of such Person to the Company or any Restricted Subsidiary;

(B) any liability for Federal, state, local or other taxes owed or owing by such Person; or

(C) any accounts payable or other liability to trade creditors arising in the ordinary course of business.

 “ Paying Agent ” means any Person authorized by the Company to pay the principal of, premium, if any, i n terest or Additional Interest, if any, on any Securities on behalf of the Company.  The Company may act as Paying Agent with respect to Securities of any series issued hereunder.

Permitted Asset Swap ” means the concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and cash or Cash Equivalents between the Company or any of its R e stricted Subsidiaries and another Person.

Permitted Investments ” means:

(1) any Investment in the Company or any of its Restricted Subsidiaries;

(2) any Investment in cash and Cash Equivalents;

(3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person that is engaged in a Similar Business if as a result of such Investment, such Person, in one transaction or a series of related transactions, (i) becomes a Restricted Subsidiary of the Company or (ii) is merged, conso l idated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company and, in each case, any Investment held by such Person; provided that, with respect to clause (ii), such Investment was not acquired by such Person in contemplation of such merger, consolidation, amalgamation, transfer, conveyance or liquidation;

(4) any Investment in securities or other assets not constituting cash or Cash Equivalents and received in connection with an Asset Sale made pursuant to the provisions of Section 6.15 or any other di s position of assets not constituting an Asset Sale;

(5) any Investment existing on the Issue Date;

(6) any Investment acquired by the Company or any of its Restricted Subsidiaries:

(a) in compromise or resolution of any other Investment or obligations owed to the Company or any such Restricted Subsidiary, including in connection with or as a result of a ban k

14

 


 

ruptcy, workout, reorganization or recapitalization of any trade creditor or customer or in satisfa c tion of litigation, arbitration or other disputes; or

(b) as a result of a foreclosure by the Company or any Restricted Subsidiary with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

and, in each case, any Investment held by such Person;

(7) Swap Obligations permitted under Section 6.10(B)(j)(x);

(8) Investments the payment for which consists of Equity Interests of the Company, or any of its direct or indirect parent companies (exclusive of Disqualified Stock); provided ,   however , that such Equ i ty Interests will not increase the amount available for Restricted Payments under the calculation set forth in the definition of “Applicable Amount”;

(9) guarantees of Indebtedness permitted under Section 6.10;

(10) any transaction to the extent it constitutes an investment that is permitted and made in a c cordance with the provisions of Section 6.12(B) (except transactions described in clauses (ii) and (iv) of Section 6.12(B));

(11) Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment;

(12) if no Default or Event of Default has occurred and is continuing, additional Investments having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (12), not to exceed since the Escrow Release Date the greater of $750.0 million and 2.5% of Total Assets at the time of such Investments (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(13) advances to employees not in excess of $25.0 million outstanding at any one time, in the aggregate;

(14) loans and advances to officers, directors and employees for business-related travel e x penses, moving expenses and other similar expenses, in each case incurred in the ordinary course of bus i ness;

(15) receivables owing to the Company or any Restricted Subsidiary of the Company if crea t ed or acquired in the ordinary course of business and payable or dischargeable in accordance with custo m ary trade terms (which trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances), and other Investments to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers’ compensation, performance and other similar deposits made in the ordinary course of business by the Company or any Restricted Subsidiary;

(16) deposits or payments made with the FCC in connection with the auction or licensing of any permit, license, authorization, plan, directive, consent, permission, consent order or consent decree of or from any Governmental Authority (“ Governmental Authorizations ”); and

(17) any Plan Contribution.

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Permitted Liens ” means, with respect to any Person:

(1) Liens securing Indebtedness and other obligations permitted to be incurred pursuant to clause (a) of the definition of “Permitted Debt”;

(2) Liens existing on the Issue Date;

(3) Liens on property that exist when the Company or any of its Restricted Subsidiaries a c quires the property; provided that such Liens were not incurred in contemplation of such acquisition;

(4) Liens securing Indebtedness that any Restricted Subsidiary of the Company owes to the Company or to any other Restricted Subsidiary of the Company;

(5) Liens on property, shares of stock or Indebtedness of any entity that exists when (a) it b e comes a Restricted Subsidiary of the Company, (b) it is merged into or consolidated with the Company or any of its Restricted Subsidiaries, or (c) the Company or any of its Restricted Subsidiaries acquires all or substantially all of the assets of the entity, provided that no such Lien extends to any other property of the Company or any of its Restricted Subsidiaries;

(6) Liens securing Indebtedness and other obligations permitted to be incurred pursuant to Section 6.10(B)(d), (j), and (m)(iii), covering only the assets referred to therein;

(7) Liens securing (a) nondelinquent performance of bids or contracts (other than for bo r rowed money, obtaining of advances or credit or the securing of debt), (b) contingent obligations on surety and appeal bonds, (c) utility obligations, and (d) other similar nondelinquent obligations, in each case i n curred in the ordinary course of business;

(8) Liens securing purchase money Indebtedness or Capital Lease Obligations, provided that (a) any such Lien attaches to the property within 270 days after the acquisition thereof and (b) such Lien a t taches solely to the property so acquired;

(9) (i) Liens arising solely by virtue of any statutory or common law provision relating to banker’s Liens, rights of set-off or similar rights and remedies as to deposit account or other funds, provi d ed that such deposit account is not a dedicated cash collateral account and is not subject to restrictions against the Company’s access in excess of those set forth by regulations promulgated by the Federal R e serve Board and such deposit account is not intended by the Company to provide collateral to the deposit o ry institution and (ii) Liens, deposits (including deposits with the FCC) or pledges to secure the perfo r mance of bids, tenders, trade governmental contracts, leases, licenses, statutory obligations or other similar obligations incurred in the ordinary course of business;

(10) pledges or deposits under worker’s compensation laws, unemployment insurance laws or similar legislation;

(11) statutory Liens and Liens for taxes, assessments or other governmental charges for sums not yet due or delinquent or which are being contested or appealed in good faith by appropriate procee d ings;

(12) Liens arising solely by operation of law and in the ordinary course of business, such as mechanics’, materialmen’s, warehousemen’s and carriers’ Liens and Liens of landlords or of mortgages of landlords on fixtures and movable property located on premises leased in the ordinary course of business;

(13) Liens on personal property (other than shares or debt of the Company’s Restricted Su b sidiaries) securing loans maturing in not more than one year or on accounts receivables in connection with a receivables financing program;

16

 


 

(14) Liens securing financings in amounts up to the value of assets, businesses and properties acquired after the Escrow Release Date; or any Lien upon any property to secure all or part of the cost of construction thereof or to secure debt incurred prior to, at the time of, or within twelve months after co m pletion of such construction or the commencement of full operations thereof (whichever is later), to provide funds for such purpose;

(15) easements, rights of way, restrictions, title defects, survey title exceptions and other e n cumbrances incurred which, in the aggregate, do not materially interfere with the ordinary conduct of bus i ness;

(16) Liens securing Indebtedness of the Company or any Restricted Subsidiary to the Rural Electrification Administration or the Rural Utilities Service (or any successor to any such agency) in an a g gregate principal amount outstanding at any time not to exceed $50.0 million;

(17) Liens on trusts, cash or Cash Equivalents or other funds in connection with the defe a sance (whether by covenant or legal defeasance), discharge or redemption of Indebtedness, pending co n summation of a strategic transaction, or similar obligations; provided that such defeasance, discharge or r e demption is otherwise permitted by this Indenture;

(18) Liens of the Company or any Restricted Subsidiary of the Company with respect to obl i gations that do not exceed the greater of $100.0 million and 0.5% of Total Assets at any one time outstan d ing;

(19) Liens to secure any Refinancing Indebtedness permitted to be incurred under this Inde n ture; provided ,   however , that (i) the new Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to such property or proceeds or distributions thereof); and (ii) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount or, if greater, committed amount, of the Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refun d ing, extension, renewal or replacement; and

(20) extensions, renewals or replacement of any of the Liens described in clauses (1) through (19) above, if limited to all or any part of the same property securing the original Lien.

In the event that a Permitted Lien meets the criteria of more than one of the types of Permitted Liens (at the time of incurrence or at a later date), the Company in its sole discretion may divide, classify or from time to time reclassify all or any portion of such Permitted Lien in any manner that complies with this definition and such Pe r mitted Lien shall be treated as having been made pursuant only to the clause or clauses of the definition of “Permi t ted Liens” to which such Permitted Lien has been classified or reclassified.

Person ” means any individual, corporation, limited liability company, partnership, joint venture, associ a tion, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

Plan Contribution ” means the contribution of real property to the Company’s defined benefit pension plan (or any successor plan) in existence on the Issue Date in lieu of or in conjunction with cash contributions to such pension plan, including by way of a Sale and Lease-Back Transaction, in a manner consistent with past practice.

Pro Forma Basis ” means, as of any date, that such calculation shall give pro forma effect to all Material Transactions (and the application of the proceeds from any such asset sale or related debt incurrence or repayment) that have occurred during the relevant calculation period and during the period immediately following the end of such period and prior to or simultaneously with the event for which the calculation is made, including pro forma adjustments arising out of events which are attributable to a Material Transaction, including giving effect to those specified in accordance with the definition of “Consolidated EBITDA,” in each case as in good faith determined by

17

 


 

a financial Officer of the Company, using historical financial statements of all entities, divisions or lines or assets so acquired or sold and the consolidated financial statements of the Company and/or any of its Restricted Subsidiaries, calculated as if such Material Transaction, and all other Material Transactions that have been consummated during the relevant period, and any Indebtedness incurred or repaid in connection therewith, had been consummated (and the change in Consolidated EBITDA resulting therefrom realized) and incurred or repaid at the beginning of such period.

Whenever pro forma effect is to be given to a Material Transaction, the pro forma calculations shall be made in good faith by a financial Officer of the Company (including adjustments for costs and charges arising out of or related to the Material Transaction and projected cost savings, operating expense reductions, other operating i m provements and initiatives and synergies resulting from such Material Transaction that have been or are reasonably anticipated to be realizable, net of the amount of actual benefits realized during such test period from such actions), and any such adjustments included in the initial pro forma calculations shall continue to apply to subsequent calcul a tions (including during any subsequent periods in which the effects thereof are reasonably expected to be realizable); provided that (i) no amounts shall be added pursuant to this paragraph to the extent duplicative of any amounts that are otherwise added back in computing Consolidated EBITDA for such period and (ii) the amount of cost savings, operating expense reductions, other operating improvements and initiatives and synergies that are not in accordance with Regulation S-X promulgated pursuant to the Securities Act shall be subject to the last proviso in clause (iv)(b) of the definition of “Consolidated EBITDA.”

Rating Agency ” means Moody’s, S&P and Fitch or if Moody’s, S&P and/or Fitch shall not make a rating on the Securities of any series (or the applicable security) publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company (in the case of the Securities of such series, as ce r tified by a Board Resolution) which shall be substituted for Moody’s, S&P and/or Fitch, as the case may be.

Ratings Decline ” means the occurrence of the following on, or within 90 days after, the date of the public notice of the occurrence of a Change of Control or of the intention by the Company or any third-party to effect a Change of Control (which period shall be extended so long as the rating of the Securities of the applicable series is under publicly announced consideration for possible downgrade by any of the Rating Agencies):  (1) in the event that the Securities of such series have an Investment Grade Rating by at least two Rating Agencies, such Securities cease to have an Investment Grade Rating by any of such Rating Agencies, or (2) in any other event, the rating of the Securities of such series by any of the Rating Agencies decreases by one or more gradations (including grad a tions within ratings categories as well as between rating categories) or is withdrawn.

Record Date ” means, with respect to any interest payable on any Security on any Interest Payment Date, the close of business on such date specified in such Security for the payment of interest and Additional Interest, if any, pursuant to Section 3.01.

Redemption Date ” means, when used with respect to any Security to be redeemed, in whole or in part, the date fixed for such redemption by or pursuant to this Indenture and the terms of such Security.

Redemption Price ” means, when used with respect to any Security to be redeemed or repurchased, in whole or in part, the price at which it is to be redeemed pursuant to the terms of the Security and this Indenture.

  Registered Exchange Offer ” means the offer by the Company, pursuant to the applicable Registration Rights Agreement, to certain holders of initial Securities described therein, to issue and deliver to such holders, in exchange for such initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act.

Registration Rights Agreement ” means, with respect to the issuance of Securities of any s eries issued in a transaction exempt from the registration requirements of the Securities Act, the registration rights agreement, if any, among the Company and the initial purchasers of such s eries of Securities .

 

Related Business Assets ” means assets (other than cash or Cash Equivalents) used or useful in a Similar Business, provided that any assets received by the Company or a Restricted Subsidiary in exchange for assets tran s ferred by the Company or a Restricted Subsidiary shall not be deemed to be Related Business Assets if they consist

18

 


 

of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restric t ed Subsidiary of the Company.

Release ”   with respect to the escrowed proceeds of a series of Securities shall have the meaning assigned to such term in the supplemental indenture, Company Order or Officer’s Certificate pursuant to which such series of Securities are issued .

Replacement Assets ” means (1) non-current assets (including any such assets acquired by capital expend i tures) that shall be used or useful in a Similar Business or (2) substantially all the assets of a Similar Business or a majority of the Voting Stock of any Person engaged in a Similar Business that shall become on the date of acquis i tion thereof a Restricted Subsidiary of the Company.

Responsible Officer ” means, with respect to the Trustee, any officer assigned to the Corporate Trust Div i sion - Corporate Finance Unit (or any successor division or unit) of the Trustee located at the Corporate Trust Office of the Trustee, who shall have direct responsibility for the administration of this Indenture, and for the purposes of Section 11.02(c)(i) and the second sentence of Section 11.03 shall also include any other officer of the Trustee to whom any corporate trust matter is referred because of such officer’s knowledge of and familiarity with the partic u lar subject .

Restricted Investment ” means an Investment other than a Permitted Investment.

Restricted Subsidiary ” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

Revolving Credit Agreement ” means the Credit Agreement dated as of June 2, 2014 by and among the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto, as amended, waived, supplemented, modified, extended, renewed, restated, replaced, refunded or restructured from time to time.

S&P ” means Standard & Poor’s Ratings Group, Inc., a division of the McGraw-Hill Companies, Inc., or any successor to its rating agency business.

Sale and Lease-Back Transaction ” means any arrangement with any Person providing for the leasing by the Company or any Restricted Subsidiary of any real or tangible personal property, which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such lea s ing.

SEC ” means the U.S. Securities and Exchange Commission.

Secured Indebtedness ” means any Indebtedness secured by a Lien on property or assets of the Company or any of its Restricted Subsidiaries.

Secured Leverage Ratio ” means (without duplication), as of any date of determination, the ratio of (a) the sum of (x) Indebtedness of the Company and its Restricted Subsidiaries that would be included in the definition of “Consolidated Total Indebtedness” that is secured by a Lien on property or assets of the Company or any of its R e stricted Subsidiaries as of the last day of the relevant Test Period after giving effect to all incurrences and repa y ments of Secured Indebtedness from the end of such Test Period to the date of determination (net of unrestricted and unencumbered cash and Cash Equivalents of the Company and its Restricted Subsidiaries as of such date and calc u lated as if any Credit Facilities constituting revolving credit facilities were fully drawn on such date) and (y) Indeb t edness of the Company’s Restricted Subsidiaries incurred pursuant to Section 6.10(B)(p)(2) outstanding as of the last day of the relevant Test Period after giving effect to all incurrences and repayments of such Indebtedness from the end of such Test Period to the date of determination to (b) Consolidated EBITDA for such Test Period.

 “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

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Security ” or “ Securities ” means any security or securities, as the case may be, duly authenticated by the Trustee and delivered under this Indenture.

Security Custodian ” means the custodian with respect to any Global Security appointed by the Depository, or any successor Person thereto, and shall initially be The Bank of New York Mellon.

Senior Credit Facilities ” means (i) the Term Loan Agreement, (ii) the Revolving Credit Agreement, (iii) the Credit Agreement dated as of October 14, 2011 by and among the Company, CoBank, ACB, as administrative agent, and the lenders from time to time party thereto and (iv) the Credit Agreements dated as of June 2, 2014 by and among the Company, CoBank, ACB, as administrative agent, and the lenders from time to time party thereto, in each case, including any guarantees, collateral documents, instruments and other agreements executed in connection therewith, and any amendments, waivers, supplements, modifications, extensions, renewals, restatements, replac e ments, refundings or other restructuring thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that replace, refund, refinance or otherwise restructure all or any part of the loans, notes, letters of credit, other credit facilities or commitments thereunder or any successor or replacement loans, notes, letters of credit, other credit facilities or commitments thereunder, including any such r e placement, refunding, refinancing or other restructuring facility or indenture that increases the amount borrowable or other credit extendable thereunder, alters the maturity thereof or alters the parties thereto.

s eries ” or “ s eries of Securities ” means each series of debentures, notes or other debt instruments of the Company created pursuant to Sections 2.01 and 3.01 hereof.

Significant Subsidiary ” means any Restricted Subsidiary that would be a “significant subsidiary” as d e fined in Article 1, Rule 1-02 (w)(1) or (2) of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the Issue Date.

Similar Business ” means any business conducted or proposed to be conducted by the Company and its Restricted Subsidiaries on the Escrow Release Date or any business that is similar, reasonably related, incidental or ancillary thereto.

Stated Maturity ” means, when used with respect to any Security or any installment of principal thereof or interest thereon, the date specified in such Security as the fixed date on which the principal (or any portion thereof) of or premium, if any, on such Security or such installment of principal or interest is due and payable.

Subordinated Indebtedness ” means any Indebtedness of the Company which is by its terms subordinated in right of payment to the Securities of a series.

Subsidiary ”   means, with respect to any Person,

(1) any corporation, association, or other business entity (other than a partnership, joint ve n ture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the ele c tion of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and

(2) any partnership, joint venture, limited liability company or similar entity of which (x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and (y) such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

Swap Agreement ” means any agreement with respect to any swap, forward, future or derivative transa c tion or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities,

20

 


 

equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no pha n tom stock or similar plan providing for payments only on account of services provided by current or former dire c tors, officers, employees or consultants of the Company or any of its Subsidiaries shall be a Swap Agreement.

Swap Obligations ” means obligations under or with respect to Swap Agreements.

Tax ” means any tax, duty, levy, impost, assessment or other governmental charge (including penalties, i n terest and any other liabilities related thereto).

Term Loan Agreement ” means the Credit Agreement dated as of August 12, 2015 by and among the Company, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the lenders from time to time party thereto, as administrative agent, and the lenders from time to time party thereto, as amended, waived, supplemented, modified, extended, renewed, restated, replaced, refunded or restructured from time to time (as fu r ther described in the definition of “Senior Credit Facilities”).

Test Period ” means, on any date of determination, the period of four consecutive fiscal quarters of the Company then most recently ended (taken as one accounting period) for which internal financial statements are available.

Total Assets ” means the total assets of the Company and its Restricted Subsidiaries, as shown on the most recent consolidated balance sheet of the Company and its Restricted Subsidiaries provided to the Trustee and Hol d ers, in conformity with GAAP (on a pro forma basis to give effect to any acquisition or disposition on or prior to the date of determination).

Total Leverage Ratio ” means, as of any date of determination, the ratio of (a) Consolidated Total Indeb t edness as of the last day of the relevant Test Period after giving effect to all incurrences and repayments of Indeb t edness from the end of such Test Period to such date of determination to (b) Consolidated EBITDA for such Test Period.

Trade Payables ” means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by such Person or any of its Subsidiaries ari s ing in the ordinary course of business in connection with the acquisition of goods or services.

Trust Indenture Act ” or “ TIA ” means the Trust Indenture Act of 1939, as amended.

Trustee ” means the Person named as the “ Trustee ” in the first paragraph of this Indenture until a successor Trustee shall have become such with respect to one or more series of Securities pursuant to the applicable provisions of this Indenture, and thereafter “ Trustee ” shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, “ Trustee ” as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series.

 “ Unrestricted Subsidiary ” means any Subsidiary of the Company that is designated as an Unrestricted Su b sidiary pursuant to a Board Resolution, but only to the extent that:

(1) except as permitted by Section 6.12, such Subsidiary is not party to any agreement, co n tract, arrangement or understanding with the Company or any of its Restricted Subsidiaries unless the terms of such agreement, contract, arrangement or understanding are, taken as a whole, no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;

(2) such Subsidiary does not hold any Liens on any property of the Company or any of its other Restricted Subsidiaries; and

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(3) such Subsidiary has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries, except to the extent that such guarantee or credit support would be released upon such designation.

U.S. Dollars ” means such currency of the United States as at the time of payment shall be legal tender for the payment of public and private debts.

United States ” shall mean the United States of America (including the States and the District of Columbia), its territories and its possessions and other areas subject to its jurisdiction .

 

 “ Verizon Acquisition ” means the Company’s acquisition of, among other things, Verizon Communications Inc.’s wireline business and statewide fiber networks that provide services to residential, commercial and wholesale customers in California, Texas and Florida, along with certain of Verizon Communications Inc.’s FIOS customers in those states, pursuant to the Verizon Purchase Agreement.

 “ Verizon Purchase Agreement ” means the securities purchase agreement, dated as of February 5, 2015, as amended, between the Company and Verizon Communications Inc. to acquire, among other things, Verizon Co m munications Inc.’s wireline business and statewide fiber networks that provide services to residential, commercial and wholesale customers in California, Texas and Florida, along with certain of Verizon Communications, Inc.’s FIOS customers in those states.

Voting Stock ” of any Person as of any date means the Capital Stock of such Person that is at the time ent i tled to vote in the election of the Board of Directors of such Person.

Weighted Average Life to Maturity ” means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (i) the amount of each then remai n ing installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse b e tween such date and the making of such payment; by (b) the then outstanding principal amount of such Indebte d ness.

Wholly-Owned Subsidiary ” of any Person means a Subsidiary of such Person, 100% of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

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               Section 1.02     Other Definitions .

 

 

 

 

Term

 

 

Defined
in Section

Acceptable Commitment

  

 

6.15 

Affiliate Transaction

  

 

6.12 

Agent Members

  

 

Appendix A

Applicable Procedures

  

 

Appendix A

Asset Sale Offer

  

 

6.15(a)

Authenticating Agent

 

 

11.09 

Base Indenture

  

 

Appendix A

Change of Control Offer

  

 

6.14 

Change of Control Payment Date

  

 

6.14 

Change of Control Payment

  

 

6.14 

Covenant Defeasance

  

 

12.03(c)

Covenant Suspension Event

  

 

6.16 

Defaulted Interest

 

 

3.08(b)

Definitive Note

  

 

Appendix A

Discharged

 

 

12.03(b)

Distribution Compliance Period

  

 

Appendix A

Event of Default

  

 

7.01 

Excess Proceeds

  

 

6.15(a)

Initial Notes

  

 

Appendix A

Initial Purchasers

  

 

Appendix A

Legal Defeasance

  

 

12.03(b)

Member

 

 

3.03(h)

Notes Custodian

  

 

Appendix A

Offer Amount

  

 

4.07(b)

Offer Period

  

 

4.07(b)

Permitted Debt

  

 

6.10 

Place of Payment

 

 

3.01(f)

Purchase Date

  

 

4.07(b)

Purchase Period

  

 

4.07(b)

QIB

  

 

Appendix A

Refinancing Indebtedness

 

 

6.10(B)(l)

Refunding Capital Stock”

 

 

6.09(B)(2)

Register

  

 

3.05 

Registrar

  

 

3.05 

Registration Statement

  

 

Appendix A

Regulation S

  

 

Appendix A

Regulation S Global Note

  

 

Appendix A

Replacement Commitment

 

 

6.15(a)

Rule 144A

  

 

Appendix A

Rule 144A Global Note

  

 

Appendix A

Rule 144A Notes

  

 

Appendix A

Restricted Payment

  

 

6.09 

Reversion Date

 

 

6.16 

Special Record Date

 

 

3.08(b)(i)

“successor”

 

 

5.01(A)(i)

“Suspended Covenants”

 

 

6.16 

“Suspended Date”

 

 

6.16 

“Suspension Period”

 

 

6.16 

Transfer Restricted Notes

  

 

Appendix A

 

 

             Section 1.03     Rules of Construction .   For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

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(a) the words “ herein ,” “ hereof ” and “ hereunder ” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;

(b) the words “ including ” and words of similar import when used in this Indenture shall mean “including, without limitation”;

(c) references to “ Article ” or “ Section ” or other subdivision herein are references to an Art i cle, Section or other subdivision of this Indenture, unless the context otherwise requires; and

(d) references to any agreement, instrument, statute or regulation defined or referred to her e in or in any instrument establishing the terms of any Securities (or executed in connection therewith) are references to such agreement, instrument, statute or regulation as from time to time amended, modified, supplemented or replaced, including (in the case of agreements or instruments) by waiver or consent and by succession of comparable successor agreements, instruments, statutes or regulations;

(e) or ” is not exclusive;

(f) words in the singular include the plural, and in the plural include the singular; and

(g) will ” shall be interpreted to express a command;

             Section 1.04     Incorporation by Reference of the Trust Indenture Act .  Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.

 

ARTICLE II

FORMS OF SECURITIES

              Section 2.01     Form Generally .

 

(a) The Securities of each series shall be established pursuant to a Company Order, Officer’s Ce r tificate or in one or more indentures supplemental hereto, in each case, with such appropriate insertions, omi s sions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regul a tion of any securities exchange on which any series of the Securities may be listed or of any automated quotation system on which any such series may be quoted, or to conform to usage, all as determined by the officers execu t ing such Securities as conclusively evidenced by their execution of such Securities. The Securities may differ b e tween series in respect of any matters, but otherwise all series of Securities are equally and ratably entitled the benefits of this Indenture.

(b) The terms and provisions of the Securities shall constitute, and are hereby expressly made, a part of this Indenture, and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture expressly agree to such terms and provisions and to be bound thereby.  However, to the extent any provision of any Security conflicts with the express provisions of this Indenture, the provisions of this Inde n ture shall govern and be controlling.

             Section 2.02     Form of Trustee’s Certificate of Authentication .

 

(a) Only such of the Securities as shall bear thereon a certificate substantially in the form of the Trustee’s certificate of authentication hereinafter recited, executed by the Trustee by manual signature,

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shall be valid or become obligatory for any purpose or entitle the Holder thereof to any right or benefit under this Indenture.

(b) Each Security shall be dated the date of its authentication.

(c) The form of the Trustee’s certificate of authentication to be borne by the Securities shall be substantially as follows:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

Date of authentication:                                      [NAME OF TRUSTEE],
                                                                                        as Trustee

By:   _______________________________________
       Authorized Signatory

               Section 2.03     Form of Trustee’s Certificate of Authentication by an Authenticating Agent .     If at any time there shall be an Authenticating Agent appointed with respect to any series of Securities, then the Trustee’s certif i cate of authentication by such Authenticating Agent to be borne by Securities of each such series shall be substa n tially as follows:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities issued referred to in the within-mentioned Indenture.

Date of auth entication:                                        [NAME OF TRUSTEE],
                                                                                        as Trustee

By: [NAME OF AUTHENTICATING AGENT]

as Authenticating Agent

By:   ___________________________________
       Authorized Signatory

ARTICLE III

THE DEBT SECURITIES

              Section 3.01     Amount Unlimited; Issuable in Series The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.  The Securities may be issued from time to time in one or more series.  There shall be set forth in a Company Order, Officer’s Certificate or in one or more i n dentures supplemental hereto, prior to the issuance of Securities of any series:

 

(a) the title of the Securities of the series (which shall distinguish the Securities of such s e ries from the Securities of all other series, except to the extent that additional Securities of an existing series are being issued);

(b) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Section 3.04, 3.06, 3.07, 4.06, or 14.05) and the percentage or percentages of principal amount at which the Securities of the series will be issued;

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(c) the dates on which or periods during which the Securities of the series may be issued, and the dates on, or the range of dates within, which the principal of and premium, if any, on the Securities of such series are or may be payable or the method by which such date or dates shall be determined or exten d ed;

(d) the rate or rates (which may be fixed or variable) per annum, at which the Securities of the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue, or the method by which such date or dates shall be dete r mined, the Interest Payment Dates on which any such interest shall be payable, and the Record Dates for the determination of Holders to whom interest is payable on such Interest Payment Dates or the method by which such date or dates shall be determined, the right, if any, to extend or defer interest payments and the duration of such extension or deferral;

(e) if the amount of payment of principal of, premium, if any, interest or Additional Interest, if any, on, the Securities of the series may be determined with reference to an index, formula or other method, the manner in which such amounts shall be determined;

(f) the place or places, if any, in addition to or instead of the Corporate Trust Office of the Trustee where the principal of, premium, if any, and interest and Additional Interest, if any, on Securities of the series shall be payable, and where Securities of any series may be presented for registration of transfer, exchange or conversion, and the place or places where notices and demands to or upon the Company in r e spect of the Securities of such series may be made (each such place, the “ Place of Payment ”);

(g) if applicable, the price or prices at which, the period or periods within which or the date or dates on which, and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company, if the Company is to have that option;

(h) the obligation or right, if any, of the Company to redeem, purchase or repay Securities of the series at the option of a Holder thereof and the price or prices at which, the period or periods within which or the date or dates on which, the terms and conditions upon which Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such right or obligation;

(i) if other than denominations of $2,000 and multiples of $1,000 in excess thereof, the d e nominations in which Securities of the series shall be issuable;

(j) if other than the principal amount thereof, the portion of the principal amount of the S e curities of the series which shall be payable upon declaration of acceleration of the Maturity thereof purs u ant to Section 7.02;

(k) whether the Securities of the series are to be issued as Original Issue Discount Securities and the amount of discount or premium, if any, with which such Securities may be issued;

(l) provisions, if any, for the defeasance of Securities of the series in whole or in part and any addition or change in the provisions related to satisfaction and discharge;

(m) whether the terms and provisions set forth in Appendix A of this Indenture apply to the Securities of such series (and, unless so specified, such terms and provisions shall not apply to Securities of such series) ;

(n) the date as of which any Global Security of the series shall be dated if other than the ori g inal issuance of the first Security of the series to be issued;

(o) the form of the Securities of the series;

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(p) whether the Securities of the series are subject to subordination and the terms of such subordination;

(q) whether the Securities of the series shall be secured;

(r) the securities exchange(s) or automated quotation system(s) on which the Securities of the series will be listed or admitted to trading, as applicable, if any;

(s) any restriction or condition on the transferability of the Securities of the series;

(t) any addition or change in the provisions related to compensation and reimbursement of the Trustee which applies to the Securities of the series;

(u) any addition or change in the provisions related to supplemental indentures set forth in Sections 14.01, 14.02 and 14.04 which applies to the Securities of the series;

(v) provisions, if any, granting special rights to Holders upon the occurrence of specified events;

(w) any addition to or change in the Events of Default which applies to any Securities of the series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 7.02 and any addition or change in the prov i sions set forth in Article VII which applies to Securities of the series;

(x) any addition to or change in the covenants set forth in Article VI or V which applies to the Securities of the series; and

(y) any other terms of the Securities of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 14.01, but which may modify or delete any provision of this Indenture insofar as it applies to such series), including any terms which may be required by or advisable under the laws of the United States or regulations thereunder or advisable (as determined by the Company) in connection with the marketing of Securities of the series.

All Securities of any one series shall be substantially identical, except as to denomination and except as may otherwise be provided herein or set forth in a Company Order, Officer’s Certificate or in one or more inde n tures supplemental hereto; provided that, if additional Securities of an existing series are issued, such additional S e curities shall not have the same CUSIP, ISIN or other identifying number unless such additional Securities are fu n gible with the existing Securities of such series for U.S. federal income tax purposes.

             Section 3.02     Denominations In the absence of any specification pursuant to Section 3.01 with respect to Securities of any series, the Securities of such series shall be issuable only as Securities in denominations of $2,000 and multiples of $1,000 in excess thereof, and shall be payable only in U.S. Dollars.

 

              Section 3.03     Execution, Authentication, Delivery and Dating .

 

(a) The Securities shall be executed in the name and on behalf of the Company by an Officer.  Such signatures may be the manual signature of the present or any future such Officer.  If the Person whose si g nature is on a Security no longer holds that office at the time the Security is authenticated and delivered, the S e curity shall nevertheless be valid.

(b) At any time and from time to time after the execution and delivery of this Indenture, the Co m pany may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities and, if required pursuant to Section 3.01, a supplemental indenture, Company Order or Officer’s Certificate setting forth the terms of the Securities of a series.  The Trustee shall thereupon authenticate and deliver such Securities without any further action by

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the Company.  The Company Order shall specify the principal amount of Securities to be authenticated and the date on which the original issue of Securities is to be authenticated.

(c) In authenticating the first Securities of any series and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall receive, and (subject to Section 11.02) shall be fully protected in relying upon, an Officer’s Certificate, prepared in accordance with Section 15.01 stating that the conditions precedent, if any, provided for in this Indenture have been complied with, and an Opinion of Counsel, prepared in accordance with Section 15.01 and substantially in the form set forth below:

(i) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws of general applicability relating to or affecting the enforcement of creditors’ rights, (B) general equitable principles (whether considered in a proceeding in equity or at law) and (C) an i m plied covenant of good faith and fair dealing;

(ii) if applicable, that the supplemental indenture, setting forth the terms of such Sec u rities, when executed and delivered by the Trustee in the manner and subject to any conditions spec i fied in such Opinion of Counsel, will constitute a valid and legally binding obligation of the Comp a ny, enforceable in accordance with its terms, subject to (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws of general applicability relating to or affecting the enforcement of creditors’ rights, (B) general equitable principles (whether considered in a pr o ceeding in equity or at law) and (C) an implied covenant of good faith and fair dealing; and

(iii) that all conditions precedent, if any, provided for in this Indenture in respect of the authentication and delivery by the Company of such Securities have been complied with.

Notwithstanding the provisions of the preceding paragraph, if all Securities of a series are not to be orig i nally issued at one time, it shall not be necessary to deliver the Officer’s Certificate or Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the authentication of each Security of such series if such Officer’s Certificate or Opinion of Counsel is delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued; provided that nothing in this clause (c) is intended to derogate the Trustee’s rights to receive an Officer’s Certificate and Opinion of Counsel under Section 15.01.

(d) The Trustee shall have the right to decline to authenticate and deliver the Securities under this Section 3.03 if the issue of the Securities pursuant to this Indenture will affect the Trustee’s own rights, duties or immunities under the Securities and this Indenture or otherwise.

(e) Each Security shall be dated the date of its authentication.

(f) If the Company shall establish pursuant to Section 3.01 that the Securities of a series are to be issued in whole or in part in the form of one or more Global Securities, then the Company shall execute and the Trustee shall authenticate and deliver one or more Global Securities that (i) shall represent an aggregate amount equal to the aggregate principal amount of the Outstanding Securities of such series to be represented by such Global Securities, (ii) shall be registered, if in registered form, in the name of the Depository for such Global S e curity or Securities or the nominee of such Depository, (iii) shall be delivered by the Trustee to such Depository or pursuant to such Depository’s instruction and (iv) shall bear a legend substantially to the following effect:

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSIT O RY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS

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REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

 

[[FOR REGULATION S GLOBAL NOTE ONLY] UNTIL 40 DAYS AFTER THE LATER OF COMMENCEMENT OR COMPLETION OF THE OFFERING, AN OFFER OR SALE OF SECURITIES WITHIN THE UNITED STATES BY A DEALER (AS DEFINED IN THE SECURITIES ACT) MAY VIOLATE THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IF SUCH OFFER OR SALE IS MADE OTHERWISE THAN IN ACCORDANCE WITH RULE 144A THEREUNDER.]

 

The aggregate principal amount of each Global Security may from time to time be increased or decreased by adjustments made on the records of the Security Custodian, as provided in this Indenture.

(g) Each Depository designated pursuant to Section 3.01 for a Global Security in registered form must, at the time of its designation an d at all times while it serves as such Depository, be a clearing agency regi s tered under the Exchange Act and any other applicable statute or regulation.

(h) Members of, or participants in, the Depository (“ Members ”) shall have no rights under this I n denture with respect to any Global Security held on their behalf by the Depository or by the Security Custodian under such Global Security, and the Depository may be treated by the Company, the Trustee, the Paying Agent and the Registrar and any of their agents as the absolute owner of such Global Security for all purposes whats o ever.  Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, the Paying Agent or the Registrar or any of their agents from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Members, the operation of customary practices of the Depository governing the exercise of the rights of an owner of a beneficial interest in any Global Security.  The Holder of a Global Security may grant proxies and otherwise authorize any Person, including Members and Persons that may hold interests through Members, to take any action that a Holder is entitled to take under this Indenture or the Securities.

(i) No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in one of the forms provided for herein duly executed by the Trustee or an Authenticating Agent by manual signature of an autho r ized signatory of the Trustee or the Authenticating Agent, as the case may be, and such certificate upon any S e curity shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture.  Notwithstanding the foregoing, if any Sec u rity shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.09, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.

             Section 3.04     Temporary Securities .

 

(a) Pending the preparation of definitive Securities of any series, the Company may execute and, upon receipt of a Company Order, the Trustee shall authenticate and deliver, temporary Securities that are prin t ed, lithographed, typewritten, mimeographed or otherwise reproduced, in any authorized denomination, substa n tially of the tenor of the definitive Securities in lieu of which they are issued, in registered form and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such temporary S e curities may determine, as conclusively evidenced by their execution of such temporary Securities.  Any such temporary Security may be in global form, representing all or a portion of the Outstanding Securities of such s e ries.  Every such temporary Security shall be executed by the Company and shall be authenticated and delivered

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by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Security or Securities in lieu of which it is issued.

(b) If temporary Securities of any series are issued, the Company shall cause definitive Securities of such series to be prepared without unreasonable delay.  After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of such temporary Securities at the office or agency maintained by the Company in a Place of Payment for such pu r poses provided in Section 6.02, without charge to the Holder.  Upon surrender for cancellation of any one or more temporary Securities of any series, the Company shall execute and the Trustee shall authenticate and deliver in e x change therefor a like principal amount of definitive Securities of the same series of authorized denominations and of like tenor.  Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series.

Upon any exchange of a portion of a temporary Global Security for a definitive Global Security or for the individual Securities represented thereby pursuant to this Section 3.04 or Section 3.06, the temporary Glo b al Security shall be endorsed by the Trustee to reflect the reduction of the principal amount evidenced thereby, whereupon the principal amount of such temporary Global Security shall be reduced for all pu r poses by the amount so exchanged and endorsed.

             Section 3.05     Registrar .

 

(a) The Company shall keep, at an office or agency to be maintained by it in a Place of Payment where Securities may be presented for registration or presented and surrendered for registration of transfer or of exchange, and where Securities of any series that are convertible or exchangeable may be surrendered for co n version or exchange, as applicable (the “ Registrar ”), a security register for the registration and the registration of transfer or of exchange of the Securities (the registers maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the “ Register ”), as in this Indenture provided, which Register shall be open for inspection by the Trustee during business hours on business days in the location of the Registrar.  Such Register shall be in written form or in any other form cap a ble of being converted into written form within a reasonable time.  The Company may have one or more co-Registrars; the term “ Registrar ” includes any co- R egistrar.

(b) The Company shall enter into an appropriate agency agreement with any Registrar or co-Registrar not a party to this Indenture.  The agreement shall implement the provisions of this Indenture that relate to such agent.  The Company shall notify the Trustee of the name and address of each such agent.  If the Company fails to maintain a Registrar for any series, the Trustee shall act as such.  The Company or any Affiliate thereof may act as Registrar, co-Registrar or transfer agent.

(c) The Company hereby initially appoints The Bank of New York Mellon at its Corporate Trust O f fice as Registrar in connection with the Securities and this Indenture, until such time as another Person is appointed as such in replacement of the Trustee as such.  So long as the Trustee serves as Registrar, it will be entitled as Regi s trar to the same rights of compensation, reimbursement and indemnification under Section 11.01 as if it were Tru s tee.  No Person shall at any time be appointed as or act as Registrar unless such Person is at such time empowered under applicable law to act as such Registrar.

             Section 3.06     Transfer and Exchange .

 

(a) When Securities of a series are pres ented to the Registrar or a co-R egistrar with a request to register a transfer or to exchange them for an equal principal amount of Securities of the same series of other d e nominations, the Registrar will register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar’s request. A Holder may transfer or exchange Securities o n ly in accordance with this Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents. No service charge shall be made for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge pa y

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able in connection therewith (other than any such transfer tax or similar governmental charge payable upon e x changes pursuant to Sections 3.04 or 4.02).

(b ) Neither the Company nor the Registrar will be required (a) to issue, register the transfer or pu r chase of, or exchange Securities of any series for the period beginning at the opening of business 15 days immed i ately preceding the sending of a notice of redemption of Securities of that series selected for redemption and ending at the close of business on the day such notice is sent or (b) to issue, register the transfer or purchase of, or exchange Securities of any series selected for redemption.

 

(c ) Neither the Trustee nor any Agent shall have any obligation or duty to monitor, determine or i n quire as to compliance with any restrictions on transfer or exchange imposed under this Indenture or under applic a ble law with respect to any transfer or exchange of any interest in any Security (including any transfers between or among participants or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

(d ) Neither the Trustee nor any Agent shall have any responsibility or obligation with respect to the accuracy of the records of the Depository or its nominee or any Members, with respect to any ownership interest in the Securities or with respect to the delivery to any Members, Beneficial Owner or other Person (other than the D e pository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Note). The rights of Beneficial Owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its Members and any Beneficial Owners.  The Trustee and the Agents shall be entitled to deal with the Deposit o ry, and any nominee thereof, that is the registered holder of any Global Note for all purposes of this Indenture rela t ing to such Global Note (including the payment of principal, premium, if any, and interest and additional amounts, if any, and the giving of instructions or directions by or to the owner or holder of a beneficial ownership interest in such Global Security) as the sole holder of such Global Note and shall have no obligations to the Beneficial Owners thereof.  None of the Trustee or any Agent shall have any responsibility or liability for any acts or omissions of the Depository with respect to such Global Note, for the records of any such depositary, including records in respect of beneficial ownership interests in respect of any such Global Note, for any transactions between the Depository and any Members or between or among the Depository, any such Members and/or any holder or owner of a beneficial interest in such Global Note, or for any transfers of beneficial interests in any such Global Note.

(e ) Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, any Agent or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authoriz a tion furnished by the Depository or impair, as between the Depository and any M ember, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Note.

             Section 3.07     Mutilated, Destroyed, Lost and Stolen Securities .

 

(a) If (i) any mutilated Security is surrendered to the Trustee at its Corporate Trust Office or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee security or indemnity satisfactory to them to save each of them and any Paying Agent harmless, and neither the Company nor the Trustee receives notice that such Security has been acquired by a protected purchaser, then the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Security, a new Security of the same series and of like tenor, form, terms and principal amount, bearing a number not conte m poraneously Outstanding, and neither gain nor loss in interest shall result from such exchange or substitution.

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(b) In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay the amount due on such Security in accordance with its terms.

(c) Upon the issuance of any new Security under this Section 3.07, the Company may require the payment of a sum sufficient to cover any Tax or other governmental charge that may be imposed in respect thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith.

(d) Every new Security of any series issued pursuant to this Section 3.07 shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder.

(e) The provisions of this Section 3.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

              Section 3.08     Payment of Interest; Interest Rights Preserved .

 

(a) Interest on any Security which is payable, and is paid or provided for, on any Interest Payment Date shall be paid to the Person in whose name such Security is registered at the close of business on the Record Date for such interest notwithstanding the cancellation of such Security upon any transfer or exchange subsequent to the Record Date.  Payment of interest and Additional Interest, if any, on Securities shall be made at the Corporate Trust Office or in accordance with the applicable procedures of the Depository (except as otherwise specified purs u ant to Section 3.01) or, at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear in the Register or, in accordance with arrangements satisfactory to the Trustee, by wire transfer to an account designated by the Holder.

(b) If the Company defaults in a payment of any interest or Additional Interest, if any, on any Security (“ Defaulted Interest ”), then such Defaulted Interest shall forthwith cease to be payable to the Holder on the relevant Record Date by virtue of his, her or its having been such a Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (i) or (ii) of this Section 3.08(b):

(i) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names such Securities are registered at the close of business on a special record date for the payment of such Defaulted Interest (a “ Special Record Date ”), which shall be fixed in the following manner.  The Company shall notify the Trustee in writing of the amount of Defaulted Interest pr o posed to be paid on each such Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount pr o posed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provi d ed.  Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Inte r est which shall be not more than 15 calendar days and not less than 10 calendar days prior to the date of the proposed payment and not less than 10 calendar days after the receipt by the Trustee of the n o tice of the proposed payment.  The Trustee shall promptly notify the Company of such Special Re c ord Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given to each Holder of Securities of such series, not less than 10 calendar days prior to such Special Record Date.  Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been given as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Securities are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (ii).

(ii) The Company may make payment of any Defaulted Interest on Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed or of any automated quotation system on which any such Securities may be

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quoted, and upon such notice as may be required by such exchange or quotation system, as applic a ble, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

(c) Subject to the foregoing provisions in this Section 3.08, each Security delivered under this Inde n ture in exchange or substitution for, or upon registration of transfer of, any other Security shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.

              Section 3.09     Cancellation     Unless otherwise specified pursuant to Section 3.01 for Securities of any series, all Securities surrendered for payment, redemption, registration of transfer or exchange or otherwise shall, if surrendered to any Person other than the Paying Agent, be delivered to the Paying Agent for cancellation and shall be promptly canceled by it and, if surrendered to the Paying Agent, shall be promptly canceled by it.  The Company may at any time deliver to the Paying Agent for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and may deliver to the Paying Agent for cancellation any Securities previously authenticated hereunder that the Company has not issued or sold, and all S e curities so delivered shall be promptly canceled by the Paying Agent.  No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Inde n ture.  The Paying Agent shall dispose of all canceled Securities held by it in accordance with its then customary pr o cedures, unless otherwise directed by a Company Order, and deliver a certificate of such disposal to the Company upon its request therefor.  The acquisition of any Securities by the Company shall not operate as a redemption or satisfaction of the Indebtedness represented thereby unless and until such Securities are surrendered to the Paying Agent for cancellation.

 

             Section 3.10     Computation of Interest     Except as otherwise specified pursuant to Section 3.01 for Sec u rities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year consis t ing of twelve 30-day months.

 

             Section 3.11     CUSIP Numbers The Company in issuing any Securities may use CUSIP, ISIN or other similar numbers, if then generally in use, and thereafter with respect to such series, the Trustee may use such nu m bers in any notice of redemption or exchange, as a convenience to Holders, with respect to such series; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other ident i fication numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omi s sion of such numbers.  The Company shall promptly notify the Trustee and the Agents of any change in the CUSIP, ISIN or other similar numbers.

 

ARTICLE I V


REDEMPTION OF SECURITIES

            

             Section 4.01     Applicability of Right of Redemption   Redemption of Securities permitted by the terms of any series of Securities shall be made (except as otherwise specified pursuant to Section 3.01 for Securities of any series) in accordance with this Article IV; provided ,   however , that if any such terms of a series of Securities shall conflict with any provision of this Article IV, the terms of such series shall govern.

 

             Section 4.02     Selection of Securities to be Redeemed .

 

(a) If less than all of the Securities in any series are to be redeemed, the Securities for redemption will be selected as follows:  (i) if such Securities are listed on a national securities exchange, in compliance with the r e quirements of such securities exchange; or (ii) on a pro rata basis (subject to the procedures of the Depository) or, to the extent a pro rata basis is not permitted, in such manner as the Trustee   shall deem to be fair and appropriate; pr o vided that, in each case, no Securities of $2,000 or less shall be purchased or redeemed in part.  In any case where more than one Security of such series is registered in the same name, the Trustee may treat the aggregate principal amount so registered as if it were represented by one Security of such series.

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(b) For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security that has been or is to be redeemed. If the Company shall so direct, Securities registered in the name of the Company, any Affiliate or any Subsidiary thereof shall not be included in the Securities selected for redemption.

             Section 4.03     Notice of Redemption .

 

(a) Notice of redemption shall be given by the Company or, at the Company’s request, by the Trustee in the name and at the expense of the Company, not less than 30 calendar days (or such shorter period as is specif i cally provided for solely in respect of a Mandatory Redemption) nor more than 60 calendar days prior to the appl i cable Redemption Date, to the Holders of Securities of any series to be redeemed in whole or in part pursuant to this Article IV, in the manner provided in Section 15.04.  Any notice given in the manner herein provided shall be co n clusively presumed to have been duly given, whether or not the Holder receives such notice.  Failure to give such notice, or any defect in such notice to the Holder of any Security of a series designated for redemption, in whole or in part, shall not affect the sufficiency of any notice of redemption with respect to the Holder of any other Security of such series.

(b) All notices of redemption shall identify the Securities to be redeemed (including CUSIP, ISIN or other similar numbers, if available) and shall state:

(i) such election by the Company to redeem Securities of such series pursuant to provisions contained in this Indenture or the terms of the Securities of such series in a Company Order, Officer’s Certificate or a supplemental indenture establishing such series, if such be the case;

(ii) the Redemption Date and whether the redemption is contingent upon any transa c tion or event and, if such redemption is subject to the satisfaction of one or more conditions prec e dent, such notice shall describe each such condition, and if applicable, shall state that, in the Comp a ny’s discretion, the Redemption Date may be delayed until such time as any or all such conditions shall be satisfied or waived, or such redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied or waived by the Redemption Date, or by the Redemption Date as so delayed;

(iii) the Redemption Price (or, if not then ascertainable, the manner in which the R e demption Price will be calculated);

(iv) if less than all Outstanding Securities of any series are to be redeemed, the identif i cation and the principal amounts of the Securities of such series to be redeemed;

(v) that on the Redemption Date the Redemption Price shall become due and payable upon each such Security, or the portion thereof, to be redeemed, and that, if applicable, interest thereon shall cease to accrue on and after said date;

(vi) the Place or Places of Payment where such Securities are to be surrendered for payment of the Redemption Price;

(vii) the name and address of the Paying Agent;

(viii) the paragraph of the Securities of any series pursuant to which the Securities of such series are to be redeemed;

(ix) the CUSIP and/or ISIN number, if any;

(x) that no representation is made as to the correctness or accuracy of the CUSIP, ISIN or other similar number, if any, listed in such notice or printed on the Securities; and

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(xi) any other information as may be required by the terms of the particular series or the Securities of a series being redeemed.

             Section 4.04     Deposit of Redemption Price .     On or prior to 10:00 a.m., New York City time, on each R e demption Date for any Securities, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 5.03) an amount of money in U.S. Dollars (except as provided pursuant to Section 3.01) sufficient to pay the Redemption Price of, and accrued and unpaid interest and Additional Interest, if any, on, such Securities or any portions thereof that are to be redeemed on that date.  The Paying Agent shall not be bound to make any payment until it has received in immed i ately available and cleared funds the full amount due to be paid to it pursuant to this Section 4.04.  The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption of and accrued and unpaid interest and Additional Interest, if any, on all Securities to be redeemed.

 

              Section 4.05     Securities Payable on Redemption Date   If notice of redemption has been given as provi d ed in Section 4.03 hereof, any Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price  and from and after such date (unless the Company shall Default in the payment of the R e demption Price and accrued and unpaid interest and Additional Interest, if any) such Securities shall cease to bear interest, and, except as provided in Section 12.03, such Securities shall cease from and after the Redemption Date to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the Redemption Price thereof and accrued and unpaid interest and Add i tional Interest, if any, to the Redemption Date.  Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Trustee or Paying Agent with the moneys deposited in accor d ance with Section 4.04 at the Redemption Price (unless the Company shall Default in the payment of the Redem p tion Price and accrued and unpaid interest and Additional Interest, if any); provided ,   however , that (unless otherwise provided pursuant to Section 3.01) installments of interest that have a Stated Maturity on or prior to the Redemption Date for such Securities shall be payable according to the terms of such Securities and the provisions of Section 3.08. If the Redemption Date is on or after a Record Date and on or before the related Interest Payment Date, the accrued and unpaid interest and Additional Interest, if any, will be paid to the person in whose name the Security of a series is registered at the close of business on such Record Date.

 

If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the princ i pal (and premium, if any) thereof shall, until paid or duly provided for, bear interest from the Redemption Date at the rate prescribed therefor in the Security.

              Section 4.06     Securities Redeemed in Part   Any Security that is to be redeemed only in part shall be surrendered at the Corporate Trust Office or such other office or agency of the Company as is specified pursuant to Section 3.01 with, if the Company, the Registrar or the Trustee so requires, due endorsement by, or a written instr u ment of transfer in form satisfactory to the Company, the Registrar and the Trustee duly executed by the Holder thereof or his, her or its attorney duly authorized in writing, and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities of the same series, of like tenor and form, of any authorized denomination as requested by such Holder in aggregate pri n cipal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered; provided that if a Global Security is so surrendered, the Company shall execute, and the Trustee shall authenticate and deliver to the Depository for such Global Security, without service charge, a new Global Security in a denom i nation equal to and in exchange for the unredeemed portion of the principal of the Global Security so surrendered.  In the case of a Security providing appropriate space for such notation, at the option of the Holder thereof, the Tru s tee, in lieu of delivering a new Security or Securities as aforesaid, may make a notation on such Security of the payment of the redeemed portion thereof.

 

             Section 4.07     Offers to Repurchase by Application of Proceeds .

 

(a) In the event that, pursuant to Section 6.15, the Company shall be required to commence an Asset Sale Offer, it shall follow the procedures specified below.

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(b) The Asset Sale Offer shall be made to all Holders and holders of Pari Passu Indebtedness as r e quired by Section 6.15.  The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the “ Offer Period ”).  No later than five Business Days after the termination of the Offer Period (the “ Purchase Date ”), the Company shall apply all Excess Proceeds (the “ Offer Amount ”) to the purchase of Securities of each applicable s e ries and, if required, Pari Passu Indebtedness (on a pro rata basis, if applicable), or, if less than the Offer Amount has been tendered, all Securities of such series and Pari Passu Indebtedness properly tendered in response to the A s set Sale Offer.  Payment for any Securities of such series so purchased shall be made in the same manner as interest payments are made.

(c) If the Purchase Date is on or after a regular Record Date and on or before the related Interest Pa y ment Date, any accrued and unpaid interest and Additional Interest, if any, up to but excluding the Purchase Date, shall be paid to the Person in whose name a Security is registered at the close of business on such Record Date, and no additional interest shall be payable to Holders who tender Securities of any series pursuant to the Asset Sale O f fer.

(d) Upon the commencement of an Asset Sale Offer, the Company shall send, in the manner provided in Section 15.04, a notice to each of the Holders, with a copy to the Trustee.  The notice shall contain all instructions and materials necessary to enable such Holders to tender Securities of each applicable series pursuant to the Asset Sale Offer.  The notice, which shall govern the terms of the Asset Sale Offer, shall state:

(i) that the Asset Sale Offer is being made pursuant to this Section 4.07 and Section 6.15 and the length of time the Asset Sale Offer shall remain open;

(ii) the Offer Amount, the purchase price and the Purchase Date;

(iii) that any Security of a series not tendered or accepted for payment shall continue to accrue interest;

(iv) that, unless the Company defaults in making such payment, any Security of a s e ries accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest on and after the Purchase Date;

(v) that Holders electing to have a Security of a series purchased pursuant to an Asset Sale Offer may elect to have Securities of such series purchased in denominations of $2,000 and i n tegral multiples of $1,000 in excess thereof;

(vi) that Holders electing to have a Security of a series purchased pursuant to any Asset Sale Offer shall be required to surrender the Security of such series, with the form entitled “Option of Holder to Elect Repurchase” attached to the Security of such series completed, or transfer such Security of such series by book-entry transfer, to the Company, the Depository, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Pu r chase Date;

(vii) that Holders shall be entitled to withdraw their election if the Company, the Depo s itory or the Paying Agent, as the case may be, receive, not later than the expiration of the Offer Per i od, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security of the applicable series the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Security of such series purchased;

(viii) that, if the aggregate principal amount of Securities of each series and Pari Passu Indebtedness surrendered by the holders thereof exceeds the Offer Amount, the Trustee shall select the Securities of each series and the Company, or, if so elected by the Company, the agent for such Pari Passu Indebtedness, shall select such Pari Passu Indebtedness to be purchased on a pro rata  b a sis based on the accreted value or principal amount of the Securities of each series or such Pari Passu

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Indebtedness properly tendered (with such adjustments as may be deemed appropriate by the Trustee so that only Securities in denominations of $2,000 and integral multiples of $1,000 in excess thereof, shall be purchased); and

(ix) that Holders whose Securities of the applicable series were purchased only in part shall be issued new Securities of such series equal in principal amount to the unpurchased portion of the Securities of such series surrendered (or transferred by book-entry transfer) representing the same indebtedness to the extent not repurchased.

(e) On or before the Purchase Date, the Company shall, to the extent lawful, (1) accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Securities of each series or portions thereof validly tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Securities of such series properly tendered and (2) deliver or cause to be delivered to the Trustee the Securities of each series properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Securities of such series or portions thereof so tendered.

(f) The Company, the Depository or the Paying Agent, as the case may be, shall promptly mail or d e liver to each tendering Holder an amount equal to the purchase price of the Securities of each series properly te n dered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new S e curity, and the Trustee, upon receipt of a Company Order, shall authenticate and mail or deliver (or cause to be transferred by book-entry) such new Security to such Holder (it being understood that, notwithstanding anything in this Indenture to the contrary, no Opinion of Counsel or Officer’s Certificate is required for the Trustee to authent i cate and mail or deliver such new Security) in a principal amount equal to any unpurchased portion of the Security of a series surrendered representing the same indebtedness to the extent not repurchased; provided that each such new Security shall be in a principal amount of $2,000 or integral multiples of $1,000 in excess thereof.  Any Secur i ty not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof.  The Company shall publicly announce the results of the Asset Sale Offer on or as soon as practicable after the Purchase Date.

Other than as specifically provided in this Section 4.07 or Section 6.15, any purchase pursuant to this Se c tion 4.07 shall be made pursuant to the applicable provisions of this Article IV.

ARTICLE V

MERGER, CONSOLIDATION OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS

             Section 5.01     Company May Consolidate, Etc., Only on Certain Terms (A) On and after the Escrow R e lease Date, the Company may not consolidate or merge with or into, or sell, lease or convey all or substantially all of the assets of the Company and its Restricted Subsidiaries, taken as a whole, in any one transactions or series of transactions, to any other Person, unless:

 

(i) the resulting, surviving or transferee Person (the “ successor ”) is either the Company or is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia and expressly assumes by supplemental indenture all of the Company’s obligations under this Indenture and the Securities of the applicable series;

(ii) immediately after giving effect to such transaction no Event of Default or event which with notice or lapse of time would be an Event of Default has occurred and is continuing; and

(iii) immediately after giving pro forma effect to such transaction, as if such transaction had occurred at the beginning of the applicable Test Period, (x) the successor would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Total Leverage Ratio test set forth in Section 6.10(A) or (y) the Total Leverage Ratio for the successor and its Restricted Subsidiaries would be less than or equal to the Total Leverage Ratio for the Company and its Restricted Subsidiaries immediately prior to such transaction.

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(B) Notwithstanding the foregoing, the Company may merge or amalgamate with an Affiliate of the Co m pany solely for the purpose of reincorporating the Company in another jurisdiction of the United States, any state thereof or the District of Columbia or converting the Company into a limited liability company organized under the United States, any state thereof or the District of Columbia ( provided that the Company shall have a co-issuer that is a corporation organized or existing under the laws of the United States, any state thereof or the District of Colu m bia).

             Section 5.02     Successor Substituted   Upon any consolidation or merger, or any sale, lease or disposition of all or substantially all of the assets of the Company in accordance with Section 5.01, the successor will be subst i tuted for the Company in this Indenture and the Registration Rights Agreements with the same effect as if it had been an original party thereto.  Thereafter, the successor may exercise the rights and powers of the Company under this Indenture.

 

             Section 5.03     Documents to be Given to the Trustee The Trustee shall receive an Officer’s Certificate and an Opinion of Counsel each stating that any consolidation, merger, sale, lease or disposition referred to in this Article V and supplemental indenture required to be executed in connection with this Article V, complies with the provisions of this Article V and that all conditions precedent provided herein relating to such transactions have been complied with.

 

ARTICLE VI

COVENANTS

              Section 6.01     Payment of Principal, Premium, if Any, and Interest   The Company covenants and agrees for the benefit of the Holders that it will pay or cause to be paid the principal of (and premium, if any) and interest and Additional Interest, if any, on the Securities of any series in accordance with the terms of and in the manner provided in the Securities of such series and this Indenture.  Principal (and premium, if any) and interest and Add i tional Interest, if any, will be considered paid on the date due if the Paying Agent, if other than the Company, holds as of 10:00 a.m., New York time, on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal (and premium, if any) and interest and Additional Interest, if any, then due.

 

The Company shall pay interest on overdue principal at the rate of 1.0% per annum (the “ Overdue Rate ”) in excess of the interest rate applicable to the Securities of any series specified therefor in the such Securities, and it shall pay interest on overdue installments of interest and Additional Interest, if any, at the same rate to the extent lawful.

               Section 6.02     Maintenance of Office or Agency The Company will maintain an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co- R egistrar) where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of any series and this Indenture may be served.  The designated office of the Trustee shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency, if such office is an office other than that of the Trustee or an affiliate o f the Trustee, Registrar or co-R egistrar. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

 

The Company may also from time to time designate one or more other offices or agencies where the Sec u rities of any series may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided ,   however , that no such designation or rescission shall in any manner relieve the Company of their obligation to maintain an office or agency in The City of New York for such purposes.  The Co m

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pany will give prompt written notice to the Trustee of any such designation or rescission and any change in the loc a tion of any such other office or agency.

The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 3.05.

 

              Section 6.03     Money for Securities Payments To Be Held in Trust (a) If the Company shall at any time act as their own Paying Agent, they will, on or before each due date of the principal of (or premium, if any) or inte r est on any of the Securities of any series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal of (or premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.

 

(b) Whenever the Company shall have one or more Paying Agents for the Securities, they will, on or before each due date of the principal of (or premium, if any) or interest on any Securities of any series, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act.

(c) The Company will cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Se c tion, that such Paying Agent will:

(i) hold all sums held by it for the payment of the principal of (and premium, if any) or i n terest on Securities of any series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

(ii) give the Trustee notice of any Default by the Company in the making of any payment of principal (and premium, if any) or interest; and

(iii) at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

(d) The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums.

(e) Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (or premium, if any) or interest on any Securities of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on Company Order, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as Trustee thereof, shall ther e upon cease; provided ,   however , that the Trustee or such Paying Agent, before being required to make any such r e payment, shall at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.

              Section 6.04    Existence Except as permitted by Article V and this Section 6.04, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and that of each Restricted Subsidiary and the rights (based on organization documents and statute) and franchises of the Co m pany and each Restricted Subsidiary; provided ,   however , that the Company shall not be required to preserve any

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such existence, right or franchise of a Restricted Subsidiary if the Company shall determine in its judgment that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole.

 

               Section 6.05     Payment of Taxes The Company will, and will cause each of its Restricted Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, all taxes, asses s ments and governmental charges except (x) such as are being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Company) are being maintained in accordance with GAAP or (y) where failure to effect such payment or discharge, taken as a whole, would not materially affect the Company's ability to make anticipated principal or interest payments on the Secur i ties (in the good faith judgment of management of the Company).

 

[Reserved]. 

              Section 6.07     Statement by Officers as to Default   The Company shall deliver to the Trustee by regi s tered or certified mail or facsimile transmission, promptly upon becoming aware of the occurrence of any Default or Event of Default, a statement specifying such Default or Event of Default.

 

The Company will deliver to the Trustee annually, within 120 days after the end of each fiscal year of the Company beginning April 30, 2016, a certificate from its principal executive officer, principal financial officer or principal accounting officer, stating whether or not to the best knowledge of the signer thereof the Company is in compliance (without regard to periods of grace or notice requirements) with all conditions and covenants under this Indenture, and if the Company shall not be in compliance, specifying such non-compliance and the nature and status thereof of which such signer may have knowledge.

               Section 6.08     SEC Reports and Reports to Holders Whether or not the Company is subject to the r e porting requirements of Section 13 or 15(d) of the Exchange Act, so long as Securities of any series are Outstanding, the Company shall provide the Trustee and Holders within fifteen (15) Business Days after filing, or in the event no such filing is required, within fifteen (15) Business Days after the end of the time periods specified in the SEC’s rules and regulations:

 

(a) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with r e spect to the annual financial statements only, a report thereon by the Company’s certified independent a c countants; and

(b) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports.

provided that, the foregoing delivery requirements shall be deemed satisfied if the foregoing materials are available on the SEC’s EDGAR system (or successor thereto) or on the Company’s website within the applicable time period.

In addition, whether or not required by the SEC, the Company shall, if the SEC will accept the filing, file a copy of all of the information and reports referred to in clauses (a) and (b) of this Section 6.08 with the SEC for pu b lic availability within the time periods specified in the SEC’s rules and regulations.  In addition, the Company will make the information and reports available to securities analysts and prospective investors upon request.

To the extent not satisfied by the foregoing, the Company will agree that, for so long as any Securities of any series are Outstanding, it will furnish to Holders, securities analysts and prospective investors, upon their r e quest, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Notwithstanding anything herein to the contrary, the Company will not be deemed to have failed to comply with any provision of this Section 6.08 for purposes of Section 7.01(iii)  as a result of the late filing or provision of any required information or report until 90 days after the date any such information or report was due.

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Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute actual or constructive knowledge or notice of any information co n tained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on certificates from the Company).

              Section 6.09     Limitation on Restricted Payments   (A) On and after the Escrow Release Date, the Co m pany will not, and will not permit any Restricted Subsidiary to, directly or indirectly:

 

(a) declare or pay any dividend or make any distribution on account of the Company’s or any of its Restricted Subsidiary’s Equity Interests, including any dividend or distribution payable on account of the Company’s or any Restricted Subsidiary’s Equity Interests in connection with any merger or consolidation, other than:

(i) dividends or distributions by the Company payable in Equity Interests (other than Disqualified Stock) of the Company or in options, warrants or other rights to purchase such Equity Interests, or

(ii) dividends or distributions payable to the Company or a Restricted Subsidiary of the Company so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary of the Company other than a Wholly-Owned Subsidiary, the Company or a Restricted Subsidiary of the Company receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;

(b) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Company or any direct or indirect parent of the Company held by Persons other than the Company or any of its Restricted Subsidiaries, including in connection with any merger, amalgamation or consolidation;

(c) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value, in each case prior to any scheduled repayment, sinking fund payment or maturity, any Subord i nated Indebtedness, other than (i) Indebtedness of the type incurred pursuant to clause (g) of the definition of “Permitted Debt” or (ii) the purchase, redemption, repurchase or other acquisition of Subordinated I n debtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, redemption, repurchase or acquisition; or

(d) make any Restricted Investment;

(all such payments and other actions set forth in clauses (a) through (d) above being collectively referred to as “ Restricted Payments ”), unless, at the time of such Restricted Payment:

(i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof;

(ii) the Company can incur at least $1.00 of additional Indebtedness pursuant to Section 6.10(A); and

(iii) such Restricted Payment, together with the aggregate amount of all other R e stricted Payments made by the Company and its Restricted Subsidiaries after the Escrow Release Date (including Restricted Payments permitted by Section 6.09(B)(1) of the next succeeding par a graph, but excluding all other Restricted Payments permitted by the next succeeding paragraph), is less than the Applicable Amount.

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(B) The foregoing provisions will not prohibit:

(1) the payment of any dividend or distribution within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of this Inde n ture;

(2) Restricted Payments made in exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of, Equity Interests of the Company (in each case, other than any Disqualified Stock) (“ Refunding Capital Stock ”);

(3) the redemption, repurchase, defeasance, exchange or other acquisition or retirement of Subordinated Indebtedness of the Company or any Restricted Subsidiary of the Company made by e x change for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Company or any Restricted Subsidiary of the Company which is incurred in compliance with Section 6.10 so long as:

(A) the principal amount (or accreted value, in the case of Indebtedness issued at a discount) of such new Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Subordinated Indebtedness being so redeemed, repurchased, acquired, defeased, exchanged or retired, plus the amount of all accrued interest and any reasonable fees, expenses and premium incurred or paid in connection with such redemption, repurchase, acquisition, defe a sance, exchange or retirement and the incurrence of such new Indebtedness;

(B) such new Indebtedness is subordinated to the Securities of each series at least to the same extent as such Subordinated Indebtedness so redeemed, repurchased, defeased, e x changed, acquired or retired; provided that this subclause (B) need not be satisfied if (i) such new Indebtedness can be incurred pursuant to Section 6.10(A) or (ii) the amount of such new Indebte d ness shall not exceed the Applicable Amount (it being understood that if amounts available under the Applicable Amount are used to redeem, repurchase, defease, exchange, acquire or retire such Subordinated Indebtedness, then the Applicable Amount shall be reduced by such amounts);

(C) such new Indebtedness has a Weighted Average Life to Maturity at the time i n curred which is not less than the shorter of (i) the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness being so redeemed, repurchased, defeased, exchanged, acquired or retired and (ii) the Weighted Average Life to Maturity that would result if all payments of princ i pal on the Indebtedness being so redeemed, repurchased, defeased, acquired or retired that were due on or after the date one year following the Stated Maturity of any Securities of any series then Outstanding were instead due on such date one year following the Stated Maturity of such Secur i ties; and

(D) the obligor of such new Indebtedness does not include any Restricted Subsidiary that is not an obligor of the Indebtedness being so redeemed, repurchased, defeased, exchanged, acquired or retired;

(4) a Restricted Payment to pay for the repurchase, redemption or other acquisition or retir e ment for value of Equity Interests of the Company or any of its Restricted Subsidiaries or direct or indirect parent companies held by any future, present or former employee, director or consultant of, or service pr o vider to, the Company, any of its Restricted Subsidiaries or any of its direct or indirect parent companies pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided ,   however , that the aggregate Restricted Payments made under this clause (4) do not exceed $75.0 million in the aggregate in any calendar year since the Escrow Release Date (with u n used amounts for any year being carried over to the next succeeding year, but not to any subsequent year, with the permitted amount for each year being used prior to any amount carried over from the previous year); provided , further , that such amount may be increased by an amount not to exceed:

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(A) the cash proceeds from the sale of Equity Interests of the Company and, to the extent contributed to the Company, Equity Interests of any of the Company’s direct or indirect parent companies, in each case to members of management, directors or consultants of, or service providers to, the Company, any of its Restricted Subsidiaries or any of its direct or indirect parent companies that occurs or occurred after the Issue Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Pa y ments by virtue of clause (B)(1) of the definition of “Applicable Amount”; plus

(B) the cash proceeds of key man life insurance policies received by the Company and its Restricted Subsidiaries after the Issue Date; less

(C) the amount of any Restricted Payments previously made since the Escrow R e lease Date pursuant to clauses (A) and (B) of this clause (4);

provided , further , that cancellation of Indebtedness owing to the Company, or its Restricted Subsidiaries from members of management of the Company, any of its direct or indirect parent companies or any R e stricted Subsidiary in connection with a repurchase of Equity Interests of the Company, its Restricted Su b sidiaries or any of its direct or indirect parent companies will not be deemed to constitute a Restricted Pa y ment for purposes of this Section 6.09 or any other provision of this Indenture;

(5) the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock of the Company or any of its Restricted Subsidiaries or preferred stock of any of the Company’s Restricted Subsidiaries issued in accordance with Section 6.10;

(6) repurchases of Equity Interests (A) deemed to occur upon exercise of stock options, wa r rants or similar instruments if such Equity Interests represent a portion of the exercise price or taxes pay a ble in respect of such options, warrants or similar instruments or (B) upon the vesting of restricted stock, restricted stock units, performance shares units or similar equity incentives to satisfy tax withholding or similar tax obligations with respect thereto;

(7) the repurchase, redemption or other acquisition or retirement for value of any Subord i nated Indebtedness or Disqualified Stock pursuant to the provisions similar to those described under Se c tions 6.14 and 6.15; provided that all Securities tendered by Holders in connection with a Change of Co n trol Offer or Asset Sale Offer relating to such Securities, as applicable, have been repurchased, redeemed or otherwise acquired for value;

(8) the declaration and payment of dividends by the Company to, or the making of loans to, any direct or indirect parent in amounts required for any direct or indirect parent companies to pay :

(A ) franchise taxes and other fees, taxes and expenses required to maintain their corporate or other legal existence, and

(B ) customary salary, bonus and other benefits payable to officers and employees of any direct or indirect parent company of the Company to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Company and its Subsidiaries;

(9) payments to holders of Equity Interests (or to the holders of Indebtedness that is conver t ible into or exchangeable for Equity Interests upon such conversion or exchange) in lieu of the issuance of fractional shares;

(10) other Restricted Payments; provided that the amount of any such Restricted Payment, when taken together with the amount of all other Restricted Payments made pursuant to this clause (10), does not exceed the greater of (x) $750.0 million and (y) 2.5% of Total Assets; and

(11) any Restricted Payments made in connection with the closing of the Verizon Acquisition;

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provided , however , that at the time of, and after giving effect to, any Restricted Payment permitted under Section 6.09(B)(10), no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof.

The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such R e stricted Subsidiary, as the case may be, pursuant to the Restricted Payment.  For purposes of determining compl i ance with this Section 6.09, in the event that a Restricted Payment meets the criteria of more than one of the categ o ries described in Section 6.09(A), clauses (1) through (11) of Section 6.09(B) or the definition of “ Permitted Inves t ments ,” the Company will be permitted to classify such Restricted Payment and later reclassify all or a portion of such Restricted Payment in any manner that complies with this Section 6.09.  In addition, a Restricted Payment need not be permitted solely by reference to one provision permitting such Restricted Payment but may be permitted in part by one such provision and in part by one or more other provisions of this Section 6.09 permitting such Restric t ed Payment.

                Section 6.10     Limitation on Incurrence of Indebtedness   (A) On and after the Escrow Release Date, the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise with respect to any Indebtedness (including Acquired Indebtedness) and the Company will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided ,   however , that the Company may incur Indebtedness (including A c quired Indebtedness) if as of the date any such Indebtedness is incurred, on a pro forma basis after giving effect to the incurrence and application of the proceeds of such Indebtedness, the Company’s Total Leverage Ratio for the Test Period immediately preceding such date shall be less than or equal to 4.50 to 1.00.

 

(B) The foregoing limitations will not apply to the following (“ Permitted Debt ”):

(a) the incurrence of Indebtedness under Credit Facilities by the Company or any of its R e stricted Subsidiaries and the issuance and creation of letters of credit and bankers’ acceptances thereunder (with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof), (x) up to an aggregate principal amount of $3,500.0 million and (y) without duplication, Indebtedness incurred to extend, renew, refund, refinance or replace any Indebtedness incurred pursuant to clause (a)(x) (including additional Indebtedness incurred to pay premiums, expenses and fees in connection therewith);

(b) the incurrence by the Company of Indebtedness represented by the Securities (ot her than any Additional Notes), any  Exchange Securities issued in exchange therefor in accordance with any Regi s tration Rights Agreement and any Indebtedness to the extent that the net proceeds therefrom are promptly deposited to defease or discharge all of the Securities in full;

(c) Existing Indebtedness (other than Indebtedness described in clauses (a) and (b) of this Section 6.10(B));

(d) Indebtedness (including Capital Lease Obligations, Indebtedness related to Sale and Lease-Back Transactions, mortgage financings or purchase money obligations) incurred by the Company or any of its Restricted Subsidiaries, or preferred stock of any Restricted Subsidiary issued, to finance the pu r chase, lease, construction or improvement (including, without limitation, the cost of design, development, construction, acquisition, transportation, installation, improvement and migration) of property (real or pe r sonal) or equipment that is used or useful in the business of the Company or any of its Restricted Subsidia r ies, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets, in an aggregate principal amount which, when aggregated with the principal amount of all other Indebtedness and preferred stock then outstanding and incurred pursuant to this clause (d) and including all Refinancing Indebtedness incurred to extend, renew, refund, refinance or replace any other Indebtedness and preferred stock incurred pursuant to this clause (d), does not exceed the greater of (x) $250.0 million and (y) 1.00% of Total Assets;

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(e) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, inclu d ing letters of credit in respect of workers’ compensation claims, death, disability or other employee benefits or property, casualty or liability insurance or self-insurance, or other Indebtedness with respect to rei m bursement type obligations regarding workers’ compensation claims; provided ,   however , that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence;

(f) Indebtedness of the Company and its Restricted Subsidiaries arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring or disposing of all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; provided ,   however , that the maximum assumable liability in respect of all such Indebtedness incurred or assumed in connection with any disposition shall at no time exceed the gross proceeds including noncash proceeds (the Fair Market Value of such noncash proceeds being measured at the time received and without giving effect to any su b sequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition;

(g) Indebtedness of the Company to any Restricted Subsidiary of the Company; provided that any such Indebtedness is subordinated in right of payment to the Securities; provided , further , that any su b sequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary of the Company or any other subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary of the Company) shall be deemed in each case to be an incurrence of such Indebtedness;

(h) Indebtedness or preferred stock of a Restricted Subsidiary to the Company or another R e stricted Subsidiary; provided that any such Indebtedness is made pursuant to an intercompany note;

(i) Indebtedness of the Company; provided ,   however , that the aggregate principal amount of Indebtedness or liquidation preference of preferred stock incurred under this clause (i), when aggregated with the principal amount of all other Indebtedness then outstanding and incurred pursuant to this clause (i) and any Refinancing Indebtedness incurred to extend, renew, refund, refinance or replace any other Indeb t edness incurred pursuant to this clause (i), does not exceed the greater of $1,000.0 million and 5.0% of T o tal Assets;

(j) (x) Swap Obligations of the Company entered into for bona fide (non-speculative) bus i ness purposes and (y) Indebtedness of the Company in respect of Interest Rate Agreements, Commodity Agreements and Currency Agreements;

(k) obligations in respect of performance, bid, appeal and surety bonds, completion guara n tees and similar obligations provided by the Company or any of its Restricted Subsidiaries in the ordinary course of business, including guarantees or obligations of the Company or any of its Restricted Subsidiaries and letters of credit supporting any of the foregoing (in each case other than for an obligation for money borrowed);

(l) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness or preferred stock which serves to extend, renew, replace, refund or refinance any Indebtedness or preferred stock incurred as permitted under Section 6.10(A), clauses (b), (c) and (m) of this Section 6.10(B), this clause (l) or any Indebtedness or preferred stock issued to so extend, renew, replace, refund or refinance such Indebtedness or preferred stock including additional Indebtedness or preferred stock incurred to pay premiums, expenses and fees in connection therewith (the “ Refinancing Indebtedness ”) prior to its respe c tive maturity; provided ,   however , that such Refinancing Indebtedness:

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(i) has a Weighted Average Life to Maturity at the time such Refinancing Indeb t edness is incurred which is not less than the remaining Weighted Average Life to Maturity of the Indebtedness being extended, renewed, replaced, refunded or refinanced;

(ii) to the extent such Refinancing Indebtedness extends, renews, replaces, refunds or refinances Subordinated Indebtedness, such Refinancing Indebtedness is subordinated to the Securities at least to the same extent as the Indebtedness being extended, renewed, replaced, r e financed or refunded; provided that this subclause (ii) need not be satisfied if the amount of such Refinancing Indebtedness shall not exceed the Applicable Amount (it being understood that if amounts available under the Applicable Amount are used to refinance such Subordinated Indeb t edness, then the Applicable Amount shall be reduced by such amount); and

(iii) shall not include Indebtedness of a Restricted Subsidiary of the Company that refinances Indebtedness of the Company,

(m) (i)  Indebtedness or preferred stock of Persons that are acquired by the Company or any of its Restricted Subsidiaries or merged into or amalgamated with a Restricted Subsidiary of the Company in accordance with the terms of this Indenture, provided that in the case of this clause (i) immediately and after giving effect to such acquisition, amalgamation or merger either (1) the Company would be permi t ted to incur at least $1.00 of additional Indebtedness pursuant to the Total Leverage Ratio set forth in Se c tion 6.10(A) or (2) the Company’s Total Leverage Ratio is less than or equal to the Company’s Total Le v erage Ratio immediately prior to such acquisition, amalgamation or merger; or

(ii) Indebtedness or preferred stock of the Company incurred in connection with or in contemplation of, or to provide all or any portion of the funds or credit support utilized to co n summate, the acquisition of Persons that are acquired by the Company or any Restricted Subsid i ary of the Company or merged into or amalgamated with a Restricted Subsidiary of the Company in accordance with the terms of this Indenture, provided that in the case of this clause (ii) immed i ately after giving effect to such acquisition, amalgamation or merger either (1) the Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Total Leve r age Ratio set forth in Section 6.10(A) or (2) the Company’s Total Leverage Ratio is less than or equal to the Company’s Total Leverage Ratio immediately prior to such acquisition, amalgam a tion or merger; or

(iii) Indebtedness of Persons acquired by the Company, directly or indirectly, purs u ant to the Verizon Purchase Agreement in existence on both the Issue Date and the Escrow R e lease Date, plus interest accruing thereon;

(n) Indebtedness (i) arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, pr o vided that such Indebtedness is extinguished within five Business Days of its incurrence, (ii) in respect of netting, overdraft protection and other arrangements arising under standard business terms of any bank which the Company or any of its Restricted Subsidiaries maintains an overdraft, cash pooling or other similar facility or arrangements or (iii) arising in connection with the endorsement of instruments for d e posit in the ordinary course of business ;

(o) Indebtedness of the Company or any of its Restricted Subsidiaries supported by a letter of credit issued pursuant to the Credit Facilities, in a principal amount not in excess of the stated amount of such letter of credit;

(p) (1)  any guarantee by the Company or any of its Restricted Subsidiaries of Indebtedness or other obligations of any of the Company’s Restricted Subsidiaries so long as the incurrence of such I n debtedness incurred by such Restricted Subsidiary is permitted under the terms of this Indenture, or (2) Indebtedness of any Restricted Subsidiary of the Company in an aggregate principal amount such that, on a pro forma basis after giving effect to the incurrence and application of proceeds of such Indebtedness, the Company’s Secured Leverage Ratio for the Test Period immediately preceding the date of incurrence

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of such Indebtedness shall be less than or equal to 1.25 to 1.00, together with any Refinancing Indebte d ness incurred to extend, renew, replace, refund or refinance any Indebtedness incurred pursuant to this clause (p)(2) ;  

(q) Indebtedness of the Company or any of its Restricted Subsidiaries consisting of (i) the f i nancing of insurance premiums and (ii) take-or-pay or similar obligations contained in supply arrang e ments, in each case, incurred in the ordinary course of business; and

(r) Indebtedness of the Company or any of its Restricted Subsidiaries attributable to any Sale and Lease-Back Transaction or similar transaction entered into by the Company or any of its Restricted Subsidiaries in connection with a Plan Contribution.

(C)       For purposes of determining compliance with this Section 6.10:

(a) in the event that an item of Indebtedness or preferred stock meets the criteria of more than one of the categories of permitted Indebtedness or preferred stock described in clauses (a) through (r) of Section 6.10(B) or is entitled to be incurred pursuant to Section 6.10(A), the Company, in its sole discr e tion, will classify or reclassify such item of Indebtedness or preferred stock (or any portion thereof) and will only be required to include the amount and type of such Indebtedness or preferred stock in one of the clauses of Section 6.10(B)  or as having been incurred pursuant to Section 6.10(A); provided , that all I n debtedness outstanding under the Senior Credit Facilities on the Escrow Release Date will be treated as i n curred on such date Section 6.10(B)(a) and the Company shall not be permitted to reclassify all or any po r tion of such Indebtedness outstanding on the Escrow Release Date;

(b) at the time of incurrence or thereafter, the Company will be entitled to divide and classify or reclassify an item of Indebtedness or preferred stock in more than one of the types of Indebtedness or preferred stock described above; and

(c) the Company or the applicable Restricted Subsidiary may, but shall not be required to, elect pursuant to an Officer’s Certificate delivered to the Trustee to treat all or any portion of the commi t ment under any Indebtedness (including with respect to any revolving loan commitment) as being incurred at the time of such commitment and thereafter outstanding so long as such commitment remains outstan d ing, regardless of whether fully drawn, in which case any subsequent incurrence of Indebtedness under such commitment shall not be deemed to be an incurrence at such subsequent time.

(D) Accrual of interest, the accretion of accreted value, the payment of interest in the form of additio n al Indebtedness, the payment of dividends on Disqualified Stock in the form of additional shares of Disqualified Stock and the reclassification of preferred stock as Indebtedness due to a change in accounting principles or the a p plication thereof will not be deemed to be an incurrence of Indebtedness for purposes of this Section 6.10.

             Section 6.11     Limitation on Liens On and after the Escrow Release Date, the Company will not, and will not permit any of its Restricted Subsidiaries to, allow any Lien on any of the Company’s or its Restricted Subsidia r ies’ property or assets (which includes capital stock) securing Indebtedness, unless the Lien secures the Securities equally and ratably with, or prior to, any such Indebtedness secured by such Lien, for so long as such other Indeb t edness is so secured, except:

 

(i) in the case of Liens securing Secured Indebtedness which the Company or its Restricted Subsidiaries may issue, assume, guarantee or permit to exist in an aggregate principal amount such that, on a pro forma basis after giving effect to the issuance and application of proceeds of such Secured Indebte d ness, the Company’s Secured Leverage Ratio for the Test Period immediately preceding such date shall be less than or equal to 1.25 to 1.00 ; and

(ii) Permitted Liens (without duplication) .

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Any Lien created for the benefit of Holders pursuant to this Section 6.11 shall be automatically released without any further action by the Holders upon release of the Lien on such other Indebtedness.

             Section 6.12     Limitations on Transactions with Affiliates (A) On and after the Escrow Release Date, the Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each of the foregoing, an “ Affiliate Transaction ”) in any one or series of related transactions involving aggregate payments or consideration in excess of $100.0 million, unless:

 

(a) such Affiliate Transaction is on terms that are not materially less favorable, taken as a whole, to the Company or the relevant Restricted Subsidiary than those that could have been obtained in a comp a rable transaction by the Company or such Restricted Subsidiary with an unrelated Person as determined by the Company in good faith (or, in the event that there are no comparable transactions involving Persons who are not Affiliates of the Company or the relevant Restricted Subsidiary to apply for comparative pu r poses, is otherwise on terms that, taken as a whole, the Company has determined in good faith to be fair to the Company or the relevant Restricted Subsidiary), and

(b) the Company delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $250.0 million, a resolution adopted by the majority of the Board of Directors of the Company (and a majority of the disi n terested directors serving on the Board of Directors of the Company) approving such Affiliate Transaction and an Officer’s Certificate certifying that such Affiliate Transaction complies with Section 6.12(A)(a).

(B) The foregoing provisions will not apply to the following:

(i) transactions between or among the Company and/or any of its Restricted Subsidia r ies;

(ii) (x) Restricted Payments permitted by Section 6.09 and (y) Permitted Investments;

(iii) (A) fees paid to, and indemnities provided on behalf of, and employment and seve r ance agreements entered into with, current or former officers, directors, employees or consultants of the Company, any of its direct or indirect parent companies or any of its Restricted Subsidiaries in the ordinary course of business and (B) any employee benefits plans or similar plans entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business;

(iv) transactions in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from a Nationally Recognized Independent Financial Advisor stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or meets the requirements of Section 6.12(A)(a);

(v) the existence of, or the performance by the Company or any of its Restricted Subsi d iaries of its obligations under the terms of, any agreement to which it is a party as of the Escrow R e lease Date and any similar agreements which it may enter into thereafter; provided ,   however , that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Escrow Release Date shall only be permitted by this clause (v) to the extent that the terms of any such agreement, together with all amendments thereto, taken as a whole, or new agre e ment are not more disadvantageous as determined by the Company to the Holders or the Company and its Restricted Subsidiaries in any material respect than the agreement in effect as of the Escrow Release Date;

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(vi) any agreement that grants registration and other customary rights in connection therewith or otherwise to the direct or indirect securityholders of the Company or any Restricted Subsidiary of the Company (and the performance of such agreements);

(vii) any transaction with an entity which would constitute an Affiliate Transaction solely because the Company or any of its Restricted Subsidiaries owns an equity interest in or otherwise controls such entity; provided that no Affiliate of the Company or any of its Restricted Subsidiaries other than the Company or a Restricted Subsidiary of the Company shall have a beneficial interest in such joint venture or similar entity;

(viii) the issuance of Equity Interests (other than Disqualified Stock) of the Company to any Person;

(ix) payments or loans (or cancellation of loans) to employees or consultants of the Co m pany, any of its direct or indirect parent companies or any Restricted Subsidiary of the Company which are approved by a majority of the Board of Directors of the Company in good faith;

(x) transactions permitted by, and complying with, the provisions of Article V;

(xi) any contribution of capital to the Company;

(xii) transactions with customers, clients, suppliers or purchasers or sellers of goods or services, or transactions otherwise relating to the purchase or sale of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture, which are fair to the Company and its Restricted Subsidiaries in the reasonable determination of the Board of Directors of the Company or the senior management of the Company, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party;

(xiii) any Plan Contribution; and

(xiv) transactions with Affiliates solely in their capacity as holders of Indebtedness or Capital Stock of the Company or any of its Restricted Subsidiaries, where such Affiliates are gene r ally treated no more favorably than non-Affiliates in such transactions.

             Section 6.13     Limitations on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries On and after the Escrow Release Date, the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encu m brance or consensual restriction on the ability of any such Restricted Subsidiary to:

 

(a)          (1)  pay dividends or make any other distributions to the Company or any of its Restric t ed Subsidiaries:

(A) on its Capital Stock or

(B) with respect to any other interest or participation in, or measured by, its profits or

(2) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries;

(b) make loans or advances to the Company or any of its Restricted Subsidiaries; or

(c) sell, lease or transfer any of its properties or assets to the Company or any of its Restric t ed Subsidiaries, except (in each case) for such encumbrances or restrictions existing under or by reason of:

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(i) contractual encumbrances or restrictions in effect on the Escrow Release Date, including pursuant to the Senior Credit Facilities and Existing Indebtedness and related docume n tation as in effect on the Escrow Release Date;

(ii) this Indenture and the Securities;

(iii) purchase money obligations and Capital Lease Obligations for property that i m pose restrictions of the nature set forth in Section 6.13(c) on that property;

(iv) applicable law or any applicable rule, regulation or order, approval, license or similar restriction, including Governmental Authorizations;

(v) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary of the Company in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired;

(vi) contracts for the sale of assets, including customary restrictions with respect to a Restricted Subsidiary of the Company pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Su b sidiary;

(vii) Secured Indebtedness otherwise permitted to be incurred pursuant to Sections 6.10 and 6.11 that limit the right of the debtor to dispose of the assets securing such Indebtedness;

(viii) restrictions on cash or other deposits or net worth imposed by customers, suppl i ers, landlords or required by insurance, surety or bonding companies, in each case under contracts entered into in the ordinary course of business;

(ix) customary provisions in joint venture agreements and other similar agreements;

(x) customary provisions contained in leases, licenses and other agreements entered into in the ordinary course of business;

(xi) restrictions in agreements or instruments which prohibit the payment or making of dividends or other distributions other than on a pro rata basis;

(xii) other Indebtedness or preferred stock of the Company or any of its Restricted Subsidiaries that is incurred pursuant to Section 6.10; provided that such encumbrances or r e strictions (1) are no less favorable to the Company or such Restricted Subsidiary, taken as a whole, than those included in the Senior Credit Facilities as in effect as of the Escrow Release Date (as determined by the Board of Directors of the Company in good faith) or (2) will not mat e rially affect the Company’s ability to make anticipated principal or interest payments on the Sec u rities (as determined by the Board of Directors of the Company in good faith); and

(xiii) any encumbrances or restrictions of the type referred to in Section 6.13(a), (b) and (c) imposed by any amendments, modifications, restatements, renewals, increases, suppl e ments, refundings, replacements or refinancings of the contracts, instruments or obligations r e ferred to in clauses (i) through (xii) of this Section 6.13(c), provided that such amendments, mod i fications, restatements, renewals, increases, supplements, refundings, replacements or refinancings (1) are, in the good faith judgment of the Company’s Board of Directors, not materially more r e strictive with respect to such encumbrance and other restrictions than those prior to such amen d ment, modification, restatement, renewal, increase, supplement, refunding, replacement or ref i nancing, taken as a whole, or (2) will not materially affect the Company’s ability to make antic i

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pated principal or interest payments on the Securities (as determined by the Board of Directors of the Company in good faith).

             Section 6.14     Repurchase of Securities upon a Change of Control Triggering Event   If a Change of Co n trol Triggering Event occurs with respect to the Securities, each Holder of Securities will have the right to require the Company to repurchase all or any part, equal to $2,000 and integral multiples of $1,000, of that Holder’s Secur i ties pursuant to a Change of Control offer (a “ Change of Control Offer ”) on the terms set forth in this Indenture at an offer price in cash equal to 101% of the aggregate principal amount of Securities repurchased, plus accrued and u n paid interest on the Securities to the applicable date of repurchase (the “ Change of Control Payment ”). Within 30 days following any Change of Control   Triggering Event, if the Company had not, prior to the Change of Control Triggering Event, sent a redemption notice, with a copy to the Trustee, for all the Securities in connection with an optional redemption permitted by Article IV, the Company will mail a notice (the “ Change of Control Notice ”), with a copy to the Trustee, to each registered Holder briefly describing the transaction or transactions that constitute a Change of Control Triggering Event and offering to repurchase Securities on the date specified in such Change of Control Notice (the “ Change of Control Payment Date ”), pursuant to the procedures required by this Indenture and described in such notice (which procedures shall be reasonably acceptable to the Trustee).

 

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other s e curities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of a series of Securities as a result of a Change of Control Triggering Event.  To the extent that the prov i sions of any securities laws or regulations conflict with the Change of Control Triggering Event provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control Triggering Event provisions of this Indenture by virtue of such conflict. 

On the Change of Control Payment Date, the Company will, to the extent lawful:

(1) accept for payment all Securities or portions thereof properly tendered pursuant to the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in r e spect of all Securities or portions thereof properly tendered; and

(3) deliver, or cause to be delivered, to the Trustee the Securities so accepted together with an Officer’s Certificate stating the aggregate principal amount of Securities or portions thereof being pu r chased by the Company.

The Paying Agent will promptly pay to each registered Holder of a series of Securities so tendered and not withdrawn the Change of Control Payment for such series of Securities, and the Trustee will promptly authenticate, or cause to be transferred by book entry, to each Holder a new Security equal in principal amount to any u n purchased portion of the Securities surrendered, if any; provided , that each such new Security will be in a principal amount of $2,000 and integral multiples of $1,000 in excess thereof.  Any Security so accepted for payment will cease to accrue interest on and after the Change of Control Payment Date.

The Company will not be required to make a Change of Control Offer upon a Change of Control Trigge r ing Event if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compl i ance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Securities properly tendered and not withdrawn under the Change of Control Offer.

A Change of Control Offer may be made in advance of a Change of Control Triggering Event, and cond i tional upon the occurrence of such Change of Control Triggering Event, if a definitive agreement is in place for the Change of Control Triggering Event at the time of making the Change of Control Offer.  If a Change of Control N o tice is delivered prior to the occurrence of a Change of Control Triggering Event, such Change of Control Notice shall state that the Change of Control Offer is conditional on the occurrence of such Change of Control and Ratings Decline and describe each such condition, and, if applicable, state that, in the Company’s discretion, the Change of Control Payment Date may be delayed until such time as any or all such conditions shall be satisfied, or that such

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redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the Change of Control Payment Date, or by the Change of Control Payment Date as so d e layed.  The Change of Control Notice shall also specify the date by which such notice was required to be given, the date by which the Holders have to make an election to repurchase and the procedures therefor, and whether the Holders may withdraw their election to repurchase and the procedures therefor.

In the event that Holders of not less than 90% in aggregate principal amount of the Outstanding Securities of a series validly tender and do not withdraw such Securities in a Change of Control Offer and the Company, or any third party making a Change of Control Offer in lieu of the Company as described above, purchases all of the Sec u rities of that series validly tendered and not withdrawn by such Holders, within 60 days of such purchase, the Co m pany or such third party will have the right, upon not less than 30 days’ nor more than 60 days’ prior notice, to r e deem all of the Securities of that series that remain Outstanding following such purchase at a Redemption Price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest on the Securities of that series to, but excluding, the Redemption Date pursuant to the procedures set forth in Article IV .

              Section 6.15     Asset Sales .

 

(a) On or after the Escrow Release Date, the Company will not, and will not permit any Restricted Subsidiary to, consummate an Asset Sale, unless:

(i) the Company or such Restricted Subsidiary, as the case may be, receives conside r ation at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or ot h erwise disposed of; and

(ii) except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary, as the case may be, is in the form of cash, Cash Equivalents, Replacement Assets or a combination of the foregoing.

Within 365 days after the Company’s or any Restricted Subsidiary’s receipt of the Net Proceeds of any A s set Sale, the Company or such Restricted Subsidiary, at its option, may apply an amount equal to the Net Proceeds from such Asset Sale:

(1) to permanently reduce Obligations under Secured Indebtedness, Indebtedness of any Subsidiary and any other Pari Passu Indebtedness and to correspondingly reduce commitments with respect thereto, provided that if the Company shall so reduce Obligations under any other Pari Passu Indebtedness (other than Pari Passu Indebtedness that is Secured Indebtedness), it will equally and ratably reduce Oblig a tions under the Securities of the applicable series in accordance with the procedures set forth in Article IV, through privately negotiated transactions or open market purchases or by making an offer (in accordance with the procedures set forth in Section 4.07 for an Asset Sale Offer) to all Holders to purchase their Sec u rities of such series in each case at or above 100% of the principal amount thereof, plus the amount of a c crued but unpaid interest, if any, on the amount of Securities of such series that would otherwise be pr e paid, which offer shall constitute a reduction of the Obligations under the Securities of the applicable series under this provision, whether or not accepted;

(2) to (a) make an investment in any one or more businesses, provided that such investment in any business is in the form of the acquisition of Capital Stock and results in the Company or a Restricted Subsidiary, as the case may be, owning or continuing to own an amount of the Capital Stock of such bus i ness such that it constitutes a Restricted Subsidiary, (b) make capital expenditures or (c) acquire other a s sets (including assets that replace the business, properties and assets that were the subject of the Asset Sale), in each of (a), (b) and (c), engaged, used or useful in a Similar Business;

(3) to retire Securities pursuant to the procedures set forth under Article IV; or

(4) any combination of the foregoing;

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provided that, in the case of clause (2) above, a binding commitment entered into prior to the end of such 365-day reinvestment period shall be treated as a permitted application of the Net Proceeds from the date of such commi t ment so long as the Company or such Restricted Subsidiary enters into such commitment with the good faith expe c tation that such Net Proceeds will be applied to satisfy such commitment (an “ Acceptable Commitment ”) and, in the event any Acceptable Commitment is later canceled or terminated for any reason before such Net Proceeds are so applied, the Company or such Restricted Subsidiary enters into another Acceptable Commitment (a “ Replacement Commitment ”) within nine months of such cancellation or termination; provided ,   further , that if any Replacement Commitment is later canceled or terminated for any reason before such Net Proceeds are applied, then such Net Pr o ceeds shall constitute Excess Proceeds.

Any Net Proceeds from an Asset Sale that are not invested or applied as set forth in the preceding par a graph and within the 365-day reinvestment period will be deemed to constitute “ Excess Proceeds .”  When the a g gregate amount of Excess Proceeds exceeds $100.0 million, the Company shall make an offer to all Holders, and, if required by the terms of any Pari Passu Indebtedness, to the holders of such Pari Passu Indebtedness (an “ Asset Sale Offer ”), to purchase the maximum principal amount of Securities of each series and such Pari Passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the princ i pal amount thereof, plus accrued and unpaid interest to, but not including, the date fixed for the closing of such o f fer, in accordance with the procedures set forth in Section 4.07.  The Company will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $100.0 million by mailing the notice required pursuant to the terms of this Indenture, with a copy to the Trustee.

To the extent that the aggregate amount of Securities of each series and such Pari Passu Indebtedness te n dered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for any purpose not otherwise prohibited by this Indenture, subject to other covenants contained in this Indenture.  If the aggregate principal amount of Securities of each series or the Pari Passu Indebtedness surrendered by such Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Securities of each series and such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Securities of each series or such Pari Passu Indebtedness tendered in accordance with Section 4.07.  Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

Pending the final application of any Net Proceeds of Asset Sales, the Company or the applicable Restricted Subsidiary may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by this Indenture.

(b) For purposes of clause (a) of this Section 6.15 only, the following shall be deemed to be Cash Equivalents:  (i) any liabilities (as shown on the Company’s, or such Restricted Subsidiary’s, most recent balance sheet or in the footnotes thereto) of the Company or any Restricted Subsidiary, other than liabilities that are by their terms subordinated in right of payment to the Securities of the applicable series, that are assumed by the transferee of any such assets and for which the Company and all of its Restricted Subsidiaries have been unconditionally r e leased by all creditors or their representatives in writing or that are discharged by the transferee or a third party in a transaction pursuant to which neither the Company nor any of its Restricted Subsidiaries has any liability following such Asset Sale, (ii) any Securities or other obligations or securities or assets received by the Company or such R e stricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 180 days following the closing of such Asset Sale, (iii) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a r e sult of such Asset Sale, to the extent that the Company and each other Restricted Subsidiary are released from any guarantee of such Indebtedness in connection with such Asset Sale; and (iv) any Designated Noncash Consideration received by the Company or any Restricted Subsidiary in such Asset Sale having an aggregate Fair Market Value, taken together with all other Designated Noncash Consideration received pursuant to this clause (iv) that is at that time in existence, not to exceed an amount equal to the greater of $900.0 million or 3.00% of Total Assets, with the Fair Market Value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other s e curities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Securities pursuant to an Asset Sale Offer.  To the extent that the provisions of any securities laws

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or regulations conflict with the provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.

              Section 6.16     Suspension of Covenants   During the period in which:  (1) the Securities of a series have an Investment Grade Rating from at least two Rating Agencies or the equivalent thereof under any new ratings sy s tem if the ratings system of any such agency shall be modified after the date hereof and (2) no Default or Event of Default has occurred and is continuing under this Indenture with respect to the Securities of such series (the occu r rence of the events described in the foregoing clauses (1) and (2) being collectively referred to as a “ Covenant Su s pension Event ”), the following provisions of this Indenture will not be applicable to the Securities of such series:

 

(A) Section 6.09;

(B) Section 6.10;

(C) Section 6.12;

(D) Section 6.13;

(E) Section 6.15; and

(F) clause (iii) of Section 5.01(A);

(collectively, the “ Suspended Covenants ” and, the date of such suspension, the “ Suspension Date ”).  Upon the o c currence of a Covenant Suspension Event, the amount of Excess Proceeds from Net Proceeds shall be set at zero.  In the event that the Company and the Restricted Subsidiaries are not subject to the Suspended Covenants for any per i od of time as a result of the foregoing, and on any subsequent date (the “ Reversion Date ”) one or more of the Rating Agencies that had assigned an Investment Grade Rating withdraw their Investment Grade Rating or downgrade the rating assigned to the Securities of a series below an Investment Grade Rating and as a result less than two Rating Agencies have assigned an Investment Grade Rating, then the Company and the Restricted Subsidiaries will therea f ter again be subject to the Suspended Covenants with respect to future events.  The period of time between the Su s pension Date and the Reversion Date is referred to in this description as the “ Suspension Period .”  Notwithstanding that the Suspended Covenants may be reinstated, no Default or Event of Default will be deemed to have occurred as a result of a failure to comply with the Suspended Covenants during the Suspension Period (or upon termination of the Suspension Period or after that time based solely on events that occurred during the Suspension Period).  For purposes of determining compliance with Section 6.11 during the Suspension Period, it shall be assumed that the provisions of Section 6.10 are applicable during such period as if the applicable Covenant Suspension Event had not occurred.

On the Reversion Date, all Indebtedness incurred during the Suspension Period will be classified to have been incurred pursuant to Section 6.10(A).  To the extent such Indebtedness would not be so permitted to be i n curred or issued pursuant to Section 6.10(A), such Indebtedness will be deemed to have been outstanding on the Escrow Release Date, so that it is classified as permitted under clause (c) of the definition of “Permitted Debt.”  Ca l culations made after the Reversion Date of the amount available to be made as Restricted Payments under Section 6.09 will be made as though Section 6.09 had been in effect since the Escrow Release Date and throughout the Su s pension Period.  Accordingly, Restricted Payments made during the Suspension Period will reduce the amount available to be made as Restricted Payments under Section 6.09(A).  Notwithstanding anything to the contrary, du r ing a Suspension Period the Company may not designate any Subsidiary as an Unrestricted Subsidiary.

The Company shall deliver promptly to the Trustee an Officer’s Certificate notifying it of any such occu r rence under this Section 6.16 and, upon written request by the Company and at its expense, the Trustee shall deliver a notice of such occurence to the Holders of Securities at their addresses as the same shall then appear in the Regi s ter.  Any failure of the Company to deliver such Officer’s Certificate or the Trustee to deliver such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any events described under this Section 6.16.  The Trustee shall have no duty to monitor any of the events described under this Section 6.16 .

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For the avoidance of doubt, the provisions of this Section 6.16 shall only be applicable to the Securities of a series in respect of which a Covenant Suspension Event has occurred.

              Section 6.17     Designation of Restricted and Unrestricted Subsidiaries Following the Escrow Release Date, the Company’s Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default.  Any designation of a Restricted Subsidiary as an Unrestricted Subsid i ary will be deemed to be a designation of each of such entity’s Subsidiaries as Unrestricted Subsidiaries.  Following the Escrow Release Date, if a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsid i ary designated as an Unrestricted Subsidiary will be deemed to be an Investment made as of the time of such desi g nation and may reduce the amount available for Restricted Payments under Section 6.09 or under one or more of the clauses of the definition of Permitted Investments, as determined by the Company.  That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the de f inition of an Unrestricted Subsidiary.  Any designation of a Subsidiary of the Company as an Unrestricted Subsid i ary will be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officer’s Certificate certifying that such designation complied with the preceding cond i tions and was permitted by Section 6.09.

 

             (b)    If, at any time, any Unrestricted Subsidiary would fail to meet the requirements as an Unrestricted Subsidiary under this Indenture, it will thereafter cease to be an Unrestricted Subsidiary for purposes of this Inde n ture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Co m pany as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 6.10, the Company will be in default of such covenant.

(c) Following the Escrow Release Date, the Company’s Board of Directors may redesignate any U n restricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such design a tion, no Default shall have occurred and be continuing and either:

(1) the Company could incur at least $1.00 of additional Indebtedness pursuant to the Total Leverage Ratio set forth in Section 6.10(A); or

(2) the Company’s Total Leverage Ratio is less than or equal to the Company’s Total Leve r age Ratio immediately prior to such designation, on a pro forma basis taking into account such designation;

provided ,   further , that such redesignation will be deemed to be an incurrence of Indebtedness and, if applicable, an incurrence of related Liens by a Restricted Subsidiary of the Company of any outstanding Indebtedness and, if a p plicable, related Liens of such Unrestricted Subsidiary and such redesignation will only be permitted if (1) such I n debtedness and, if applicable, related Liens are permitted under Section 6.10 and, if applicable, Section 6.11, calc u lated, if applicable, on a pro forma basis as if such designation had occurred at the beginning of the four-quarter re f erence period and (2) no Default or Event of Default would be in existence following such designation.


ARTICLE VII


REMEDIES OF TRUSTEE AND SECURITYHOLDERS

            

                        Section 7.01     Events of Default   The term “ Event of Default ,” wherever used herein, with respect to any series of Securities, means any of the following:

 

(i) default in the payment of any installment of interest up on any Securities of any series as and when the same shall become due and payable, and continuance of such default for a period of 60 days ;

(ii) default in the payment of all or any part of the principal or premium (if any) on any Security of such series as and when the same shall become due and payable either at its final Stated Maturity, upon any redemption, by declaration or otherwise ;

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(iii) failure on the part of the Company duly to observe or perform any other of the cov e nants or agreements on the part of the Company in the Securities of such series or contained in this Indenture for a period of 90 days after the date on which written notice specifying such failure, sta t ing that such notice is a “Notice of Default” hereunder and demanding that the Company remedy the same, shall have been given by registered or certified mail, return receipt requested, to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 25% in aggregate pri n cipal amount of the Outstanding Securities of such series ;

(iv) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness by the Company or any Restricted Subsidiary or the payment of which is guaranteed by the Company or any Restricted Subsidiary, other than I n debtedness owed to the Company or a Restricted Subsidiary, whether such Indebtedness or guara n tee now exists or is created after the issuance of a series of Securities, if

(A) such default either

(1) results from the failure to pay any such Indebtedness at its final Stated Maturity (after giving effect to any applicable grace periods) or

(2) relates to an obligation other than the obligation to pay principal of any such Indebtedness at its final Stated Maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its final Stated Maturity;

(B) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final Stated Maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $500.0 million or more at any one time outstanding; and

(C) in the case of the occurrence of a default described in Section 7.01(iv)(A)(2), such default results in (x) the acceleration of such Indebtedness prior to the final Stated Maturity thereof or (y) the commencement of judicial proceedings to foreclose upon, or to exercise rem e dies under applicable law or applicable security documents to take ownership of, the assets secu r ing such Indebtedness;

(v) failure by the Company or any Significant Subsidiary to pay final judgments aggr e gating in excess of $500.0 million or its foreign currency equivalent (net of any amounts which are covered by insurance policies from creditworthy insurers), which final judgments remain undi s charged, unwaived and unstayed for a period of more than 60 days after such judgment becomes f i nal; or

(vi) the Company shall commence a voluntary case under any applicable bankruptcy, i n solvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or make any general assignment for the benefit of creditors.

             Section 7.02     Acceleration of Maturity; Rescission and Annulment .

 

(a) If an Event of Default described in Section 7.01(i) or (ii) occurs with respect to any series of Securities and is continuing, then, and in each and every such case, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities then Outstanding of such series by notice in writing to the Company (and to the Trustee if given by Holders), may declare the entire principal of the Securities of such series, and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declar a tion, the same shall become immediately due and payable .  

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(b) If an Event of Default described in Section 7.01(iii) occurs with respect to any series of Securities and is continuing for a period of 60 days after the date on which the underlying Default becomes an Event of D e fault, then, and in each and every such case, unless the principal of all of the Securities of such series shall have a l ready become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of all of the Securities of such series then Outstanding by notice in writing to the Company (and to the Trustee if given by Holders), may declare the entire principal of all of the Securities of such series then Outstan d ing, and the interest accrued thereon, if any, to be due and payable immediately, and upon such declaration, the same shall become immediately due and payable.

(c) If an Event of Default described in Section 7.01(vi)   occurs and is continuing, then the principal amount of all the Securities then Outstanding of such series, and the interest accrued thereon, if any, shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.  

(d) The foregoing provisions are subject to the condition that if, at any time after the principal of the Securities of such series shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided:

(x) the Company shall pay or shall deposit with the Trustee a sum sufficient to pay:

 

 

(i)

all matured installments of interest upon all the Securities of such series; and

 

(ii)

the principal of any and all Securities of such series which shall have become due otherwise than by acceleration; and

 

(iii)

interest upon such principal and, to the extent that payment of such interest is enforceable under a p plicable law, on overdue installments of interest, at the Overdue Rate applicable to such series to the date of such payment or deposit; and

 

(iv)

all amounts payable to the Trustee pursuant to Section 7.07; and

(y) all Events of Default with respect to such series of Securities, other than the non-payment of the principal of Securities of such series which shall have become due by acceleration, shall have been cured, waived or othe r wise remedied as provided herein,

then, and in every such case, the Holders of a majority, or any applicable supermajority, in aggregate principal amount of the Securities of such series then Outstanding, by written notice to the Company and to the Trustee, may waive all defaults related to such series of Securities and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default relating to such series of Securities or shall impair any right consequent thereon.

 

(e) In the event of a declaration of acceleration of the Securities because an Event of Default pursuant to Section 7.01(iv) has occurred and is continuing, the declaration of acceleration of the Securities shall be aut o matically annulled if the default triggering such Event of Default pursuant to Section 7.01(iv) shall be remedied or cured, or waived by the holders of the Indebtedness with respect to which such default has occurred within 30 days after the declaration of acceleration of the Securities.

              Section 7.03     Collection of Indebtedness by Trustee; Trustee May Prove Debt .

 

(a) The Company covenants that (i) in case default shall be made in the payment of any instal l ment of interest on any of the Securities of any series when such interest shall have become due and payable, and such default shall have continued for a period of 60 days, or (ii) in case default shall be made in the payment of all or any part of the principal of any of the Securities of any series when the same shall have become due and payable, whether upon maturity of such Securities or upon any redemption or by declaration or otherwise, then upon demand of the Trustee, the Company will pay to the Trustee for the benefit of the Holders of such Secur i ties of such series the whole amount that then shall have become due and payable on such Securities for principal and interest, as the case may be (with interest to the date of such payment upon the overdue principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest at the Overdue Rate applicable to such series of Securities); and in addition thereto, such further amount as shall be

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sufficient to cover the costs and expenses of collection, and such other amount due the Trustee under Section 11.01 in respect of such Securities.

(b) Until such demand is made by the Trustee, the Company may pay the principal of and interest on such Securities to the registered Holders, whether or not the Securities be overdue.

(c) In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or procee d ings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or pr o ceedings to judgment or final decree, and may enforce any such judgment or final decree against the Company or other obligor upon such Securities of such series and collect in the manner provided by law out of the property of the Company or other obligor upon such Securities of such series, wherever situated, all the moneys adjudged or d e creed to be payable.

(d) In case there shall be pending proceedings relative to the Company or any other obligor upon the Securities of any series then Outstanding under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorgan i zation, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Company or its property or such other obligor, or in case of any other similar judicial proceedings relative to the Company or other obligor upon such Securities, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of such Securities shall then be due and payable as therein expressed or by de c laration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 7.03, shall be entitled and empowered, by intervention in such proceedings or otherwise:

(i) to file and prove a claim or claims for the whole amount of principal and interest, if any, owing and unpaid in respect of such Securities, and, in the case of any judicial proceedings, to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for amounts payable to the Trustee under Section 11.01) and of the Holders of such Securities allowed in any judicial proceedings rel a tive to the Company or other obligor upon such Securities, or to the creditors or property of the Company or such other obligor; and

(ii) unless prohibited by applicable law and regulations, or unless otherwise directed by a majority in aggr e gate principal amount of the Securities of each affected series at the time Outstanding, to vote on behalf of the Hol d ers of such Securities in any election of a receiver, assignee, trustee or a standby trustee in arrangement, reorganiz a tion, liquidation or other bankruptcy or insolvency proceedings, custodian or other person performing similar fun c tions in respect of any such proceedings; and

(iii) to collect and receive any moneys or other property payable or deliverable on any such claims, and to di s tribute all amounts received with respect to the claims of the Holders of such Securities and of the Trustee on their behalf;

and any trustee, receiver, or liquidator, custodian or other similar official performing similar functions in respect of any such proceedings is hereby authorized by each of the Holders of such Securities to make payments to the Tru s tee, and, in the event that the Trustee shall consent to the making of payments directly to the Holders of such Secur i ties, to pay to the Trustee its costs and expenses of collection and all other amounts due to it pursuant to Section 11.01.

(e) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder of such Securities any plan of reorganization, arrangement, a d justment or composition affecting such Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of such Securities in any such proceeding, except as aforesaid in clause (ii).

(f) All rights of action and of asserting claims under this Indenture, or under any of the Securities of any series, may be enforced by the Trustee without the possession of any of such Securities or the production thereof in any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall be awarded to the

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Trustee for ratable distribution to the Holders of such Securities in respect of which such action was taken, after payment of all sums due to the Trustee under Section 11.01 in respect of such Securities.

(g) In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Securities of such series in respect to which such action was taken, and it shall not be necessary to make any Holders of such Securities parties to any such proceedings.

 

              Section 7.04     Application of Proceeds .

 

(a) Any moneys collected by the Trustee pursuant to this Article VII in respect of the Company’s obligations with respect to a series of Securities or, after an Event of Default, any money or other property di s tributable in respect of the Company’s obligations under this Indenture, shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal or interest, upon presentation of the several Securities in respect of which monies have been collected and stamping (or otherwise noting) thereon the payment, or issuing Securities of such series in reduced principal amounts in exchange for the presented Securities of like series if only partially paid, or upon surrender thereof if fully paid:

FIRST: To the payment of all amounts payable to the Trustee (including any predecessor trustee) under Section 11.01 in respect to the Securities of such series;

SECOND: In case the principal of the Outstanding Securities of such series in respect of which moneys have been collected shall not have become and be then due and payable, to the payment of interest on such Securities in default in the order of the maturity of the installments on such interest, with interest (to the extent that such interest has been collected by the Trustee and is permitted by applicable law) upon the overdue i n stallments of interest at the Overdue Rate applicable to such Securities, such payments to be made ratably to the persons entitled thereto, without discrimination or preference;

THIRD: In case the principal of the Outstanding Securities of such series in respect of which moneys have been collected shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon such Securities for principal and interest, with interest upon the overdue princ i pal, and (to the extent that such interest has been collected by the Trustee and is permitted by applicable law) upon the overdue installations of interest at the Overdue Rate applicable to such Securities; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities of such s e ries, then to the payment of such principal and interest, without preference or priority of principal over inte r est, or of interest over principal, or of any installment of interest over any other installment of interest or of any such Security over any other such Security, ratably to the aggregate of such principal and accrued and u n paid interest; and

FOURTH: To the payment of the remainder, if any, to the Company or any other person lawfully ent i tled thereto.

 

             Section 7.05     Suits for Enforcements .  

In case an Event of Default with respect to any series of Securities has occurred, has not been waived and is continuing, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture and such Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforc e ment of any covenant or agreement contained in this Indenture or such Securities or in aid of the exercise of any power granted in this Indenture or such Securities or to enforce any other legal or equitable right vested in the Tru s tee by this Indenture, such Securities or by law.

 

             Section 7.06     Restoration of Rights on Abandonment of Proceedings .  

In case the Trustee or any Holder shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or such Holder, then and in every such case the Company, the Trustee and the Holders shall be restored

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respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Holders shall continue as though no such proceedings had been taken.

 

             Section 7.07     Limitation on Suits by Noteholders .  

No Holder of any Security of any series shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture or such Security, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder or thereunder, unless:

(a) such Holder previously shall have given to the Trustee written notice of an Event of Default with respect to the Securities of that series and of the continuance thereof, as hereinbefore provided,

(b) the Holders of at least than 25% in aggregate principal amount of the Securities then Outstanding of such series shall have made written request upon the Trustee to institute such action or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby,

(c) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceeding, and

(d) no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 7.10.

For the protection and enforcement of the provisions of this Section 7.07, each and every Holder of Secur i ties of such series and the Trustee shall be entitled to such relief as can be given either at law or in equity.

 

          Section 7.08    Right of Securityholders To Institute Certain Suits .  

Notwithstanding any other provision in this Indenture and any provision of any Security, the right of any Holder of any Security to receive payment of the principal of, premium, if any, and interest, if any, on such Security, on or after the respective due dates expressed in such Security, or upon redemption, by declaration, repayment or otherwise, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

 

         Section 7.09     Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default .  

No right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities of any s e ries is intended to be exclusive of any other right or remedy and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

No delay or omission of the Trustee or of any Holder of such Securities to exercise any right or remedy accr u ing upon any Event of Default with respect to any such series of Securities occurring and continuing as aforesaid shall impair any such right or remedy or shall be construed to be a waiver of any such Event of Default or an acqu i escence therein. Every right and remedy given by this Indenture, any Security or law to the Trustee or to the Holders of such Securities may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or, subject to Section 7.07, by the Holders of Securities.

 

              Section 7.10     Control by Holders of Securities .  

 

The Holders of a majority in aggregate principal amount of the Securities of each affected series at the time Outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such Securities by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and shall not expose the Trustee to personal liability; and provided further , that (subject to Section 11.02) the Trustee shall have the right to decline to follow any such direction (a) if the Trustee, being advised by

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counsel, shall determine that the action or proceeding so directed may not lawfully be taken; or (b) if the Trustee by its board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Tru s tee shall determine in good faith that the action or proceedings so directed would involve the Trustee in personal liability; or (c) if the Trustee in good faith shall so determine that the actions or forbearances specified in or pursuant to such direction would be unduly prejudicial to the interests of the Holders of the Securities not joining in the gi v ing of said direction, it being understood that (subject to Section 11.02) the Trustee shall have no duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders.

Nothing in this Indenture shall impair the right of the Trustee in its discretion to take any action deemed proper by the Trustee that is not inconsistent with such direction or directions by Securityholders.

 

              Section 7.11     Waiver of Past Defaults .  

Prior to the declaration of acceleration of the maturity of the Securities of any series as provided in Section 7.01, the Holders of a majority in aggregate principal amount of such Securities at the time Outstanding may on b e half of the Holders of all such Securities waive any past default or Event of Default described in Section 7.01 and its consequences, except a default in respect of a covenant or provision of this Indenture or of such series of Securities which cannot be modified or amended without the consent of the Holder of each Security of such series affected. In the case of any such waiver, the Company, the Trustee and the Holders of all such Securities shall be restored to their former positions and rights hereunder, respectively, and such default shall cease to exist and be deemed to have been cured and not to have occurred for purposes of this Indenture; but no such waiver shall extend to any subs e quent or other default or impair any right consequent thereon.

 

              Section 7.12     Right of Court To Require Filing of Undertaking To Pay Costs .  

All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken, suffered or omitted by it as Tru s tee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 7.12 shall not apply to any suit instituted by the Trustee, to any suit instituted by any S e curityholder or group of Securityholders holding in the aggregate more than 10% in aggregate principal amount of the Securities of any series, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of or interest on any Security on or after the due date expressed in such Security or any date fixed for r e demption.

 

ARTICLE VIII

CONCERNING THE SECURITYHOLDERS

              Section 8.01     Evidence of Action of Securityholders Whenever in this Indenture it is provided that the Holders of a specified percentage or a majority in aggregate principal amount of the Securities or of any series of Securities may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the Holders of such spe c ified percentage or majority have joined therein may be evidenced by (a) any instrument or any number of instr u ments of similar tenor executed by Securityholders in person, by an agent or by a proxy appointed in writing, inclu d ing through an electronic system for tabulating consents operated by the Depository for such series or otherwise (such action becoming effective, except as herein otherwise expressly provided, when such instruments or evidence of electronic consents are delivered to the Trustee and, where it is hereby expressly required, to the Company), or (b) by the record of the Holders of Securities voting in favor thereof at any meeting of Securityholders duly called, or (c) by a combination of such instrument or instruments and any such record of such a meeting of Securityholders.

 

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              Section 8.02     Proof of Execution or Holding of Securities   Proof of the execution of any instrument by a Securityholder or his, her or its agent or proxy and proof of the holding by any Person of any of the Securities shall be sufficient if made in the following manner:

 

(a) The fact and date of the execution by any Person of any such instrument may be proved (i) by the certificate of any notary public or other officer in any jurisdiction who, by the laws thereof, has power to take acknowledgments or proof of deeds to be recorded within such jurisdiction, that the Person who signed such instrument did acknowledge before such notary public or other officer the execution thereof, or (ii) by the affidavit of a witness of such execution sworn to before any such notary or other o f ficer.  Where such execution is by a Person acting in other than his or her individual capacity, such certif i cate or affidavit shall also constitute sufficient proof of his or her authority.

(b) The ownership of Securities of any series shall be proved by the Register of such Secur i ties or by a certificate of the Registrar for such series.

(c) The Trustee may require such additional proof of any matter referred to in this Section 8.02 as it shall deem appropriate or necessary, so long as the request is a reasonable one.

(d) If the Company shall solicit from the Holders of Securities of any series any action, the Company may, at its option, fix in advance a record date for the determination of Holders of Securities e n titled to take such action, but the Company shall have no obligation to do so.  Any such record date shall be fixed at the Company’s discretion; provided that such record date shall not be more than 30 calendar days prior to the first solicitation of any consent or waiver or more than 30 calendar days prior to the date of the most recent list of Holders furnished to the Trustee prior to such solicitation pursuant to Section 312 of the TIA.  If such a record date is fixed, such action may be sought or given before or after the record date, but only the Holders of Securities of record at the close of business on such record date shall be deemed to be Holders of Securities for the purpose of determining whether Holders of the requisite proportion of Ou t standing Securities of such series have authorized or agreed or consented to such action, and for that pu r pose the Outstanding Securities of such series shall be computed as of such record date.

             Section 8.03     Persons Deemed Owners .

 

(a) The Company, the Trustee, any Agent and any agent of the Company or the Trustee may treat the Person in whose name any Security is registered in the Register as the owner of such Security for the purpose of receiving payment of principal of and premium, if any, and (subject to Section 3.08) interest and Additional Inte r est if any, on, such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee, any Agent nor any agent of the Company or the Trustee shall be affected by n o tice to the contrary.  All payments made to any Holder, or upon his, her or its order, shall be valid, and, to the e x tent of the sum or sums paid, effectual to satisfy and discharge the liability for moneys payable upon such Security.

(b) None of the Company, the Trustee or any Agent shall have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

              Section 8.04     Effect of Consents   After an amendment, supplement, waiver or other action becomes effective as to any series of Securities, a consent to it by a Holder of such series of Securities is a continuing consent conclusive and binding upon such Holder and every subsequent Holder of the same Securities or portion thereof, and of any Security issued upon the transfer thereof or in exchange therefor or in place thereof, even if notation of the consent is not made on any such Security.  An amendment, supplement or waiver becomes effective in accor d ance with its terms and thereafter binds every Holder.

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ARTICLE IX

[ RESERVED ]

ARTICLE X

REPORTS BY THE TRUSTEE
AND SECURITYHOLDERS’ LISTS

              Section 10.01     Reports by Trustee .

 

(a) Within 60 days after May 15 in each year, the Trustee will send to all Holders, as their names and addresses appear on the register kept by the Registrar, a brief report dated as of such May 15, in accordance with, and to the extent required under, TIA § 313(a) .

(b) A copy of each report at the time of its being sent to Holders of Securities of any series will be sent by the Trustee to the Company and filed by the Trustee with the SEC and each stock exchange on which the Securities of that series are listed in accordance with TIA § 313(d). The Company will promptly notify the Trustee when Securities of any series are listed on any stock exchange.

(c) The Company shall reimburse the Trustee for all reasonable expenses incurred in the preparation and transmission of any report pursuant to the provisions of this Section 10.01.

              Section 10.02     Securityholders’   Lists The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders of each series of Securities and will otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, the Company will furnish to the Trustee at least ten days before each Interest Payment Date and at such other times as the Trustee may request in writing a list, in such form and as of such date as the Trustee may reasonably require, of the names and addresses of Holders of each series of Securities.

 

ARTICLE XI

CONCERNING THE TRUSTEE

             Section 11.01     Rights of Trustees; Compensation and Indemnity   The Trustee accepts the trusts created by this Indenture upon the terms and conditions hereof, including the following, to all of which the parties hereto and the Holders from time to time of the Securities agree:

 

(a) The Trustee shall be entitled to such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (including in any agent capacity in which it acts).  The compensation of the Trustee shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust.  The Company shall reimburse the Trustee promptly upon its request for all out-of-pocket expenses, disbursements and advances (including costs of collection) i n curred or made by the Trustee in accordance with this Indenture (including, without limitation, the reason a bly incurred expenses and disbursements of its agents, delegates, attorneys and counsel), except any such expense, disbursement or advance caused by its own negligence, bad faith or willful misconduct.

The Company also agrees to indemnify each of the Trustee and its officers, agents, directors and employees hereunder for, and to hold them harmless against, any and all loss, liability, damage, claim, or expense (including fees and expense of counsel), including taxes (other than taxes based upon, measured by or determined by the income of the Trustee), arising out of or in connection with this Indenture, the Secur i ties, the acceptance or administration of the trust or trusts hereunder and the performance of its duties (i n cluding in any agent capacity in which it acts), as well as the costs and expenses of defending itself against any claim (whether asserted by the Company, or any Holder or any other Person) or liability in connection

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with the exercise or performance of any of its powers or duties hereunder,  or in connection with enforcing the provisions of this Section, except to the extent such loss, liability, damage claim or expense is due to the Trustee’s own negligence, bad faith or willful misconduct.  The Trustee shall notify the Company promptly of any claim for which it may seek indemnity; provided ,   however , that the Trustee shall not incur any liability if it fails to so notify and that the failure to so notify the Company shall not affect the oblig a tions of the Company hereunder to indemnify.

As security for the performance of the obligations of the Company under this Section 11.01(a), the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust by the Trustee to pay principal of and interest and Additional Interest, if any, on any Securities.  Notwithstanding any provisions of this Indenture to the contrary, the obligations of the Company to compensate and indemnify the Trustee under this Section 11.01(a) shall survive the resi g nation or removal of the Trustee, any satisfaction and discharge under Article XII, the payment of any S e curities and the termination of this Indenture for any reason.  In addition to and without prejudice to its ot h er rights hereunder, when the Trustee incurs expenses or renders services after an Event of Default spec i fied in Section 7.01(vi) occurs, the expenses and compensation for the services are intended to constitute expenses of administration under the Bankruptcy Code or any applicable state bankruptcy, insolvency or similar laws.  “Trustee” for purposes of this Section 11.01(a) shall include any predecessor Trustee; provi d ed ,   however , that the negligence, willful misconduct or bad faith of any Trustee hereunder shall not affect the rights of any other Trustee hereunder.

(b) The Trustee may execute any of the trusts or powers hereunder or perform any duty her e under either directly or by its agents, delegates or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, delegate or attorney appointed with due care by it her e under.

(c) The Trustee may consult with counsel of its selection, and, subject to Section 11.02, the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Trustee hereunder in reliance thereon.

(d) The Trustee, subject to Section 11.02, may rely upon the certificate of the Secretary or one of the Assistant Secretaries of the Company as to the adoption of any Board Resolution or resolution of the stockholders of the Company, and any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by a Company Order.

(e) Subject to Section 11.04, the Trustee, any Agent or any agent of the Trustee, in its ind i vidual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 310(b) and 311 of the TIA, may otherwise deal with the Company with the same rights it would have had if it were not the Trustee or such agent.

(f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law.  The Trustee shall be under no liability for interest on or investment of any money received by it hereunder except as otherwise agreed in writing with the Company.

(g) Any action taken by the Trustee pursuant to any provision hereof at the request or with the consent of any Person who at the time is the Holder of any Security shall be conclusive and binding in respect of such Security upon all future Holders thereof or of any Security or Securities which may be i s sued for or in lieu thereof in whole or in part, whether or not such Security shall have noted thereon the fact that such request or consent had been made or given.

(h) The Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, direction, order, approval, bond, debenture, other evidence of indebtedness  or other paper or document b e lieved by it to be genuine and to have been signed or presented by the proper party or parties.

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(i) The Trustee shall not be under any obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders of the Securities, purs u ant to any provision of this Indenture, unless such Holders of the Securities shall have offered to the Tru s tee pre-funding, security and/or indemnity satisfactory to the Trustee against the costs, expenses and liabil i ties which may be incurred by it therein or thereby.

(j) The Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith and believed by it to be authorized or within its discretion or within the rights or powers co n ferred upon it by this Indenture.

(k) The Trustee shall not be deemed to have knowledge or be charged with notice of any D e fault or Event of Default with respect to any Securities unless a Responsible Officer of the Trustee has a c tual knowledge by way of written notice thereof or unless the Holders of not less than 25% of the Outstan d ing Securities notify the Trustee thereof by a written notice to the Trustee that is received by a Responsible Officer of the Trustee at its Corporate Trust Office and such notice references such Securities and this I n denture.

(l) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, o r der, bond, debenture, note, other evidence of Indebtedness or other paper or document; provided ,   however , that the Trustee, may, but shall not be required to, make such further inquiry or investigation into such facts or matters as it may see fit at the expense of the Company and shall incur no liability of any kind by reason of such inquiry or investigation.

(m) The rights, privileges, protections, immunities and benefits given to the Trustee, inclu d ing, without limitation, its right to be secured, pre-funded and/or indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other pe r son employed to act hereunder.

(n) In no event shall the Trustee, the Paying Agent, the transfer agent or the Registrar, be r e sponsible or liable for special, indirect, punitive, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit), whether or not foreseeable and irrespective of whether the Trustee has been advised of the possibility of such loss or damage and regardless of the form of action.

(o) The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Inde n ture, which certificate may be signed by any person authorized to sign an Officer’s Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

(p) The permissive right of the Trustee to take or refrain from taking action hereunder shall not be construed as a duty.

(q) The Trustee may refrain from taking any action in any jurisdiction if taking such action in that jurisdiction would, in the reasonable opinion of the Trustee based on written advice received from counsel or any opinion of counsel, be contrary to any law of that jurisdiction or, to the extent applicable, the State of New York.  Furthermore, the Trustee may refrain from taking such action if, in the reasonable opinion of the Trustee based on such written advice or opinion of counsel, it would otherwise render the Trustee liable to any person in that jurisdiction or the State of New York and there has not been offered to the Trustee pre-funding, security and/or indemnity satisfactory to it against the liabilities to be incurred therein or thereby, or the Trustee would not have the legal capacity to take such action in that jurisdiction by virtue of applicable law in that jurisdiction or the State of New York or by virtue of a written order of any court or other competent authority in that jurisdiction that the Trustee does not have such legal capac i ty.

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(r) Notwithstanding any other provision of this Indenture, the Trustee shall be entitled to make a deduction or withholding from any payment which it makes under this Indenture for or on account of any present or future taxes, duties or charges if and to the extent so required by any applicable law and any current or future regulations or agreements thereunder or official interpretations thereof or any law i m plementing an intergovernmental approach thereto or by virtue of the relevant holder failing to satisfy any certification or other requirements in respect of the Securities, in which event the Trustee shall make such payment after such withholding or deduction has been made and shall account to the relevant authorities for the amount so withheld or deducted and shall have no obligation to gross up any payment hereunder or pay any additional amount as a result of such withholding tax.

             Section 11.02     Duties of Trustee .

 

(a) In case an Event of Default has occurred and is continuing, the Trustee shall, with respect to such Securities, exercise such of the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the ci r cumstances in the conduct of such his or her own affairs.

(b) Except during the continuance of an Event of Default with respect to a series of Secur i ties,

(i) the Trustee undertakes to perform such duties and only such duties with respect to the Securities of that series as are specifically set forth in this Indenture, and no implied cov e nants or obligations shall be read into this Indenture against the Trustee, whose duties and oblig a tions shall be determined solely by the express provisions of this Indenture; and

(ii) the Trustee may conclusively rely, as to the truth of the statements and the co r rectness of the opinions expressed therein, in the absence of bad faith on the part of the Trustee, upon certificates and opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts, statements, opinions or conclusions stated therein).

(c) None of the provisions of this Indenture shall be construed to relieve the Trustee from l i ability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that

(i) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in a s certaining the pertinent facts;

(ii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in connection with a series of Securities in accordance with the direction of Securityholders of a majority in principal amount of the Outstanding Securities of such series, determined as provided herein, relating to the time, method and place of conducting any procee d ing for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with; and

(iii) this subsection (c) shall not be construed to limit the effect of subsections (b) and (e) of this Section 11.02.

(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the prov i sions of this Section 11.02.

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(e) None of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise to incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if the Trustee shall have reasonable grounds for believing that repayment of such funds or adequate security, pre-funding and/or indemnity against such risk or liability is not reasonably assured to it.

            Section 11.03     Notice of Defaults Within 90 calendar days after the occurrence thereof and if known to the Trustee, the Trustee shall give to the Holders of the Securities of a series notice of each Default or Event of D e fault with respect to the Securities of such series known to the Trustee, by transmitting such notice to Holders at their addresses as the same shall then appear on the Register, unless such Default shall have been cured or waived before the giving of such notice. Except in the case of a default in the payment of the principal of (or premium, if any) or interest or Additional Interest, if any, on any Security of such series, the Trustee shall be protected in wit h holding such notice if and so long as the board of directors, the executive committee or a trust committee of dire c tors or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the i n terest of the Holders of Securities of such series.

 

              Section 11.04     Eligibility; Disqualification .

 

(a) The Trustee shall at all times satisfy the requirements of Section 310(a) of the TIA.  The Tru s tee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published a n nual report of condition, and shall have a Corporate Trust Office.  If at any time the Trustee shall cease to be el i gible in accordance with the provisions of this Section 11.04, it shall resign immediately in the manner and with the effect hereinafter specified in this Article XI.

(b) The Trustee shall comply with Section 310(b) of the TIA; provided ,   however , that there shall be excluded from the operation of Section 310(b)(i) of the TIA any indenture or indentures under which other secur i ties or certificates of interest or participation in other securities of the Company are Outstanding if the requirements for such exclusion set forth in Section 310(b)(1) of the TIA are met.  If the Trustee has or shall acquire a conflicting interest within the meaning of Section 310(b) of the TIA, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this I n denture.  If Section 310(b) of the TIA is amended any time after the date of this Indenture to change the circu m stances under which a Trustee shall be deemed to have a conflicting interest with respect to the Securities of any series or to change any of the definitions in connection therewith, this Section 11.04 shall be automatically amen d ed to incorporate such changes.

             Section 11.05     Resignation and Notice; Removal   The Trustee, or any successor to it hereafter appointed, may at any time resign and be discharged of the trusts hereby created with respect to any one or more or all series of Securities by giving to the Company notice in writing and specifying the effective date of such resignation.  Such resignation shall take effect upon the appointment of a successor Trustee and the acceptance of such appointment by such successor Trustee on or after the effective date of such resignation specified in such written notice.  Any Tru s tee hereunder may be removed with respect to any series of Securities at any time by the filing with such Trustee and the delivery to the Company of an instrument or instruments in writing signed by the Holders of a majority in principal amount of the Securities of such series then Outstanding, specifying such removal and the date when it shall become effective.

 

If at any time:

(1) the Trustee shall fail to comply with the provisions of Section 310(b) of the TIA after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or

(2) the Trustee shall cease to be eligible under Section 11.04 and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or

(3) the Trustee shall become incapable of acting or shall be adjudged bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or

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control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquid a tion,

then, in any such case, (i) the Company by written notice to the Trustee may remove the Trustee and appoint a su c cessor Trustee with respect to all Securities, or (ii) subject to Section 315(e) of the TIA, any Securityholder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly sit u ated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.

Upon its resignation or removal, any Trustee shall be entitled to the payment of reasonable compensation for the services rendered hereunder by such Trustee and to the payment of all reasonable expenses incurred hereu n der and all moneys then due to it hereunder.  The Trustee’s rights to indemnification and its lien provided in Section 11.01(a) shall survive its resignation or removal, the satisfaction and discharge of this Indenture and the termination of this Indenture for any reason.

              Section 11.06     Successor Trustee by Appointment .

 

(a) In case at any time the Trustee shall resign, or shall be removed (unless the Trustee shall be removed as provided in Section 11.04(b), in which event the vacancy shall be filled as provided in Section 11.04(b)), or shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or if a receiver of the Trustee or of its property shall be appointed, or if any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation with respect to the Secur i ties of one or more series, a successor Trustee with respect to the Securities of that or those series (it being u n derstood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any series) may be appointed by the Holders of a majority in aggregate principal amount of the Securities of that or those series then Outstanding, by an instrument or instruments in writing signed in duplicate by such Holders and filed, one original thereof with the Company and the other with the successor Trustee; provided that, until a successor Trustee shall have been so appointed by the Holders of Securities of that or those series as herein authorized, the Company, or, in case all or substantially all the assets of the Company shall be in the possession of one or more custodians or receivers lawfully appointed, or of trustees in bankruptcy or reorganization proceedings (including a trustee or trustees appointed under the provisions of the Bankruptcy Code), or of assignees for the benefit of creditors, such receivers, custodians, trustees or assignees, as the case may be, by an instrument in writing, shall appoint a successor Trustee with respect to the Securities of such series.  Subject to the provisions of Sections 11.04 and 11.05, upon the appointment as above provided of a successor Trustee with respect to the Securities of any series, the Trustee with respect to the Securities of such series shall cease to be Trustee hereunder.  After any such appointment other than by the Holders of Securities of that or those series, the Person making such a p pointment shall forthwith cause notice thereof to be mailed to the Holders of Securities of such series at their a d dresses as the same shall then appear on the Register but any successor Trustee with respect to the Securities of such series so appointed shall, immediately and without further act, be superseded by a successor Trustee a p pointed by the Holders of Securities of such series in the manner above prescribed, if such appointment be made prior to the expiration of one year from the date of the mailing of such notice by the Company, or by such r e ceivers, trustees or assignees.

(b) If any Trustee with respect to the Securities of one or more series shall resign or be removed and a successor Trustee shall not have been appointed by the Company or by the Holders of the Securities of such series within 30 days of any notice of resignation or removal or, if any successor Trustee so appointed shall not have a c cepted its appointment within 30 calendar days after such appointment shall have been made, the resigning Trustee at the expense of the Company may appoint a successor Trustee or apply to any court of competent jurisdiction for the appointment of a successor Trustee.  If in any other case a successor Trustee shall not be appointed pursuant to the foregoing provisions of this Section 11.06 within three months after such appointment might have been made hereunder, the Holder of any Security of the applicable series or any retiring Trustee at the expense of the Comp a ny may apply to any court of competent jurisdiction to appoint a successor Trustee.  Such court may thereupon, in any such case, after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee.

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(c) Any successor Trustee appointed hereunder with respect to the Securities of one or more series shall execute, acknowledge and deliver to its predecessor Trustee and to the Company, or to the receivers, trustees, assignees or court appointing it, as the case may be, an instrument accepting such appointment hereunder, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations with respect to such series of such predecessor Trustee with like effect as if originally named as Trustee hereunder, and such predecessor Trustee, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to pay over, and such successor Trustee shall be entitled to receive, all moneys and properties held by such predecessor Trustee as Trustee hereu n der, subject nevertheless to its lien provided for in Section 11.01(a).  Nevertheless, on the written request of the Company or of the successor Trustee or of the Holders of at least 10% in aggregate principal amount of the Secur i ties of such series then Outstanding, such predecessor Trustee, upon payment of its said charges and disbursements, shall execute and deliver an instrument transferring to such successor Trustee upon the trusts herein expressed all the rights, powers and trusts of such predecessor Trustee and shall assign, transfer and deliver to the successor Trustee all moneys and properties held by such predecessor Trustee, subject nevertheless to its lien provided for in Section 10.01(a); and, upon request of any such successor Trustee and the Company shall make, execute, acknowledge and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Trustee all such authority, rights, powers, trusts, immunities, duties and obligations.  In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, then, the predecessor Trustee and each successor Trustee with respect to such Securities shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the admi n istration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such su p plemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.

              Section 11.07     Successor Trustee by Merger Any Person into which the Trustee or any successor to it in the trusts created by this Indenture shall be merged or converted, or any Person with which it or any successor to it shall be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee or any such successor to it shall be a party, or any Person to which the Trustee or any successor to it shall sell or othe r wise transfer all or substantially all of the corporate trust business of the Trustee, shall be the successor Trustee u n der this Indenture without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such Person shall be otherwise qualified and eligible under this Article XI.  In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture with respect to one or more series of Securities, any of such Securities shall have been authenticated but not delivered by the Trustee then in office, any successor to such Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Sec u rities; and in case at that time any of the Securities shall not have been authenticated, any successor to such Trustee may authenticate such Securities either in the name of any predecessor Trustee hereunder or in the name of the su c cessor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture; provided that the certificate of the Trustee shall have; provided ,   however , that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

 

               Section 11.08     Right to Rely on Officer’s Certificate   Subject to Section 11.02, and subject to the prov i sions of Section 15.01 with respect to the certificates required thereby, whenever in the administration of the prov i sions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officer’s Certificate with respect thereto delivered to the Trustee, and such Officer’s Certificate, in the absence of bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof.

 

               Section 11.09     Appointment of Authenticating Agent The Trustee may appoint an agent (the “ Authe n ticating Agent ”) to authenticate the Securities, and the Trustee shall give written notice of such appointment to the Company and all Holders of Securities of the series with respect to which such Authenticating Agent shall serve. 

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Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Securities whe n ever the Trustee may do so.  Each reference in this Indenture to authentication by the Trustee includes authentication by the Authenticating Agent.  Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder.

 

Each Authenticating Agent shall at all times be a Person organized and doing business and in good standing under the laws of the United States, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to superv i sion or examination by federal or state authority.  If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Art i cle XI, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Article XI, it shall resign immediately in the manner and with the effect specified in this Article XI.

Any Person into which an Authenticating Agent may be merged or converted or with which it may be co n solidated, or any Person resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any Person succeeding to all or substantially all of the corporate agency or corporate trust bus i ness of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such Person shall be othe r wise eligible under this Article XI, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company.  The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company.  Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the pr o visions of this Section 11.09, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give written notice of such appointment to all Holders of Securities of the series with respect to which such Authenticating Agent shall serve.  Any successor Authenticating Agent upon acceptance of its a p pointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent.  No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 11.09.

The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 11.09.

              Section 11.10     Communications by Securityholders with Other Securityholders Holders of Securities may communicate pursuant to Section 312(b) of the TIA with other Holders with respect to their rights under this Indenture or the Securities.  The Company, the Trustee, the Registrar and anyone else shall have the protection of Section 312(c) of the TIA with respect to such communications.

 

              Section 11.11     Not Responsible for Recitals of Issuance of Securities The Trustee or any Authenticating Agent shall not be responsible in any manner whatsoever for the correctness of the recitals herein or in the Securities (except its certificates of authentication thereon) contained, all of which are made solely by the Company.  The Trustee shall not be responsible or accountable in any manner whatsoever for or with respect to the validity or ex e cution or sufficiency of this Indenture or of the Securities (except with respect to its own signatures and/or certif i cates of authentication thereon), and the Trustee makes no representation with respect thereto.  The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of any Securities, or the proceeds of any Securities.  The Trustee shall not be responsible to make any calculation with respect to any matter under this Indenture.  The Trustee shall have no duty to monitor or investigate the Issuer’s compliance with or the breach of, or cause to be performed or observed, any representation, warranty, or covenant, or agreement of any Person, other than the Trustee, made in this Indenture.

 

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ARTICLE XII

SATISFACTION AND DISCHARGE; DEFEASANCE

                Section 12.01     Applicability of Article The provisions of this Article shall be applicable to any series of Securities except as otherwise specified pursuant to Section 3.01 for Securities of such series. 

 

                Section 12.02     Satisfaction and Discharge of Indenture .

 

(a) This Indenture, with respect to the Securities of any series (if all series issued under this Indenture are not to be affected), shall, upon Company Order and at the Company’s expense, be di s charged and cease to be of further effect as to all Securities of a series issued hereunder (except as to any surviving rights of registration of transfer or exchange of such Securities herein expressly provided for and rights to receive payments of principal of, premium, if any, and interest and Special Interest, if any, on, such Securities ), and the Trustee, at the expense of the Company, shall execute proper instruments a c knowledging satisfaction and discharge of this Indenture when:

(i) either

(A) all Securities of a series heretofore authenticated and delivered (other than (i) Securities of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.07 and (ii) Securities of such series for whose payment money has theretofore been deposited in trust with the Trustee or any Paying Agent or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as pr o vided in Section 6.03) have been delivered to the Trustee for cancellation; or

(B) (I) all Securities of such series that have not been previously delivered to the Trustee for cancellation, (1) have become due and payable by their terms, or (2) will become due and payable at their Stated Maturity within one year, or (3) have been called for redemption or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company , in the case of (1), (2) or (3) above, has irrevocably deposited or caused to be deposited with the Tru s tee, as trust funds in trust solely for the benefit of the Holders of such series of Securities, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as shall be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire amount Outstanding  on the Securities of such series not previously delivered to the Trustee for cancellation or redemption for principal (and premium, if any) and accrued interest and Add i tional Interest, if any, on the Securities of such series to the date of such deposit (in the case of S e curities of a series which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (II) the Company has paid or caused to be paid all other sums payable by the Company with respect to the Securities of such series under this Indenture and the Securities; and (III) the Company has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Securities of such series at their Stated Maturity or on the R e demption Date, as the case may be; and

(ii) no Default or Event of Default shall have occurred and be continuing with respect to such series of Securities on the date of such deposit or shall occur as a result of such deposit and such deposit shall not result in a breach or violation of, or constitute a default under, any other i n strument to which the Company is a party or by which the Company bound.

(b) The Company must deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been complied with.

(c) Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 11.01, the obligations of the Company to any Authenticating Agent under Section 11.09 and, if money or Government Securities shall have been deposited with the Trustee

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pursuant to subclause (B) of clause (i) of this Section 12.02, the obligations of the Trustee under Section 12.07 and the last paragraph of Section 6.03 shall survive such satisfaction and discharge .

              Section 12.03     Defeasance upon Deposit of Moneys or Government Securities .

 

(a) The Company may, at its option and at any time, elect to have either Section 12.03(b) or Section 12.03(c) applied to all Outstanding Securities of any series upon compliance with the conditions set forth below in this Section 12.03.

(b) Upon the Company’s exercise under Section 12.03(a) of the option applicable to this Section 12.03(b), the Company shall, subject to the satisfaction of the conditions set forth in Section 12.03(d), be deemed to have been Discharged from its obligations with respect to all Outstanding Securities of such series on the date such conditions are satisfied (“ Legal Defeasance ”).  For this purpose, “ Legal Defeasance ” means that the Co m pany shall be deemed to have paid and Discharged the entire Indebtedness represented by the Securities of such series then Outstanding and to have satisfied all of its other obligations under the Securities of such series and this Indenture, except for the following provisions which shall survive until otherwise terminated or discharged hereunder:

(i) the rights of Holders of the Securities of such series then Outstanding to receive payments in respect of the principal of, or interest or premium, if any, on such Securities when such payments are due from the trust referred to in Section 12.03(d);

(ii) the Company’s obligations with respect to a series of Securities issued under this Indenture concerning mutilated, destroyed, lost or stolen Securities of such series and the maint e nance of an office or agency for payment and money for security payments held in trust;

(iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Company’s obligations in connection therewith; and

(iv) this Section 12.03(b) and Section 12.03(c) with respect to the Securities of such s e ries.

Subject to compliance with this Article XII, the Company may exercise its option under this Section 12.03(b) notwithstanding the prior exercise of its option under Section 12.03(c).

Discharged ” means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by, and obligations under, the Securities of a series and to have satisfied all the obligations under this Indenture relating to the Securities of such series (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except (A) the rights of Holders of Securities of such series to receive, from the trust fund described in clause (i) of 12.03(d), payment of the principal of, premium, if any, interest or Add i tional Interest, if any, on such Securities when such payments are due, (B) the Company’s obligations with respect to Securities of such series under Sections 3.04, 3.06, 3.07, 6.02, 6.03, 12.06 and 12.07 and (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder.

(c) Upon the Company’s exercise under Section 12.03(a) of the option applicable to this Section 12.03(c), the Company shall, subject to the satisfaction of the conditions set forth in Section 12.03(d), be released from its obligations under any covenant contained in Section 5.01 and in Section 6.05 and Sections 6.08 through and including 6.15 with respect to the Securities of such series then Outstanding on and after the date the conditions set forth in Section 11.03(d) are satisfied (hereinafter, “ Covenant Defeasance ”), and the Securities of such series shall thereafter be deemed not to be “Outstanding” for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “Outstanding” for all other purposes hereunder.  For this purpose, such “ Covenant Defeasance ” means that, with respect to the Securities of such series then Outstanding, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirec t ly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such co v

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enant to any other provision herein or in any other document and such omission to comply shall not constitute a D e fault or an Event of Default under Sections 7.01(iii), 7.01(iv) and 7.01(v) and, with respect to only any Significant Subsidiary and not the Company, Section 7.01(vi), but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby.

(d) The following shall be the conditions to the exercise of either the Legal Defeasance option under Section 12.03(b) or the Covenant Defeasance option under Section 12.03(c):

(i) The Company shall irrevocably have deposited, or caused to be deposited, with the Tru s tee (or another trustee satisfying the requirements of Section 11.04 who shall agree to comply with the pr o visions of this Article XII applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to the benefit of the Holders of the S e curities of such series; (A) cash in U.S. Dollars, or (B) non-callable Government Securities, or (C) a co m bination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of i n dependent public accountants, to pay, without reinvestment, and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay, without reinvestment, and discharge, the principal of (and premium, if any) and interest on the Securities of such series then Outstanding on the Stated Maturity (or Redemption Date, if applicable); provided that the Trustee shall have been irrevocably instructed to apply such cash or the proceeds of such Government Securities to said payments with respect to the Securities of such series.  Before such a deposit, the Company may give to the Trustee, in accordance with Section 4.03, a notice of its election to redeem all of the Securities of such series Outstanding at a future date in accor d ance with Article IV, which notice shall be irrevocable.  Such irrevocable redemption notice, if given, shall be given effect in applying the foregoing;

(ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel confirming that,

(A) the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling, or

(B) there has been a change in the applicable U.S. Federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. Federal i n come tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel confirming that the Holders of the Outstanding Securities of such series will not reco g nize income, gain or loss for U.S. Federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(iv) no Default or Event of Default (other than that resulting from borrowing funds to be a p plied to make such deposit) shall have occurred and be continuing on the date of such deposit or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st   day after the date of deposit;

(v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which, the Company is a party or by which the Company is bound;

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(vi) the Company shall have delivered to the Trustee an Officer’s Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over its other creditors, or with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and

(vii) the Company shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel in the United States each stating that all conditions precedent provided for or relating to the L e gal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.

             Section 12.04    Repayment to Company   The Trustee and any Paying Agent shall promptly pay to the Company (or to its designee) upon Company Order any excess moneys or Government Securities held by them at any time, including any such moneys or Government Securities held by the Trustee under any escrow trust agre e ment entered into pursuant to Section 12.06.  The provisions of the last paragraph of Section 6.03 shall apply to any moneys or Government Securities held by the Trustee or any Paying Agent under this Article that remains u n claimed for two years after the Maturity of any series of Securities for which moneys or Government Securities have been deposited pursuant to Section 12.03.

 

             Section 12.05     Indemnity for Government Securities The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the deposited Government Securities or the principal or interest received on such Government Securities.

 

             Section 12.06     Deposits to Be Held in Escrow Any deposits with the Trustee referred to in Section 12.03  shall be irrevocable (except to the extent provided in Sections 12.04 and 12.07) and shall be made under the terms of an escrow trust agreement.  As contemplated under this Article XII, if any Outstanding Securities of a series are to be redeemed prior to their Stated Maturity, pursuant to any optional redemption provisions, the applicable escrow trust agreement shall provide therefor and the Company shall make such arrangements as are satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company.

 

If Securities of a series with respect to which such deposits are made may be subject to later redemption at the option of the Company, the applicable escrow trust agreement may, at the option of the Company, provide ther e for.  In the case of an optional redemption in whole or in part, such agreement shall require the Company to deposit with the Trustee on or before the date notice of redemption is given funds sufficient to pay the Redemption Price of the Securities to be redeemed together with all unpaid interest thereon to the Redemption Date.  Upon such deposit of funds, the Trustee shall pay or deliver over to the Company as excess funds pursuant to Section 12.04 all funds or obligations then held under such agreement and allocable to the Securities to be redeemed.

              Section 12.07     Application of Trust Money .

 

(a) Neither the Trustee nor any other paying agent shall be required to pay interest on any moneys deposited pursuant to the provisions of this Indenture, except such as it shall agree with the Company in writing to pay thereon.  Any moneys so deposited for the payment of the principal of, or premium, if any, interest or A d ditional Interest, if any, on the Securities of any series and remaining unclaimed for two years after the date of the Maturity of the Securities of such series or the date fixed for the redemption of all the Securities of such s e ries at the time Outstanding, as the case may be, shall be applied as provided in Section 6.03(e).

(b) Subject to the provisions of clause (a) above, any moneys or Government Securities which at any time shall be deposited by the Company or on its behalf with the Trustee or any other paying agent for the purpose of paying the principal of, premium, if any, and interest and Additional Interest, if any, on any of the Securities shall be and are hereby assigned, transferred and set over to the Trustee or such other paying agent in trust for the respective Holders of the Securities for the purpose for which such moneys or Government Securities shall have been deposited; provided that such moneys or Government Securities need not be segregated from other funds e x cept to the extent required by law.

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ARTICLE XIII

IMMUNITY OF CERTAIN PERSONS

              Section 13.01     No Personal Liability of Directors, Officers, Employees and Stockholders   No director, officer, employee, incorporator or stockholder of the Company or any of its parent companies shall have any liabi l ity for any obligations of the Company under any series of Securities or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation to the extent permitted by applicable law.  Each Holder by accepting a Security of any series waives and releases all such liability.  The waiver and release are part of the consideration for issuance of such Securities.

 

ARTICLE XIV

AMENDMENTS, SUPPLEMENTS AND WAIVERS

              Section 14.01     Without Consent of Securityholders Other than as otherwise provided or contemplated by Section 3.01 with respect to any series of Securities, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any one or more of or all the following purposes:

 

(a) to cure any ambiguity, mistake, defect or inconsistency;

(b) to provide for uncertificated Securities of a series in addition to or in place of certificated Securities of a series or to provide for or confirm the issuance of Additional Notes otherwise permitted by this Indenture;

(c) to comply with Article V;

(d) to provide the assumption of the Company’s obligations to Holders;

(e) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under this Indenture of any such Holder;

(f) to add covenants for the benefit of the Holders or to surrender any right or power co n ferred in this Indenture upon the Company;

(g) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act;

(h) to evidence and provide for the acceptance and appointment under this Indenture of a successor Trustee pursuant to the requirements of Sections 11.05 and 11.06;

(i) to add guarantees of each series of Securities under this Indenture;

(j) to conform the text of this Indenture, the Securities of any series or the Escrow Agre e ment to any provision of the “Description of notes” section of the Offering Memorandum to the extent that such provision in the “Description of notes” was intended to be a verbatim recitation of a provision of this Indenture, the Securities of any series or the Escrow Agreement; or

(k) making any amendment to the provisions of this Indenture relating to the transfer and legending of Securities of a series; provided ,   however , that (A) compliance with this Indenture as so amended would not result in Securities of such series being transferred in violation of the Securities Act or any applicable securities law and (B) such amendment does not materially and adversely affect the rights of Holders to transfer Securities of such series.

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Subject to the provisions of Section 14.03, the Trustee is authorized to join with the Company in the exec u tion of any such supplemental indenture, to make the further agreements and stipulations which may be therein co n tained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property or assets thereunder.

Any supplemental indenture authorized by the provisions of this Section 14.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Securities at the time Outstanding, no t withstanding any of the provisions of Section 14.02.

After the execution by the Company and the Trustee of any supplemental indenture pursuant to the prov i sions of this Section 14.01, the Company shall deliver, or upon written request and at the Company’s expense, the Trustee shall deliver, a notice, setting forth in general terms the substance of such supplemental indenture, to the Holders of Securities at their addresses as the same shall then appear in the Register.  Any failure of the Company to deliver or cause to be delivered such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

           Section 14.02    With Consent of Securityholders; Limitations .

 

(a) With the consent of the Holders of at least a majority in aggregate principal amount of the Ou t standing Securities of each series affected by such supplemental indenture voting separately, the Company and the Trustee may, from time to time and at any time, amend or supplement this Indenture, the Securities of a series or the Escrow Agreement for the purpose of adding any provisions hereto or thereto, changing in any manner or elimina t ing any of the provisions or of modifying in any manner the rights of the Holders hereunder or thereunder (including consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Securities of any s e ries) and any existing Default, Event of Default or compliance with any provision of this Indenture, the Securities of such series to be affected or the Escrow Agreement may be waived with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of such series, other than Securities of such series benef i cially owned by the Company or its Affiliates (including consents obtained in connection with a purchase of or te n der offer or exchange offer for Securities of such series); provided ,   however , without the consent of each Holder of Securities of the series issued under this Indenture affected thereby, an amendment, supplement or waiver may not, with respect to any Securities of such series issued under this Indenture and held by a non-consenting Holder,

(i) reduce the principal amount of Securities of a series whose Holders must consent to an amendment, supplement or waiver;

(ii) reduce the principal of or change the Stated Maturity of any Securities of a series or alter or waive the provisions with respect to the redemption of the Securities of such series (other than Sections 6.14 and 6.15);

(iii) reduce the rate of or change the time for payment of interest on any Security of a series;

(iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Securities of a series issued under this Indenture, except a rescission of acce l eration of the Securities of such series by the Holders of at least a majority in aggregate principal amount of the Securities of such series and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in this Indenture which cannot be amended or modified without the consent of all Holders;

(v) make any Security of a series payable in money other than that stated in the Secur i ty of such series;

(vi) make any change in Section 7.11 or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Securities of a series;

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(vii) make any change in the amendment and waiver provisions set forth in this Section 14.02;

(viii) modify or change any provision of this Indenture or the related definitions to affect the ranking of the Securities of a series in a manner that adversely affects the Holders of such Secur i ties; or

(ix) impair the right of any Holder to receive payment of principal of, or interest on such Holder’s Securities of a series on or after the due dates therefor or to institute suit for the e n forcement of any payment on or with respect to such Holder’s Securities of such series.

(b) A supplemental indenture that changes or eliminates any provision of this Indenture which has e x pressly been included solely for the benefit of one or more particular series of Securities or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.

(c) It shall not be necessary for the consent of the Securityholders under this Section 14.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall a p prove the substance thereof.

(d) The Company may set a record date pursuant to Section 8.02(d) for purposes of determining the identity of the Holders of each series of Securities entitled to give a written consent or waive compliance by the Company as authorized or permitted by this Section 14.02.

(e) After the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section 14.02, the Company shall mail a notice, setting forth in general terms the substance of such supplemental indenture, to the Holders of Securities at their addresses as the same shall then appear in the Register.  Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

(f) In addition, without the consent of the Holders of at least a majority of the Securities of the affec t ed series then Outstanding, no amendment, supplement or waiver may amend or waive any condition to the R e lease under the Escrow Agreement.

              Section 14.03    Trustee Protected Upon the request of the Company, accompanied by the Officer’s Ce r tificate and Opinion of Counsel required by Section 15.01 stating that the execution of such supplemental indenture to be entered into pursuant to Section 14.01 or Section 14.02 is authorized or permitted by this Indenture, and ev i dence reasonably satisfactory to the Trustee of consent of the Holders if the supplemental indenture is to be executed pursuant to Section 14.02, the Trustee shall join with the Company in the execution of said supplemental indenture unless said supplemental indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into said supplemental indenture.  The Trustee shall be fully protected in relying upon such Officer’s Certificate and an Opinion of Cou n sel.

 

              Section 14.04     Effect of Execution of Supplemental Indenture   Upon the execution of any supplemental indenture pursuant to the provisions of this Article XIV, this Indenture shall be deemed to be modified and amended in accordance therewith and, except as herein otherwise expressly provided, the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders of all of the Securities or of the Securities of any series affected, as the case may be, shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and cond i tions of any such supplemental indenture shall be, and be deemed to be, part of the terms and conditions of this I n denture for any and all purposes.

 

              Section 14.05     Notation on or Exchange of Securities Securities of any series authenticated and deli v ered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in the form approved by the Trustee as to any matter provided for in such supplemental indenture.  If the Company

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or the Trustee shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for the Securities then Ou t standing in equal aggregate principal amounts, and such exchange shall be made without cost to the Holders of the Securities.

 

               Section 14.06     Conformity with TIA   Every supplemental indenture executed pursuant to the provisions of this Article XIV shall conform to the requirements of the Trust Indenture Act as then in effect.

 

ARTICLE XV

MISCELLANEOUS PROVISIONS

              Section 15.01     Certificates and Opinions as to Conditions Precedent .

 

(a) Upon any request or application by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such document is specifically required by any provision of this Indenture relating to such particular application or r e quest, no additional certificate or opinion need be furnished.

(b) Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (i) a statement that the Person giving such certificate or opinion has read such covenant or condition; (ii) a brief statement as to the n a ture and scope of the examination or investigation upon which the statements or opinions contained in such ce r tificate or opinion are based; (iii) a statement that in the opinion of such Person, he or she has made such exam i nation or investigation as is necessary to enable such Person to express an informed view or opinion as to whet h er or not such covenant or condition has been complied with; and (iv) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.

(c) Any certificate, statement or opinion of an officer of the Company may be based, insofar as it r e lates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate, statement or opinion is based are erroneous.  Any certificate, stat e ment or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate, statement or opinion of, or representations by, governmental or other officials, customary for opinions of the type required, or an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate, statement or opinion or representations with respect to such matters are erroneous.

(d) Any certificate, statement or opinion of an officer of the Company or of counsel to the Company may be based, insofar as it relates to accounting matters, upon a certificate or opinion of, or representations by, an accountant or firm of accountants, unless such officer or counsel, as the case may be, knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the accounting matters upon which his or her certificate, statement or opinion may be based are erroneous.  Any certificate or opinion of any firm of independent registered public accountants filed with the Trustee shall contain a statement that such firm is independent.

(e) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

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(f) Where any Person is required to make, give or execute two or more applications, requests, co n sents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be co n solidated and form one instrument.

              Section 15.02     Trust Indenture Act Controls If and to the extent that any provision of this Indenture li m its, qualifies or conflicts with the duties imposed by, or with a provision included in this Indenture which is required to be included in this Indenture by any of the provisions of Sections 310 to 318, inclusive, of, the TIA, such imposed duties or incorporated provision shall control.  If any provision of this Indenture modifies or excludes any provision of the TIA, which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be.

 

               Section 15.03     Notices to the Company and Trustee   Any notice or demand authorized or permitted by this Indenture to be made upon, given or furnished to, or filed with, the Company or the Trustee shall be sufficiently made, given, furnished or filed for all purposes if it shall be mailed, by regular mail or overnight courier, delivered or faxed to:

 

(a) the Company, at Frontier Communications Corporation, 401 Merritt 7, Norwalk, Co n necticut 06851, Facsimile No.:  (203) 614-4651, Attn:  Chief Financial Officer and General Counsel, or at such other address or facsimile number as may have been furnished in writing to the Trustee by the Co m pany.

(b) the Trustee, at the Corporate Trust Office of the Trustee.

Any such notice, demand or other document shall be in writing.  Anything herein to the contrary notwit h standing, no such notice or demand shall be effective as to the Trustee unless it is actually received by the Trustee at its Corporate Trust Office.

The Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture sent by uns e cured e-mail, pdf, facsimile transmission or other similar unsecured electronic methods; provided ,   however , that the Trustee shall have received an incumbency certificate listing persons designated to give such instructions or dire c tions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing.  If the Company elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method), the Trustee’s unde r standing of such instructions shall be deemed controlling.  The Trustee shall have no duty or obligation to verify or confirm that the person who sent such instructions or directions is, in fact, such person who is authorized to give instructions or directions on behalf of the Company as listed in an incumbency certificate; and the Trustee shall not be liable for any liabilities, losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subs e quent written instruction.  The Company agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk or interception and misuse by third parties.

              Section 15.04     Notices to Securityholders; Waiver   Any notice required or permitted to be given to S e curityholders shall be sufficiently given (unless otherwise herein expressly provided), if to Holders, if given in wri t ing by first class mail, postage prepaid, to such Holders at their addresses as the same shall appear on the Register or in accordance with the applicable procedures of the Depository.  Notwithstanding the foregoing sentence, where this Indenture provides for notice of any event to a Holder of a Global Security, such notice shall be sufficiently given if given to the Depository for such Security (or its designee), pursuant to the Applicable Procedures of the Depository, not later than the latest date, if any, and not earlier than the earliest date, if any, prescribed for the giving of such notice by this Indenture.

 

(a) In the event of suspension of regular mail service or by reason of any other cause it shall be impracticable to give notice by mail, then such notification as shall be given with the approval of the Trustee shall constitute sufficient notice for every purpose hereunder.

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(b) Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Holders shall be filed with the Trustee, but such fi l ing shall not be a condition precedent to the validity of any action taken in reliance on such waiver.  In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given.  In any case where notice to Holders is given by publication, any defect in any notice so published as to any particular Holder shall not affect the sufficiency of such notice with respect to other Holders, and any notice that is published in the manner herein provided shall be conclusively presumed to have been duly given.

             Section 15.05     Legal Holiday   Unless otherwise specified pursuant to Section 3.01, in any case where any Interest Payment Date, Redemption Date, Maturity or other scheduled date of payment of any Security of any series shall not be a Business Day at any Place of Payment for the Securities of that series, then payment of principal and premium, if any, interest or Additional Interest, if any, need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on such Interest Payment Date, Redemption Date or Maturity, as the case may be, and no interest shall accrue on such payment for the period from and after such Interest Payment Date, Redemption Date or Maturity, as the case may be, to such Business Day if such payment is made or duly provided for on such Business Day.

 

              Section 15 .06     Effects of Headings and Table of Contents   The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

 

              Section 15.07     Successors and Assigns All covenants and agreements in this Indenture by the parties hereto shall bind their respective successors and assigns and inure to the benefit of their permitted successors and assigns, whether so expressed or not.

 

              Section 15.08     Severability If any provision hereof shall be held to be invalid, illegal or unenforceable under applicable law, then the remaining provisions hereof shall be construed as though such invalid, illegal or u n enforceable provision were not contained herein.

 

              Section 15.09     Benefits of Indenture   Nothing in this Indenture expressed and nothing that may be i m plied from any of the provisions hereof is intended, or shall be construed, to confer upon, or to give to, any Person other than the parties hereto and their successors and the Holders of the Securities any benefit or any right, remedy or claim under or by reason of this Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all covenants, conditions, stipulations, promises and agreements in this Indenture contained shall be for the sole and exclusive benefit of the parties hereto and their successors and of the Holders of the Securities.

 

               Section 15.10     Counterparts   This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.  The exchange of copies of this Indenture and of signature pages by facsimile or electronic ( i.e. , “pdf” or “tif”) transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes.  Signatures of the parties hereto transmitted by facsimile or electronic ( i.e. , “pdf” or “tif”) transmission shall be deemed to be their original signatures for all purposes.

 

              Section 15.11     Governing Law; Waiver of Trial by Jury   This Indenture and the Securities shall be go v erned by, and construed in accordance with, the laws of the State of New York.

 

EACH OF THE PARTIES HERETO, AND EACH HOLDER OF A SECURITY BY ITS ACCEPTANCE THEREOF, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION D I RECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS INDENTURE OR THE SECURITIES.

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               Section 15.12     Submission to Jurisdiction The Company irrevocably and unconditionally submits to the non-exclusive jurisdiction of any U.S. federal or New York State court located in the Borough of Manhattan, the City of New York over any suit, action or proceeding arising out of or relating to this Indenture or the Securities.    The Company irrevocably and unconditionally waives any objection to the laying of venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding has been brought in an inconvenient forum.  A final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon the Company and may be enforced in any other courts to whose jurisdiction the Co m pany is or may be subject, by suit upon judgment.  The Company further agrees that nothing herein shall affect any Holder’s right to effect service of process in any other manner permitted by law or bring a suit action or proceeding (including a proceeding for enforcement of a judgment) in any other court or jurisdiction in accordance with appl i cable law.

 

                Section 15.13     U.S.A. PATRIOT Act The parties hereto acknowledge that in order to help the United States government fight the funding of terrorism and money laundering activities, pursuant to Federal regulations that became effective on October 1, 2003 (Section 326 of the USA PATRIOT Act) all financial institutions are r e quired to obtain, verify, record and update information that identifies each person establishing a relationship or opening an account. The parties to this Indenture agree that they will provide to the Trustee and the Agents such information as they may reasonably request, from time to time, in order for the Trustee and the Agents to satisfy the requirements of the USA PATRIOT Act, including but not limited to the name, address, tax identification number and other information that will allow them to identify the individual or entity who is establishing the relationship or opening the account and may also ask for formation documents such as articles of incorporation or other identifying documents to be provided.

 

              Section 15.14     Force Majeure   In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces b e yond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of util i ties, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

 

              Section 15.15     No Adverse Interpretation of Other Agreements This Indenture may not be used to inte r pret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person.  Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

 

[Signatures on following page]

 

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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

FRONTIER COMMUNICATIONS CORPORATION,

as Issuer

 

By: /s/ John M. Jureller

Name:  John M. Jureller
Title:  EVP, Chief Financial Officer

THE BANK OF NEW YORK MELLON,
as Trustee

By: /s/ Laurence J. O’Brien

Name:  Laurence J. O’Brien
Title:  Vice President

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Appendix A

PROVISIONS RELATING TO INITIAL SECURITIES AND EXCHANGE SECURITIES

1. Definitions.

1.1 Definitions . For the purposes of this Appendix the following terms shall have the meanings indicated below (capitalized terms used but not defined in this Appendix shall have the meanings assigned to such terms in the Base Indenture):

Applicable Procedures ” means, with respect to any transfer or transaction involving a Regulation S Global Note or beneficial interest therein, the rules and procedures of the Depositary for such a Regulation S Global Note, to the extent applicable to such transaction and as in effect from time to time.

Base Indenture ” means the Indenture, dated as of September 25, 2015, among Frontier Communications Corpor a tion and The Bank of New York Mellon, as trustee.

Definitive Note ” means a certificated Initial Security or Exchange Security bearing, if required, the appropriate restricted securities legend set forth in Section 2.3(e).

Depositary ” means, with respect to the Securities of any series, a clearing agency registered under the Exchange Act. For the avoidance of doubt, no Board Resolution, Officer’s Certificate, supplemental indenture or other deli v ery to the Trustee or otherwise will be required in connection with such designation.

Distribution Compliance Period ,” with respect to any Securities, means the period of 40 consecutive days begi n ning on and including the later of (i) the day on which such Securities are first offered to Persons other than distrib u tors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the Series Issue Date with respect to such Securities.

Initial Securities ” means (1) the Securities of any series issued on the applicable Series Issue Date and (2) Additional Notes of such series, if any, issued in a transaction exempt from the registration requirements of the Securities Act.

Initial Purchasers ” means (1) with respect to the Initial Securities issued on the Series Issue Date, J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith, Barclays Capital Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC, Mizuho Securities USA Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co. and UBS Securities LLC  and (2) with respect to each issuance of Additional Notes, the Persons purchasing such Additional Notes under the related purchase agreement.

Notes Custodian ” means the custodian with respect to a Global Security(as appointed by the Depositary), or any successor Person thereto and shall initially be the Trustee.

QIB ” means a “qualified institutional buyer” as defined in Rule 144A.

 

Rule 144A Notes ” means all Securities offered and sold to QIBs in reliance on Rule 144A.

Series Issue Date ” means with respect to a series of Securities, the effective date of the Board Resolution, Officer’s Certificate or supplemental indenture pursuant to which the first Securities of such series is issued.

Registration Statement ” means a registration statement filed under the Securities Act by the Company in respect of any Securities.

Transfer Restricted Notes ” means Securities that bear or are required to bear the legend relating to restrictions on transfer relating to the Securities Act set forth in Section 2.3(e) hereto.

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1.2 Other Definitions .  

 

 

 

 

Term

  

Defined in Section:

“Agent Members”

  

2.1(b)

“Regulation S”

  

2.1(a)

“Regulation S Global Note”

  

2.1(a)

“Rule 144A”

  

2.1(a)

“Rule 144A Global Note”

  

2.1(a)

2. The Securities.

2.1 (a) Form and Dating . The Initial Securities will be issued by the Company to the Initial Purchasers, and will be in the form of one or more Definitive Notes with the definitive notes legend and the appropriate restricted notes le g end set forth on Section 2.3(e). Initial Securities may be transferred (i) to QIBs in reliance on Rule 144A under the Securities Act (“ Rule 144A ”), (ii) to Persons other than U.S. Persons (as defined in Regulation S) in reliance on Regulation S under the Securities Act (“ Regulation S ”) and (iii) otherwise in reliance upon another exemption from the requirements of the Securities Act, subject in each case to the restrictions on transfer set forth herein. Initial S e curities may also be transferred during the period of effectiveness of a Registration Statement with respect thereto. Initial Securities resold pursuant to Rule 144A may be in the form of one or more permanent Global Securities in definitive, fully registered form (collectively, the “ Rule 144A Global Notes ”), Initial Securities resold pursuant to Regulation S may be in the form of one or more global notes in fully registered form (collectively, the “ Regulation S Global Notes ”), Initial Securities resold in connection with a Registered Exchange Offer may be in the form of one or more global notes in fully registered form (collectively, the “ Exchange Global Notes ”), and Initial Securities r e sold pursuant to a Registration Statement may be in the form of one or more global notes in fully registered form (collectively, the “ Registered Global Notes ”) in each case without interest coupons and with the global notes legend and the applicable restricted notes legend set forth in Section 2.3(e) hereof, which shall be deposited with the Notes Custodian and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Co m pany and authenticated by the Trustee as provided in the Indenture.

Beneficial interests in Regulation S Global Notes may be exchanged for interests in Rule 144A Global Notes if (1) such exchange occurs in connection with a transfer of Securities in compliance with Rule 144A and (2) the tran s feror of the beneficial interest in the Regulation S Global Note (if such transfer is during the Distribution Compl i ance Period) first delivers to the Trustee a written certificate to the effect that the beneficial interest in the Regul a tion S Global Note is being transferred to a Person (a) who the transferor reasonably believes to be a QIB, (b) purchasing for its own account or the account of a QIB in a transaction meeting the requirements of Rule 144A and (c) in accordance with all applicable securities laws of the States of the United States and other jurisdictions.

Beneficial interests in a Rule 144A Global Note may be transferred to a Person who takes delivery in the form of an interest in a Regulation S Global Note, whether before or after the expiration of the Distribution Compliance Period, only if the transferor first delivers to the Trustee a written certificate (in the form provided in the Indenture) to the effect that such transfer is being made in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if applic a ble).

The aggregate principal amount of the Global Securities may from time to time be increased or decreased by a d justments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided.

The Company may (and, at the election of a majority of the Holders of the applicable series of Securities, shall) o b tain “CUSIP,” and/or “ISIN” numbers relating to the Securities of the applicable series at any time (if then generally in use), including after the Series Issue Date thereof, and, if so, the Trustee will use “CUSIP” and/or “ISIN” nu m bers in notices of redemption as a convenience to Holders of Securities of such series; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities of such series or as contained in any notice of a redemption and that reliance may be placed only on the other elements of identification printed on the Securities of such series, and any such redemption will not be affected by any defect in or omission of such numbers.

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(b) Book-Entry Provisions . This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depositary.

The Company shall execute and the Trustee, upon receipt of a Company Order in the form of an Officer’s Certif i cate, shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depositary for such Global Security or Global Securities or the nom i nee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary’s instructions or held by the Trustee as custodian for the Depositary.

Members of, or participants in, the Depositary (“ Agent Members ”) shall have no rights under the Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as the custodian of the D e positary or under such Global Note, and the Company, the Trustee and any agent of the Company or the Trustee shall be entitled to treat the Depositary as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depos i tary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such D e positary governing the exercise of the rights of a holder of a beneficial interest in any Global Note.

 

(c) Definitive Notes . Except as provided in this Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global Securities shall not be entitled to receive physical delivery of Definitive Notes.

2.2 Authentication . The Trustee shall authenticate and deliver: (1) on the Series Issue Date, the Initial Securities in an aggregate principal amount specified in the Company Order pursuant to Section 3.03 of the Base Indenture, (2) any Additional Notes for an original issue in an aggregate principal amount and on the date specified in the Company Order pursuant to Section 3.03 of the Base Indenture, (3) Exchange Securities for issue only in a Regi s tered Exchange Offer, for a like principal amount of Initial Securities, in each case upon a Company Order in the form of an Officer’s Certificate and (4) Securities as contemplated by Section 3.03 and Sections 3.04, 3.06 and 3.07 of the Base Indenture.

2.3 Transfer and Exchange .  

(a) Transfer and Exchange of Definitive Notes . When Definitive Notes are presented to the Registrar with a request:

(x) to register the transfer of such Definitive Notes; or

(y) to exchange such Definitive Notes for an equal principal amount of Definitive Notes of other authorized deno m inations,

the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided ,   however , that the Definitive Notes surrendered for transfer or exchange:

(i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the Holder thereof or its attorney duly authorized in writing; and

(ii) if such Definitive Notes are required to bear a restricted notes legend, they are being transferred or exchanged pursuant to an effective registration statement under the Securities Act, pursuant to Section 2.3(b) below or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable:

(A) if such Definitive Notes are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or

(B) if such Definitive Notes are being transferred to the Company, a certification to that effect; or

(C) if such Definitive Notes are being transferred (x) pursuant to an exemption from registration in accordance with Rule 144A, Regulation S or Rule 144 under the Securities Act or (y) in reliance upon another exemption from the requirements of the Securities Act: (1) a certification to that effect (in the form set forth on the reverse of the Note) and (2) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(e)(i).

 

(b) Restrictions on Transfer of a Definitive Note for a Beneficial Interest in a Global Note . A Definitive Note may not be exchanged for a beneficial interest in a Rule 144A Global Note or a Regulation S Global Note except upon

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satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by appropriate instruments of transfer, together with:

(i) certification, in the form set forth on the reverse of the Note, that such Definitive Note is either (A) being tran s ferred to a QIB in accordance with Rule 144A (B) being transferred to a Person in reliance on Regulation S, or (C) being transferred after expiration of the Distribution Compliance Period by a Person who initially purchased such Security in reliance on Regulation S to a buyer who elects to hold its interest in such Security in the form of a beneficial interest in the Regulation S Global Note; and

(ii) written instructions directing the Trustee to make, or to direct the Notes Custodian to make, an adjustment on its books and records with respect to such Rule 144A Global Note (in the case of a transfer pursuant to clause (b)(i)(A)) or Regulation S Global Note (in the case of a transfer pursuant to clause (b)(i)(B) or (b)(i)(C)) to reflect an increase in the aggregate principal amount of the Securities represented by the Rule 144A Global Note or Regulation S Glo b al Note, as applicable, such instructions to contain information regarding the Depositary account to be credited with such increase, then the Trustee shall cancel such Definitive Note and cause, or direct the Notes Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Notes Custod i an, the aggregate principal amount of Securities represented by the Rule 144A Global Note or Regulation S Global Note, as applicable, to be increased by the aggregate principal amount of the Definitive Note to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Note or Regulation S Global Note, as applicable, equal to the principal amount of the Defin i tive Note so canceled. If no Rule 144A Global Notes or Regulation S Global Notes, as applicable, are then outstan d ing, the Company shall issue and the Trustee shall authenticate, upon Company Order in the form of an Officer’s Certificate of the Company, a new Rule 144A Global Note or Regulation S Global Note, as applicable, in the appr o priate principal amount.

(c) Transfer and Exchange of Global Securities .  

(i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depo s itary, in accordance with the Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Security shall deliver to the Registrar a written order given in accordance with the Depositary’s procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in the Global Note. The Registrar shall, in accordance with such instructions, instruct the Depositary to credit to the account of the Person specified in such instructions a beneficial interest in the Global Security and to debit the account of the Person making the transfer the beneficial interest in the Global Security being transferred.

 

(ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in a n other Global Note, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a correspon d ing decrease in the principal amount of the Global Security from which such interest is being transferred.

(iii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.

(iv) In the event that a Global Security is exchanged for Definitive Notes pursuant to Section 2.4 of this Appendix, prior to the consummation of a Registered Exchange Offer or prior to or following the effectiveness of a Registr a tion Statement with respect to such Securities, such Securities may be exchanged only in accordance with such pr o cedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requir e ments set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A, Regulation S or another applicable exemption under the Securities Act, as the case may be) and such other proc e dures as may from time to time be adopted by the Company.

(d) Restrictions on Transfer of Regulation S Global Notes . (i) Prior to the expiration of the Distribution Compliance Period, beneficial ownership interests in the Regulation S Global Note may only be sold, pledged or transferred in accordance with the Applicable Procedures and only (A) to the Company, (B) so long as such security is eligible for resale pursuant to Rule 144A, to a person whom the selling holder reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the resale, pledge or transfer is being made in

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reliance on Rule 144A, (C) in an offshore transaction in accordance with Regulation S, (D) pursuant to an exem p tion from registration under the Securities Act provided by Rule 144 (if applicable), or (E) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any State of the United States. Prior to the expiration of the Distribution Compliance Period, transfers by an owner of a beneficial interest in the Regulation S Global Note to a transferee who takes delivery of such interest through the Rule 144A Global Note shall be made only in accordance with Applicable Procedures and upon receipt by the Tru s tee of a written certification from the transferor of the beneficial interest in the form provided on the reverse of the Initial Security to the effect that such transfer is being made to a QIB within the meaning of Rule 144A in a transa c tion meeting the requirements of Rule 144A. Such written certification shall no longer be required after the expir a tion of the Distribution Compliance Period.

 

(e) Legends .  

(i) Except as permitted by the following paragraphs (iii), (iv) and (v), each Security certificate evidencing the Global Securities shall bear a legend in substantially the following form:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE ‘‘RESALE RESTRICTION TERMINATION DATE’’) THAT IS, IN THE CASE OF RULE 144A NOTES, ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF, THE ORIGINAL ISSUE DATE OF THE ISSUANCE OF ANY ADDITIONAL NOTES AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), OR, IN THE CASE OF REGULATION S NOTES, 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE DATE ON WHICH THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) WAS FIRST OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN RULE 902 OF REGULATION S) IN RELIANCE ON REGULATION S, ONLY (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’), TO A PERSON IT REASONABLY BELIEVES IS A ‘‘QUALIFIED INSTITUTIONAL BUYER’’ AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS’ AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

Each certificate evidencing a Security offered in reliance on Regulation S shall, in addition to the foregoing, bear a legend in substantially the following form:

BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.

Each Definitive Note shall also bear the following additional legend:

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IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREG O ING RESTRICTIONS.

(ii) Except as permitted by the following paragraphs (iii), (iv) and (v), each Security certificate evidencing the D e finitive Notes shall bear a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

(iii) Upon any sale or transfer of a Transfer Restricted Note (including any Transfer Restricted Note represented by a Global Note) pursuant to Rule 144 under the Securities Act, the Registrar shall permit the transferee thereof to e x change such Transfer Restricted Note for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Note, if the transferor thereof certifies in writing to the Registrar that such sale or transfer was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Note).

(iv) After or in connection with a transfer of any Initial Securities pursuant to and during the period of the effectiv e ness of a Registration Statement with respect to such Initial Securities to a person who is not the Company or an Affiliate thereof, all requirements pertaining to legends on such Initial Security will cease to apply, and a certificated Security or a Security in global form, in each case without restrictive transfer legends, will be available to the tran s feree of the Holder of such Initial Securities upon exchange of such transferring Holder’s certificated Initial Security or directions to transfer such Holder’s interest in the Global Note, as applicable.

(v) Upon the occurrence of a Registered Exchange Offer, the Company shall issue and, upon receipt of a Company Order in accordance with Section 2.2, the Trustee shall authenticate, one or more Global Securities or Definitive Notes, as directed by the Holders of the Securities to be exchanged, not bearing the restricted notes legend in an a g gregate principal amount equal to the principal amount of the beneficial interests in the Securities that are Initial Securities tendered for acceptance by a Person other than the Company or an Affiliate thereof in accordance with the Registered Exchange Offer and accepted for exchange in the Registered Exchange Offer. Concurrently with the i s suance of such Securities, the Registrar shall cause the aggregate principal amount of the applicable Initial Securities to be reduced accordingly, and the Registrar shall deliver to the Persons designated by the Holders of the Initial S e curities so accepted Securities not bearing the restricted securities legend in the appropriate principal amount. Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities, Exchange Securities in ce r tificated or global form, in each case without the restricted notes legend set forth in Section 2.3(e) hereof, will be available to Holders other than the Company or an Affiliate thereof that exchange such Initial Securities in such Registered Exchange Offer.

(f) Cancellation or Adjustment of Global Note . At such time as all beneficial interests in a Global Security have e i ther been exchanged for Definitive Notes, redeemed, purchased or canceled, such Global Security shall be returned to the Trustee for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for Definitive Notes, redeemed, purchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Notes Custodian for such Global Note) with respect to such Global Note, by the Trustee or the Notes Custodian, to reflect such reduction.

(g) No Obligation of the Trustee .  

(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depositary or other Person with respect to the accuracy of the records of the Depositary or its no m inee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any n o tice (including any notice of redemption) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its no m

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inee in the case of a Global Note). The rights of beneficial owners in any Global Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, partic i pants and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any r e strictions on transfer imposed under the Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are e x pressly required by, and to do so if and when expressly required by, the terms of the Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

 

2.4 Definitive Notes .  

(a) A Global Security deposited with the Depositary or with the Trustee as Notes Custodian for the Depositary pu r suant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Notes in an aggr e gate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.3 hereof and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security and the Depositary fails to appoint a successor depositary or if at any time such Depositary ceases to be a “clearing agency” registered under the Exchange Act and, in either case, a successor depositary is not appointed by the Company within 120 days of such notice, or (ii) if requested by such a beneficial owner after the occurrence and during the continuance of an Event of Default or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Definitive Notes under the Indenture.

(b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be su r rendered by the Depositary to the Trustee located at its Corporate Trust Office, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall, upon receipt of a Company Order, authenticate and deli v er, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations. Any portion of a Global Security transferred pursuant to this Section 2.4 shall be ex e cuted, authenticated and delivered only in denominations of a minimum of $2,000 principal amount and any integral multiples of $1,000 in excess thereof and registered in such names as the Depositary shall direct. Any Definitive Note delivered in exchange for an interest in the Transfer Restricted Note shall, except as otherwise provided by Section 2.3(e) hereof, bear the applicable restricted notes legend and definitive notes legend set forth in Se c tion 2.3(e) hereof.

(c) Subject to the provisions of Section 2.4(b) hereof, the registered Holder of a Global Security shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under the Indenture or the Securities.

(d) In the event of the occurrence of one of the events specified in Section 2.4(a) hereof, the Company shall promp t ly make available to the Trustee a reasonable supply of Definitive Notes in definitive, fully registered form without interest coupons. In the event that such Definitive Notes are not issued, the Company expressly acknowledges, with respect to the right of any Holder to pursue a remedy pursuant to Section 7.07 of the Base Indenture, the right of any beneficial owner of Securities to pursue such remedy with respect to the portion of the Global Security that repr e sents such beneficial owner’s Securities as if such Definitive Notes had been issued.

 

 

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Exhibit 4.2

EXECUTION VERSION

FIRST SUPPLEMENTAL INDENTURE
Dated as of
September 25, 2015  
b etween
FRONTIER COMMUNICATIONS CORPORATION  
as Company
and
THE BANK OF NEW YORK MELLON
as Trustee
8.875 % SENIOR NOTES DUE 2020

FIRST SUPPLEMENTAL INDENTURE dated as of September 25 , 201 5 between Frontier Communications Corporation, a Delaware corporation (the Company ”), and The Bank of New York Mellon, as trustee (the Trustee ”).

WITNESSETH:

WHEREAS, the Company and the Trustee executed and delivered an Indenture dated as of September 25 , 201 5 (the Base Indenture ”) to provide for the issuance of debentures, notes, bonds or other evidences of indebtedness in an unlimited aggregate principal amount to be issued from time to time in one or more series (such Base Indenture, as supplemented and amended by this First Supplemental Indenture, herein referred to as the Indenture ”);

WHEREAS, the Company has duly authorized the issuance of $1,000,000,000 aggregate principal amount of 8.875 % Senior Notes due 2020 (the Notes ”);

WHEREAS, the Company has duly authorized the execution and delivery of this First Supplemental Indenture pursuant to Section 1 4 .01 of the Base Indenture to establish the terms and the form of the Notes in accordance with Sections 2.01, 3.01 and 3.03 of the Bas e Indenture;

WHEREAS, pursuant to Section 14 .0 3 of the Base Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture and the Company hereby requests that the Trustee join with the Company in the execution of this Supplemental Indenture; and

WHEREAS, all things necessary to make this First Supplemental Indenture a valid and legally binding agreement of the Company, in accordance with its terms, have been done.

NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:

That, in consideration of the premises and the purchase of the Notes by the Holders thereof for the equal and proportionate benefit of all of the present and future Holders of the Notes, each party agrees and covenants as follows:

ARTICLE I

SCOPE AND DEFINITIONS

Section 1.01 Scope The changes, modifications and supplements to the Base Indenture effected by this First Supplemental Indenture shall be applicable only with respect to, and govern the terms of, the Notes and shall not apply to any other series of Securities that may be issued under the Base

 

 


 

Indenture unless a supplemental indenture with respect to such other series of Securities specifically incorporates such changes, modifications and supplements.

Section 1.02 Definitions .

(a) Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Base Indenture.

(b) As used herein, the following additional defined terms shall have the following meanings with respect to the Notes only and be equally applicable to both the singular and the plural forms of any of the terms herein defined:

Additional Notes has the meaning provided in Section 2.01(c)

Adjusted Treasury Rate ” means, with respect to any R edemption D ate:

(1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15(519)” or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or

(2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such R edemption D ate.

The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the R edemption D ate.

Base Indenture has the meaning provided in the recitals hereof.

Comparable Treasury Issue ” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the applicable notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such notes (“ Remaining Life ”).

Comparable Treasury Price ” means, for any Redemption Date, (1) the average of four Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if the Independent Investment Banker obtains fewer than four such Reference Treasury Dealer Quotations the average of all such quotations.

Escrow Account ” has the meaning assigned to such term in the Escrow Agreement.

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Escrow Agent ” means MUFG Union Bank, N.A., in its capacity as escrow agent.

Escrowed Funds ” has the meaning assigned to such term in the Escrow Agreement.

Escrow End Date ” means (x) August 6, 2016 or (y) such earlier date as the Company shall notify the Trustee in writing of the Company’s announcement that the Verizon Purchase Agreement has been terminated or that it will not pursue the consummation of the Verizon Acquisition.

First Supplemental Indenture ” means this instrument.

Independent Investment Banker ” means one of the Reference Treasury Dealers appointed by the Company.

Initial Notes has the meaning provided in Section 2.01(c).

Mandatory Redemption ” has the meaning provided in Section 2.0 5 .

Mandatory Redemption Date ” has the meaning provided in Section 2.0 5 .

Mandatory Redemption Notice ” has the meaning provided in Section 2.0 5 .

Notes has the meaning provided in the recitals hereof.

Registration Rights Agreement has the meaning provided in Section 2.0 6 .

Reference Treasury Dealer ” means any of the primary U.S. Government securities dealers in New York City.

Reference Treasury Dealer Quotations ” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.

Release ” mean s the release of the Escrowed Funds to the Company from the Escrow Account upon satisfaction of the conditions set forth in the Escrow Agreement .

Section 1.03 Rules of Construction For all purposes of this First Supplemental Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a) The words herein ,   hereof and hereunder and other words of similar import refer to this First Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision.

(b) References to Article or Section or other subdivision herein are references to an Article, Section or other subdivision of this First Supplemental Indenture, unless the context otherwise requires.

(c) The words including and words of similar import when used in this Indenture shall mean “including, without limitation .  

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(d) References to any agreement, instrument, statute or regulation defined or referred to herein or in any instrument establishing the terms of the Notes (or executed in connection therewith) are references to such agreement, instrument, statute or regulation as from time to time amended, modified, supplemented or replaced, including (in the case of agreements or instruments) by waiver or consent and by succession of comparable successor agreements, instruments, statutes or regulations;

(e) or ” is not exclusive; and

(f) will ” shall be interpreted to express a command.

ARTICLE II

THE NOTES

Section 2.01 Terms of the Notes The Notes are hereby created and designated as a separate series of Securities under the Base Indenture The following terms relate to the Notes:

(a) The Notes shall constitute a separate series of Securities under the Base Indenture having the title “ 8.875 % Senior Notes due 2020 .”

(b) The Notes shall be issued at a price of 100 % of the principal amount thereof, other than any offering discounts pursuant to the initial offering and resale of the Notes.

(c) The aggregate principal amount of the Notes (the Initial Notes ”) that may be initially authenticated and delivered under the Indenture shall be $1,000,000,000 The Company may from time to time, without the consent of the Holders of the Notes, issue additional Notes (in any such case Additional Notes ”) having the same terms and conditions as the Initial Notes in all respects (or in all respects except for the Issue Date, the issue price or the first Interest Payment Date) Any Additional Notes and the Initial Notes shall constitute a single series under the Indenture, provided that if such Additional Notes are not fungible with the Initial Notes for U.S. federal income tax purposes, such Additional Notes shall not have the same CUSIP, ISIN or other identifying number as the Initial Notes All references to the Notes shall include the Initial Notes and any Additional Notes unless the context otherwise requires The aggregate principal amount of each of the Additional Notes shall be unlimited.

(d) The entire outstanding principal of the Notes shall be payable on September 15 , 20 20 .

(e) The rate at which the Notes shall bear interest shall be 8.875 % per year The date from which interest shall accrue on the Notes shall be September 25 , 201 5 , or the most recent Interest Payment Date   to which interest has been paid or provided for The Interest Payment Date s   for the Notes shall be March 15 and September 15 of each year, commencing March 15 , 201 6 Interest shall be payable on each Interest Payment Date   to the Holders of record at the close of business on the March 1 and September 1 prior to each Interest Payment Date The basis upon which interest shall be calculated shall be that of a 360 - day year comprised of twelve 30 - day months.

(f) The Notes shall be issuable in whole in the form of one or more registered Global Securities, and the Depository for such Global Securities shall be DTC The Notes shall be substantially in the form attached hereto as Exhibit A, the terms of which are herein incorporated

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by reference The Notes shall be denominated in U.S. Dollars and shall be issuable in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.

(g) The Notes may be redeemed at the option of the Company prior to the date of Stated Maturity for payment of principal on the Notes, as provided in Section 2.0 4 .

(h) The Notes will not have the benefit of any sinking fund.

(i) Except as provided herein, the Holders of the Notes shall have no special rights in addition to those provided in the Base Indenture upon the occurrence of any particular events.

(j) The Notes will be senior unsecured obligations of the Company, and will rank :   (i)   equal in right of payment with all of the Company’s existing and future senior I ndebtedness ,   (ii) effectively junior to all of the Company’s existing and future senior Secured Indebtedness (including Indebtedness under our Senior Credit Facilities) to the extent of the value of the assets securing such Indebtedness, (iii) structurally junior to all existing and future Indebtedness and other liabilities and commitments of the Company’s Subsidiaries (including Trade Payables and Capital Lease Obligations); and   (iv)   senior in right of payment to the Company’s existing and future S ubordinated I ndebtedness , if any .

(k) The terms and provisions of Appendix A of the Base Indenture shall apply to the   Notes of this series .

 

Section 2.02 Global Securities .   The Notes issued in global form will be substantially in   the form of Exhibit A hereto (including the Global Security Legend thereon and the “Schedule of Exchanges   of Interests in the Global Security ” attached thereto). Notes of this series issued in definitive form will be   substantially in the form of Exhibit A hereto (but without the Global Security Legend thereon and without the   Schedule of Exchanges of Interests in the Global Security ” attached thereto). Each Global Security will represent   such of the outstanding Notes of this s eries as will be specified therein and each shall provide that it   represents the aggregate principal amoun t of outstanding Notes of this s eries from time to time endorsed   thereon and that the aggregate principal amount of outstanding Notes of this series represented thereby   may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions.

Any endorsement of a Global Security to reflect the amount of any increase or decrease in the aggregate   principal amoun t of outstanding Notes of this s eries represented thereby will be made by the Trustee or   the Notes Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder   thereof.

 

Section 2.03 Transfer and Exchange .

The Notes of this s eries shall be issued in registered form and shall be transferable only upon the   surrender of a Note of this series for registration of transfer and in compliance with Appendix A of the   Base Indenture.

 

When Notes of this series are presented to the Registrar or a co-registrar with a request to register   a transfer or to exchange them for an equal principal amount of Notes of this series of other denominations,   the Registrar will register the transfer or make the exchange as requested if its requirements for   such transactions are met. To permit registrations of transfers and exchanges, the Company shall execute   and the Trustee shall authenticate Notes of this series at the Registrar’s request. A Holder of Notes of   this series may transfer or exchange Notes of this series only in accordance with the

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Indenture. Upon   any transfer or exchange, the Registrar and the Trustee may require a Holder of Notes of this series ,   among other things, to furnish appropriate endorsements or transfer documents. No service charge shall   be made for any registration of transfer or exchange (except as otherwise expressly permitted herein), but   the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental   charge payable in connection therewith.

 

Prior to due presentment of any Note of this series for registration of transfer, the Company, the   Trustee, any agent of the Company or the Trustee, the Paying Agent and the Registrar may deem and treat   the Person in whose name a Note of this series is registered as the absolute owner of such Note for all   purposes, including for the purpose of receiving payment of principal of, and any premium and any interest,   if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and   none of the Company, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the   contrary.

 

Any holder of a beneficial interest in a Global Security of this series shall, by acceptance of such   beneficial interest, agree that transfers of beneficial interests in such Global Security may be effected only   through a book-entry system maintained by (a) the holder of such Global Security (or its agent) or (b) any   holder of a beneficial interest in such Global Security , and that ownership of a beneficial interest in such   Global Security shall be required to be reflected in a book entry.

 

All Notes of this series issued upon any transfer or exchange pursuant to the terms of the Indenture   shall evidence the same debt and shall be entitled to the same benefits under the Indenture as such   Notes surrendered upon such transfer or exchange.

 

Section 2.04 Optional Redemption .

(a) The provisions of Article IV of the Base Indenture, as amended by the provisions of this First Supplemental Indenture, shall apply to the Notes.

(b) The Notes may be redeemed at the Company’s election, in whole or in part, at any time prior to June 15, 2020 (three months prior to the maturity date of the Notes) at a redemption price equal to the greater of:

(1)

100% of the principal amount of the Notes to be redeemed then Outstanding; and

(2)

as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the R edemption D ate on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 50 basis points;

plus, in either of the above cases, accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

(c) The Notes may be redeemed at the Company’s election, in whole or in part, at any time on or after June 15, 2020 (three months prior to the maturity date of the Notes), at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

Section 2.05 Mandatory Redemption If (a) the Release has not occurred on or prior to the Escrow End Date or (b) if the Company has notified the Trustee in writing of the Company’s

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announcement that the Verizon Purchase Agreement has been terminated or that it will not pursue the consummation of the Verizon Acquisition , the Company will redeem all of the Notes (the “ Mandatory Redemption ”) at the Mandatory Redemption Price. The “Mandatory Redemption Price” will be a price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, from September 25, 2015 to , but not including, the Mandatory Redemption Date (as defined below). Notice of the occurrence of a Mandatory Redemption shall be delivered by the Company (a “ Mandatory Redemption Notice ”) promptly to the Trustee and the Escrow Agent. Concurrently with the delivery of the Mandatory Redemption Notice, the Company shall request the Trustee to, at the Company’s expense, deliver (in accordance with the proce dures of the Deposito ry or otherwise by first-class mail to each Holder’s registered address) a notice that a Mandatory Redemption is to occur. Within two B usiness D ays (or such other minimum period as may be required by the Depositary) after the Company’s delivery of a Mandatory Redemption Notice, the Company will effect the Mandatory Redemption (the date of such redemption, the “ Mandatory Redemption Date ”) in accordance with the Escrow Agreement. For avoidance of doubt, the provisions of Section 4.03 of the Base Indenture relating to the means and timing of delivery of a notice of redemption shall not apply to a Mandatory Redemption.

Notwithstanding anything to the contrary contained in Article XIV of the Base Indenture, the provi sions of this Section 2 .0 5 may be waived or modified with the written consent of Holders of at least 90% in prin cipal amount of the Notes O utstanding.

Section 2.06 Registration Rights Agreement .   In addition to the rights set forth under the Indenture and this First Supplemental Indenture, Holders of the Notes will have all the rights set forth in the Registration Rights Agreement, dated as of September 25 , 2015 , among the Company , J.P. Morgan Securities LLC , Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. (the “ Registration Rights Agreement ”), including the right to receive certain Additional Interest upon the occurrence of certain events as set forth in the Registration Rights A greement.

Section 2.07 Registe r ed Exchange Offer .  

(a) Upon the consummation of the Registered Exchange Offer in accordance with the Registration Rights Agreement, the Company will issue and, upon receipt of a Company Order in accordance with Section 3.03 of the Indenture, the Trustee will authenticate   one or more Global Securities or Definitive Notes, as directed by the Holders of the Notes to be exchanged, not bearing the restricted notes legend in an aggregate principal amount equal to the principal amount of the beneficial interests in the Notes that are Initial Securities tendered for acceptance by a Person other than the Company or an Affiliate thereof in accordance with the Registered Exchange Offer and accepted for exchange in the Registered Exchange Offer, in accordance with Appendix A to the Base Indenture.

(b) All Exchange Securities issued and authenticated in accordance with Section 2.07 (a) shall be part of the same series as any Outstanding Notes and shall vote and consent, together with any Outstanding Notes as one class, on all matters that require their vote or consent under the Indenture or this First Supplemental Indenture, except in the case of any matter that affects only the Outstanding Notes or only the Exchange Securities.

ARTICLE III

MISCELLANEOUS PROVISIONS

Section 3.01 Confirmation of Indenture The Base Indenture, as supplemented and amended by this First Supplemental Indenture, is in all respects ratified and confirmed, and the Base Indenture, this

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First Supplemental Indenture and all indentures supplemental thereto with respect to the Notes shall be read, taken and construed as one and the same instrument.

Section 3.02 Severability If any provision in this First Supplemental Indenture or in the Notes shall be held to be invalid, illegal or unenforceable under applicable law, then the remaining provisions in this First Supplemental Indenture or in the Notes shall be construed as though such invalid, illegal or unenforceable provision were not contained herein.

Section 3.03 Conflicts with Base Indenture In the event that any provision of this First Supplemental Indenture limits, qualifies or conflicts with the express provisions of the Base Indenture, such provision of the First Supplemental Indenture shall prevail.

Section 3.04 Benefits of Indenture Nothing in this First Supplemental Indenture expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or to give to, any Person other than the parties hereto and their successors and the Holders of the Notes any benefit or any right, remedy or claim under or by reason of this First Supplemental Indenture or the Base Indenture or any covenant, condition, stipulation, promise or agreement hereof or thereof, and all covenants, conditions, stipulations, promises and agreements contained herein or therein shall be for the sole and exclusive benefit of the parties hereto and their successors and of the Holders of the Notes.

Section 3.05 Counterparts This First Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.     The exchange of copies of this First Supplemental Indenture and of signature pages by facsimile or electronic ( i.e. , “pdf” or “tif”) transmission shall constitute effective execution and delivery of this First Supplemental Indenture as to the parties hereto and may be used in lieu of the original First Supplemental Indenture for all purposes.  Signatures of the parties hereto transmitted by facsimile or electronic ( i.e. , “pdf” or “tif”) transmission shall be deemed to be their original signatures for all purposes.

Section 3.06 Governing Law; Waiver of Trial by Jury This First Supplemental Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.

EACH OF THE PARTIES HERE TO, AND EACH HOLDER OF A NOTE BY ITS ACCEPTANCE THEREOF, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS FIRST SUPPLEMENTAL INDENTURE OR THE NOTES.

Section 3.07 Effect of First Supplemental Indenture .   This First Supplemental Indenture is a supplemental indenture within the   meaning of Section 2.0 1 of the Base Indenture, and the Base Indenture shall be rea d together with this First Supplemental Indenture and   shall have the same effect over the Notes of this series , in the same manner as if the provisions of the   Ba se Indenture and this First Supplemental Indenture were c ontained in the same instrument .  

Section 3.08 The Trustee The Trustee makes no representations as to the validity, adequacy  or sufficiency of this First Supplemental Indenture or of the Notes.  The recitals and statements herein and in the Notes (except in the Trustee’s certificate of authentication) are deemed to be those of the Company and not those of the Trustee, and the Trustee assumes no responsibility for their correctness.

 

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[Signatures on following page]

 

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IN WITNESS WHEREOF, the parties have caused this First Supplemental Indenture to be duly executed as of the date first written above.

FRONTIER COMMUNICATIONS CORPORATION ,

  a s Issuer

By:     /s/ John M. Jureller
Name:     John M. Jureller
Title: EVP ,   Chief Financial Officer

THE BANK OF NEW YORK MELLON,
as Trustee

By:     /s/  Laurence J. O’Brien  
Name: Laurence J. O’Brien
Title: Vice President

 

 


 

EXHIBIT A

[FORM OF FACE OF INITIAL NOTE ]

[ Global Notes Legend ]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE   OF THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW   YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,   EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME   OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED   REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH   OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY   TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY   PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,   HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,   BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH   SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL   BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET   FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

 

[[FOR REGULATION S GLOBAL NOTE ONLY] UNTIL 40 DAYS AFTER THE LATER OF   COMMENCEMENT OR COMPLETION OF THE OFFERING, AN OFFER OR SALE OF   SECURITIES WITHIN THE UNITED STATES BY A DEALER (AS DEFINED IN THE SECURITIES   ACT) MAY VIOLATE THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IF   SUCH OFFER OR SALE IS MADE OTHERWISE THAN IN ACCORDANCE WITH RULE 144A   THEREUNDER.]

 

[ Restricted Notes Legend ]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF   ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION   HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE   DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT   FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE   HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS   PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE   DATE (THE ‘‘RESALE RESTRICTION TERMINATION DATE’’) THAT IS, IN THE CASE OF RULE 144A NOTES,   ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF, THE ORIGINAL ISSUE DATE OF THE   ISSUANCE OF ANY ADDITIONAL NOTES AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE   OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), OR, IN   THE CASE OF REGULATION S NOTES, 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF   AND THE DATE ON WHICH THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) WAS FIRST   OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN RULE 902 OF REGULATION S) IN   RELIANCE ON REGULATION S, ONLY (A) TO THE ISSUER OR ANY

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SUBSIDIARY THEREOF, (B) PURSUANT TO   A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)   FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE   SECURITIES ACT (‘‘RULE 144A’’), TO A PERSON IT REASONABLY BELIEVES IS A ‘‘QUALIFIED   INSTITUTIONAL BUYER’’ AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR   THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER   IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.   PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER   THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION   REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS’ AND THE TRUSTEE’S RIGHT PRIOR   TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY   OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH   OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE   RESTRICTION TERMINATION DATE.

[ Additional Restricted Notes Legend for Notes Offered in Reliance of Regulation S]

BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.

[Definitive Notes Legend]

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

 

 

 

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FORM OF 8.875 % SENIOR NOTES DUE 20 20  
Frontier Communications Corporation  
8.875 % Senior Notes Due 20 20

PRINCIPAL AMOUNT: $

____ ____________________________

CUSIP:

________________________________

ISIN:

________________________________

No.:

Frontier Communications Corporation, a Delaware corporation (the Company, which term includes any successor thereto under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of      DOLLARS ($ ) (or such other principal amount as shall be set forth in the Schedule of Exchanges of Interest in the Global Note at tached hereto) on September 15 , 20 20 , or on such earlier date as the principal hereof may become due in accordance with the provisions of this Note.

Interest Rate: 8.875 % per annum.

Interest Payment Dates: March 15 and September 15 of each year, commencing on March 15, 2016 .

Record Dates: March 1 and September 1 .

Reference is made to the further provisions of this Note set forth on the reverse hereof Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee under the Indenture referred to on the reverse hereof.

 

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IN WITNESS WHEREOF, Frontier Communications Corporation has caused this Note to be duly executed.

FRONTIER COMMUNICATIONS CORPORATION

By: ______________________________
Name:
Title:

 

Dated:

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TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

Date of authentication: THE BANK O F NEW YORK MELLON,

                                                                                      a s Trustee

By: _________________________________
  Authorized Signatory

 

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[FORM OF REVERSE OF INITIAL NOTE ]  
FRONTIER COMMUNICATIONS CORPORATION  
8.875 % Senior Notes Due 2020

This Note is one of a duly authorized issue of debt securities of the Company of the series designated as the “ 8.875 % Senior Notes due 20 20 ” (the Notes ”), all issued or to be issued under and pursuant to an Indenture, dated as of September 25 , 201 5 (the Base Indenture ”), duly executed and delivered by and between the Company and The Bank of New York Mellon, as trustee (the Trustee, which term includes any successor trustee), as supplemented by the First Supplemental Indenture, dated as of September 25 , 201 5 (the First Supplemental Indenture ”), duly executed and delivered by and between the Company and the Trustee The Base Indenture as supplemented and amended by the First Supplemental Indenture is referred to herein as the Indenture .     Capitalized terms used herein and not otherwise defined shall have the meanings given them in the Indenture To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

1. Interest The Company promises to pay interest on the principal amount of this Note at a rate of 8.875 % per annum and shall pay the Additional Interest, if any, payable pursuant to the Registration Rights Agreement The date from which interest shall accrue on the Notes shall be September 25, 2015 , or the most recent Interest Payment Date   to which interest has been paid or provided for The Company will pay interest and Additional Interest, if any, semi - annually in arrears on March 15 and September 15 of each year, beginning March 15 , 201 6 In any case in which an Interest Payment Date , Redemption Date, M aturity or other payment date is not a Business Day as defined in the Indenture at a Place of Payment, payment may be made at that place on the next succeeding day that is a Business Day Any payment made on such Business Day will have the same force and effect as if made on the date on which the payment is due, and no interest shall accrue for the intervening period Interest shall be computed on the basis of a 360 - day year of twelve 30 - day months.

2. Method of Payment The Company shall pay interest and Additional Interest, if any, on the Notes (except Defaulted Interest), if any, to the Persons in whose name such Notes are registered at the close of business on the Record Date referred to on the face of this Note immediately preceding the related Interest Payment Date , even if such Notes are canceled, repurchased or redeemed on or after such Record Date and on or before such Interest Payment Date Payment of interest and Additional Interest, if any, on the Notes shall be made, in the currency of the United States of America that at the time is legal tender for payment of public and private debts, at the Corporate Trust Office or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address shall appear in the Register or, in accordance with arrangements satisfactory to the Paying Agent, by wire transfer to an account designated by the Holder.

3. Paying Agent, Authenticating Agent and Registrar Initially, The Bank of New York Mellon will act as Paying Agent, Authenticating Agent and Registrar The Company may change or appoint any Paying Agent or Registrar without notice to any Holder The Company may act in any such capacity.

4. Indenture The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (“ TIA ”), as in effect on the date the Indenture is qualified The Notes are subject to all such terms, and Holders are referred to the Indenture and TIA for a statement of such terms The Notes are unsecured general obligations of the Company and constitute the series designated on the face of this Note as the “ 8.875 % Senior Notes due 2020 ,” initially limited to $ 1,000,000,000 in aggregate principal amount The Company will furnish to   any Holder upon written request and without charge a copy of the Base Indenture, the First Supplemental  

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Indenture and the Registration Rights Agreement Requests may be made to:   Frontier Communications Corporation ,   401 Merritt 7 ,   Norwalk ,   Connecticut 06851 , Attn: Mark D. Nielsen , Esq.

5. Optional Redemption

(a) The Notes may be redeemed at the Company’s election, in whole or in part, at any time prior to June 15, 2020 (three months prior to the maturity date of the Notes) at a redemption price equal to the greater of:

(1)

100% of the principal amount of the Notes to be redeemed then Outstanding; and

(2)

as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the R edemption D ate on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 50 basis points;

 

plus, in either of the above cases, accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

 

(b) The Notes may be redeemed at the Company’s election, in whole or in part, at any time on or after June 15, 2020 (three months prior to the maturity date of the Notes), at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

6. Mandatory Redemption . If (a) the Release has not occurred on or prior to the Escrow End Date or (b) if the Company has notified the Trustee in writing of the Company’s announcement that the Verizon Purchase Agreement has been terminated or that it will not pursue the consummation of the Verizon Acquisition, the Company will redeem all of the Notes (the “ Mandatory Redemption ”) at the Mandatory Redemption Price. The “Mandatory Redemption Price” will be a price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, from September 25, 2015 to, but not including, the Mandatory Redemption Date (as defined below). Notice of the occurrence of a Mandatory Redemption shall be delivered by the Company (a “ Mandatory Redemption Notice ”) promptly to the Trustee and the Escrow Agent. Concurrently with the delivery of the Mandatory Redemption Notice, the Company shall request the Trustee to, at the Company’s expense, deliver (in accordance with the procedures of the Depository or otherwise by first-class mail to each Holder’s registered address) a notice that a Mandatory Redemption is to occur. Within two B usiness D ays (or such other minimum period as may be required by the Depositary) after the Company’s delivery of a Mandatory Redemption Notice, the Company will effect the Mandatory Redemption (the date of such redemption, the “ Mandatory Redemption Date ”) in accordance with the Escrow Agreement. For avoidance of doubt, the provisions of Section 4.03 of the Base Indenture relating to the means and timing of delivery of a notice of redemption shall not apply to a Mandatory Redemption.

 

Notwithstanding anything to the contrary contained in Article XIV of the Base Indenture, the provisions of Section 2.0 5 of the First Supplemental Indenture may be waived or modified with the written consent of Holders of at least 90% in principal amount of the Notes Outstanding.

Other than as set for th in Section 2.0 5 of the First Supplemental Indenture , the Company will not be required to make any mandatory redemption or sinking fund payments with respect to the Notes.

7. Repurchase at the Option of Holder

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(a) If there is a Change of Control Triggering Event, the Company will be required to make a   Change of Control Offer to each Holder to repurchase all or any part (equal to $2,000 or an integral multiple   of $1,000 in excess thereof) of such Holder’s Notes at a purchase price in cash equal to 101% of the   aggregate principal amount thereof plus accrued and unpaid interest on the Notes repurchased to, but not   including, the date of purchase, subject to the rights of Holders on the relevant record date to receive interest   due on the relevant Interest Payment Date for periods prior to such repurchase date pursuant to Section   6.14 of the Base Indenture. Within 30 days following any Change of Control Triggering Event, the   Company will send a notice to each Holder and the Trustee describing the transaction or transactions and   identify the ratings decline that together constitute the Change of Control Triggering Event, offering to   repurchase Notes on the Change of Control Payment Date specified in the notice, which date will be no   earlier than 30 days and no later than 60 days from the date such notice is sent and setting forth the procedures   governing the Change of Control Offer as required by the Indenture.

 

(b) If the Company or a Restricted Subsidiary of the Company consummates any Asset   Sales, within twenty days of each date on which the aggregate amount of Excess Proceeds exceeds $100.0   million, the Company shall apply the entire aggregate amount of unutilized Excess Proceeds to make an Asset S ale Offer pursuant to Section 6.14 of the Base Indenture   to all Holders of Notes and all holders of other Pari Passsu Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem   with the proceeds of sales of assets to purchase the maximum principal amount of Notes (including   any Additional Notes) and purchase or redeem such other Pari P assu Indebtedness that may be purchased   or redeemed out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal   amount of the Notes and such other Pari P assu Indebtedness that may be purchased or redeemed   with Excess Proceeds thereof plus accrued and unpaid interest thereon to, but not including, the date of   consummation of the purchase, in accordance with the procedures set forth in the Indenture. To the extent   that the aggregate amount of Notes (including any Additional Notes) and other Pari P assu Indebtedness   tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Restricted   Subsidiary) may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture.   If the aggregate principal amount of Notes and other P ari P assu Indebtedness tendered in response   to such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes   and the Company shall select such other P ari P assu Indebtedness to be purchased or redeemed on a pro   rata basis unless otherwise required by law or applicable stock exchange or depositary requirements.   Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the   Company prior to any related purchase date and may elect to have such Notes purchased by completing   the form entitled “Option of Holder to Elect Purchase” attached to the Notes.

 

8.   N otice of R edemption . Notice of redemption will be sent at least 30 days (or, if   any Global Notes are outstanding, such shorter period as may be permitted by the eligibility rules of the   Depositary) but no t more than 60 days before the R edemption D ate to each Holder whose Notes are to be   redeemed, except that redemption notices may be sent or maile d more than 60 days prior to a R edemption   D ate if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of   the Indenture. Notes in denominations larger than $2,000 may be redeemed in part but only in whole   multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed.

 

9 . Denominations, Transfer, Exchange The Notes are in registered form without coupons in the denominations of $ 2,000 and integral multiple s of $ 1,000 in excess thereof The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture The Notes may be presented for exchange or for registration of transfer (duly endorsed or with the form of transfer endorsed thereon duly executed if so required by the Company or the Registrar) at the office of the Registrar or at the office of any transfer agent designated by the Company for such purpose.   Also, the Company need not exchange or register the transfer of any Notes (i) for a period beginning   at the opening of business 15

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days immediately preceding the sending of notice of redemption of   Notes selected for redemption and ending at the close of business on the day such notice is sent or (ii)   during the period between a record date and the corresponding Interest Payment Date.

10 . Registration Rights In addition to the rights set forth under the Indenture and the First Supplemental Indenture, Holders of this Security will have all the rights set forth in the Registration Rights Agreement, dated as of September 25, 2015 , among the Company , J.P. Morgan Securities LLC , Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. (the “ Registration Rights Agreement ”), including the right to receive Additional Interest pursuant to the Registration Rights Agreement.

11 . Persons Deemed Owners The registered Holder may be treated as its owner for all purposes.

12 . Amendments, Supplements and Waivers The Indenture and the Notes may be amended or supplemented as provided in the Indenture Any consent or waiver by the Holders as provided in the Indenture shall be conclusive and binding upon such Holders and upon all future Holders and holders of any security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon the Notes.

13 . Defaults and Remedies The Events of Default relating to the Notes are defined in Sec tion 7 .01 of the Base Indenture Upon the occurrence of an Event of Default, the rights and obligations of the Company, the Trustee and the Holders shall be as set forth in the applicable provisions of the Indenture.

14 . No Recourse Against Others No recourse under or upon any obligation, covenant or agreement contained in the Indenture or the Notes, or because of any indebtedness evidenced thereby, shall be had against any incorporator as such, or against any past, present or future stockholder, officer, director or employee, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as part of the consideration for the issue hereof.

15 . Authentication This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee.

16 . Governing Law The Base Indenture, the First Supplemental Indenture and this Note shall be governed by, and construed in accordance with, the laws of the State of New York.

17 . CUSIP and ISIN Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP and ISIN numbers to be printed on the Notes, and the Trustee may use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

 

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ASSIGNMENT

To assign this Security, fill in the form below: I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint agent to transfer this Security on the books of the Company The agent may substitute another to act for him.

Date: Your Signature:

Sign exactly as your name appears on the other side of this Security.

 

       Si gnature Guarantee:

 

 

 

 

 

 

 

 

       Signature must be guaranteed                                                           Signature

 

SIGNATURE GUARANTEE

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“ STAMP ”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 6.14   or Section 6.15 of the Base Indenture, check the box below:

◻ Section 6.14 ◻ Section 6.15

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 6.14   or Section 6.15 of the Base Indenture, state the amount you elect to have purchased:

$

 

 

 

Date:

Your Signature:

______________________________

 

 

(Sign exactly as your name appears on the face of this Note)

 

 

 

 

Tax Identification No:

______________________________

 

 

(Sign exactly as your name appears on the face of this Note)

 

 

 

______________________________

 

SIGNATURE GUARANTEE

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“ STAMP ”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

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CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF   TRANSFER RESTRICTED NOTES

 

This certificate relates to $ principal amount of Notes held in definitive form by the undersigned.   The undersigned has requested the Trustee by written order to exchange or register the transfer of   a Note or Notes.

 

In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to   the expiration of the period referred to in Rule 144 under the Securities Act, the undersigned confirms that   such Notes are being transferred in accordance with its terms:

 

CHECK ONE BOX BELOW

 

    (1) to the Company; or

 

    (2) to the Registrar for registration in the name of the Holder, without transfer; or

 

    (3) pursuant to an effective registration statement under the Securities Act of 1933; or

 

    (4) inside the United States to a “qualified institutional buyer” (as defined in Rule 144A   under the Securities Act of 1933) that purchases for its own account or for the account   of a qualified institutional buyer to whom notice is given that such transfer is being   made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule   144A under the Securities Act of 1933; or   _  

 

    (5) outside the United States in an offshore transaction within the meaning of Regulation S   under the Securities Act in compliance with Rule 904 under the Securities Act of 1933;

or

    (6) pursuant to another available exemption from registration provided by Rule 144 under   the Securities Act of 1933.

 

Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced   by this certificate in the name of any Person other than the registered holder thereof; provided, however,   that if box (4), (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the   Notes, such legal opinions, certifications and other information as the Company has reasonably requested   to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject   to, the registration requirements of the Securities Act of 1933.

 

______________________________________

                     Your Signature

 

 

______________________________________

Signature Guarantee : Signature of Signature Guarantee:

 

Date: ____________________

Signature must be guaranteed by

a participant in a recognized signature

guaranty medallion program or other

signature guarantor acceptable to the

Trustee

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TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

 

The undersigned represents and warrants that it is purchasing this Note for its own account or an   account with respect to which it exercises sole investment discretion and that it and any such account is a   “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is   aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received   such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has   determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s   foregoing representations in order to claim the exemption from registration provided by Rule   144A.

 

Dated: _____________________ NOTICE: To be executed by an executive officer

 

 

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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*

The following exchanges of a part of this Global Note for an interest in another Global Note or   for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in   this Global Note, have been made:

 

Date

 

 

 

 

Date of Exchange

Amount of decrease in principal amount of this Global Note

Amount of increase in principal amount of this Global Note

Principal amount of this  Global Note following such  decrease (or increase)

Signature of   authorized

officer of   Trustee or

Notes Custodian

 

 

 

 

 

 

 

 

 

 

 

 

 

___ ________________________

* Insert in Global Notes.

 

 

 

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Exhibit 4.3

EXECUTION VERSION

SECOND SUPPLEMENTAL INDENTURE
Dated as of
September 25, 2015  
b etween
FRONTIER COMMUNICATIONS CORPORATION  
as Company
and
THE BANK OF NEW YORK MELLON
as Trustee
10.500 % SENIOR NOTES DUE 2022

SECOND SUPPLEMENTAL INDENTURE dated as of September 25 , 201 5 between Frontier Communications Corporation, a Delaware corporation (the Company ”), and The Bank of New York Mellon, as trustee (the Trustee ”).

WITNESSETH:

WHEREAS, the Company and the Trustee executed and delivered an Indenture dated as of September 25 , 201 5 (the Base Indenture ”) to provide for the issuance of debentures, notes, bonds or other evidences of indebtedness in an unlimited aggregate principal amount to be issued from time to time in one or more series (such Base Indenture, as supplemented and amended by this Second Supplemental Indenture, herein referred to as the Indenture ”);

WHEREAS, the Company has duly authorized the issuance of $ 2,000,000,000 aggregate principal amount of 10.500 % Senior Notes due 2022   (the Notes ”);

WHEREAS, the Company has duly authorized the execution and delivery of this Second Supplemental Indenture pursuant to Section 1 4 .01 of the Base Indenture to establish the terms and the form of the Notes in accordance with Sections 2.01, 3.01 and 3.03 of the Bas e Indenture;

WHEREAS, pursuant to Section 14 .0 3 of the Base Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture and the Company hereby requests that the Trustee join with the Company in the execution of this Supplemental Indenture; and

WHEREAS, all things necessary to make this Second Supplemental Indenture a valid and legally binding agreement of the Company, in accordance with its terms, have been done.

NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:

That, in consideration of the premises and the purchase of the Notes by the Holders thereof for the equal and proportionate benefit of all of the present and future Holders of the Notes, each party agrees and covenants as follows:

ARTICLE I

SCOPE AND DEFINITIONS

Section 1.01 Scope The changes, modifications and supplements to the Base Indenture effected by this Second Supplemental Indenture shall be applicable only with respect to, and govern the terms of, the Notes and shall not apply to any other series of Securities that may be issued under the Base

 

 


 

Indenture unless a supplemental indenture with respect to such other series of Securities specifically incorporates such changes, modifications and supplements.

Section 1.02 Definitions .

(a) Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Base Indenture.

(b) As used herein, the following additional defined terms shall have the following meanings with respect to the Notes only and be equally applicable to both the singular and the plural forms of any of the terms herein defined:

Additional Notes has the meaning provided in Section 2.01(c)

Adjusted Treasury Rate ” means, with respect to any R edemption D ate:

(1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15(519)” or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or

(2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such R edemption D ate.

The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the R edemption D ate.

Base Indenture has the meaning provided in the recitals hereof.

Comparable Treasury Issue ” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the applicable notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such notes (“ Remaining Life ”).

Comparable Treasury Price ” means, for any Redemption Date, (1) the average of four Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if the Independent Investment Banker obtains fewer than four such Reference Treasury Dealer Quotations the average of all such quotations.

Escrow Account ” has the meaning assigned to such term in the Escrow Agreement.

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Escrow Agent ” means MUFG Union Bank, N.A., in its capacity as escrow agent.

Escrowed Funds ” has the meaning assigned to such term in the Escrow Agreement.

Escrow End Date ” means (x) August 6, 2016 or (y) such earlier date as the Company shall notify the Trustee in writing of the Company’s announcement that the Verizon Purchase Agreement has been terminated or that it will not pursue the consummation of the Verizon Acquisition.

  Independent Investment Banker ” means one of the Reference Treasury Dealers appointed by the Company.

Initial Notes has the meaning provided in Section 2.01(c).

Mandatory Redemption ” has the meaning provided in Section 2.0 5 .

Mandatory Redemption Date ” has the meaning provided in Section 2.0 5 .

Mandatory Redemption Notice ” has the meaning provided in Section 2.0 5 .

Notes has the meaning provided in the recitals hereof.

Registration Rights Agreement has the meaning provided in Section 2.0 6 .

Reference Treasury Dealer ” means any of the primary U.S. Government securities dealers in New York City.

Reference Treasury Dealer Quotations ” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.

Release ” mean s the release of the Escrowed Funds to the Company from the Escrow Account upon satisfaction of the conditions set forth in the Escrow Agreement .

Second Supplemental Indenture ” means this instrument.

Section 1.03 Rules of Construction For all purposes of this Second Supplemental Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a) The words herein ,   hereof and hereunder and other words of similar import refer to this Second Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision.

(b) References to Article or Section or other subdivision herein are references to an Article, Section or other subdivision of this Second Supplemental Indenture, unless the context otherwise requires.

(c) The words including and words of similar import when used in this Indenture shall mean “including, without limitation .  

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(d) References to any agreement, instrument, statute or regulation defined or referred to herein or in any instrument establishing the terms of the Notes (or executed in connection therewith) are references to such agreement, instrument, statute or regulation as from time to time amended, modified, supplemented or replaced, including (in the case of agreements or instruments) by waiver or consent and by succession of comparable successor agreements, instruments, statutes or regulations;

(e) or ” is not exclusive; and

(f) will ” shall be interpreted to express a command.

ARTICLE II

THE NOTES

Section 2.01 Terms of the Notes The Notes are hereby created and designated as a separate series of Securities under the Base Indenture The following terms relate to the Notes:

(a) The Notes shall constitute a separate series of Securities under the Base Indenture having the title “ 10.500 % Senior Notes due 2022 .”

(b) The Notes shall be issued at a price of 100 % of the principal amount thereof, other than any offering discounts pursuant to the initial offering and resale of the Notes.

(c) The aggregate principal amount of the Notes (the Initial Notes ”) that may be initially authenticated and delivered under the Indenture shall be $ 2,000,000,000 The Company may from time to time, without the consent of the Holders of the Notes, issue additional Notes (in any such case Additional Notes ”) having the same terms and conditions as the Initial Notes in all respects (or in all respects except for the Issue Date, the issue price or the first Interest Payment Date) Any Additional Notes and the Initial Notes shall constitute a single series under the Indenture, provided that if such Additional Notes are not fungible with the Initial Notes for U.S. federal income tax purposes, such Additional Notes shall not have the same CUSIP, ISIN or other identifying number as the Initial Notes All references to the Notes shall include the Initial Notes and any Additional Notes unless the context otherwise requires The aggregate principal amount of each of the Additional Notes shall be unlimited.

(d) The entire outstanding principal of the Notes shall be payable on September 15 ,   2022 .

(e) The rate at which the Notes shall bear interest shall be 10.500 % per year The date from which interest shall accrue on the Notes shall be September 25 , 201 5 , or the most recent Interest Payment Date   to which interest has been paid or provided for The Interest Payment Date s   for the Notes shall be March 15 and September 15 of each year, commencing March 15 , 201 6 Interest shall be payable on each Interest Payment Date   to the Holders of record at the close of business on the March 1 and September 1 prior to each Interest Payment Date The basis upon which interest shall be calculated shall be that of a 360 - day year comprised of twelve 30 - day months.

(f) The Notes shall be issuable in whole in the form of one or more registered Global Securities, and the Depository for such Global Securities shall be DTC The Notes shall be substantially in the form attached hereto as Exhibit A, the terms of which are herein incorporated

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by reference The Notes shall be denominated in U.S. Dollars and shall be issuable in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.

(g) The Notes may be redeemed at the option of the Company prior to the date of Stated Maturity for payment of principal on the Notes, as provided in Section 2.0 4 .

(h) The Notes will not have the benefit of any sinking fund.

(i) Except as provided herein, the Holders of the Notes shall have no special rights in addition to those provided in the Base Indenture upon the occurrence of any particular events.

(j) The Notes will be senior unsecured obligations of the Company, and will rank :   (i)   equal in right of payment with all of the Company’s existing and future senior I ndebtedness ,   (ii) effectively junior to all of the Company’s existing and future senior Secured Indebtedness (including Indebtedness under our Senior Credit Facilities) to the extent of the value of the assets securing such Indebtedness, (iii) structurally junior to all existing and future Indebtedness and other liabilities and commitments of the Company’s Subsidiaries (including Trade Payables and Capital Lease Obligations); and   (iv)   senior in right of payment to the Company’s existing and future S ubordinated I ndebtedness , if any .

(k) The terms and provisions of Appendix A of the Base Indenture shall apply to the   Notes of this series .

 

Section 2.02 Global Securities .   The Notes issued in global form will be substantially in   the form of Exhibit A hereto (including the Global Security Legend thereon and the “Schedule of Exchanges   of Interests in the Global Security ” attached thereto). Notes of this series issued in definitive form will be   substantially in the form of Exhibit A hereto (but without the Global Security Legend thereon and without the   Schedule of Exchanges of Interests in the Global Security ” attached thereto). Each Global Security will represent   such of the outstanding Notes of this s eries as will be specified therein and each shall provide that it   represents the aggregate principal amoun t of outstanding Notes of this s eries from time to time endorsed   thereon and that the aggregate principal amount of outstanding Notes of this series represented thereby   may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions.

Any endorsement of a Global Security to reflect the amount of any increase or decrease in the aggregate   principal amoun t of outstanding Notes of this s eries represented thereby will be made by the Trustee or   the Notes Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder   thereof.

 

Section 2.03 Transfer and Exchange .

The Notes of this s eries shall be issued in registered form and shall be transferable only upon the   surrender of a Note of this series for registration of transfer and in compliance with Appendix A of the   Base Indenture.

 

When Notes of this series are presented to the Registrar or a co-registrar with a request to register   a transfer or to exchange them for an equal principal amount of Notes of this series of other denominations,   the Registrar will register the transfer or make the exchange as requested if its requirements for   such transactions are met. To permit registrations of transfers and exchanges, the Company shall execute   and the Trustee shall authenticate Notes of this series at the Registrar’s request. A Holder of Notes of   this series may transfer or exchange Notes of this series only in accordance with the

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Indenture. Upon   any transfer or exchange, the Registrar and the Trustee may require a Holder of Notes of this series ,   among other things, to furnish appropriate endorsements or transfer documents. No service charge shall   be made for any registration of transfer or exchange (except as otherwise expressly permitted herein), but   the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental   charge payable in connection therewith.

 

Prior to due presentment of any Note of this series for registration of transfer, the Company, the   Trustee, any agent of the Company or the Trustee, the Paying Agent and the Registrar may deem and treat   the Person in whose name a Note of this series is registered as the absolute owner of such Note for all   purposes, including for the purpose of receiving payment of principal of, and any premium and any interest,   if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and   none of the Company, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the   contrary.

 

Any holder of a beneficial interest in a Global Security of this series shall, by acceptance of such   beneficial interest, agree that transfers of beneficial interests in such Global Security may be effected only   through a book-entry system maintained by (a) the holder of such Global Security (or its agent) or (b) any   holder of a beneficial interest in such Global Security , and that ownership of a beneficial interest in such   Global Security shall be required to be reflected in a book entry.

 

All Notes of this series issued upon any transfer or exchange pursuant to the terms of the Indenture   shall evidence the same debt and shall be entitled to the same benefits under the Indenture as such   Notes surrendered upon such transfer or exchange.

 

Section 2.04 Optional Redemption .

(a) The provisions of Article IV of the Base Indenture, as amended by the provisions of this Second Supplemental Indenture, shall apply to the Notes.

(b) The Notes may be redeemed at the Company’s election, in whole or in part, at any time prior to June 15, 2022   (three months prior to the maturity date of the Notes) at a redemption price equal to the greater of:

(1)

100% of the principal amount of the Notes to be redeemed then Outstanding; and

(2)

as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the R edemption D ate on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 50 basis points;

plus, in either of the above cases, accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

(c) The Notes may be redeemed at the Company’s election, in whole or in part, at any time on or after June 15,  2022 (three months prior to the maturity date of the Notes), at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

Section 2.05 Mandatory Redemption If (a) the Release has not occurred on or prior to the Escrow End Date or (b) if the Company has notified the Trustee in writing of the Company’s

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announcement that the Verizon Purchase Agreement has been terminated or that it will not pursue the consummation of the Verizon Acquisition , the Company will redeem all of the Notes (the “ Mandatory Redemption ”) at the Mandatory Redemption Price. The “Mandatory Redemption Price” will be a price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, from September 25, 2015 to , but not including, the Mandatory Redemption Date (as defined below). Notice of the occurrence of a Mandatory Redemption shall be delivered by the Company (a “ Mandatory Redemption Notice ”) promptly to the Trustee and the Escrow Agent. Concurrently with the delivery of the Mandatory Redemption Notice, the Company shall request the Trustee to, at the Company’s expense, deliver (in accordance with the proce dures of the Deposito ry or otherwise by first-class mail to each Holder’s registered address) a notice that a Mandatory Redemption is to occur. Within two B usiness D ays (or such other minimum period as may be required by the Depositary) after the Company’s delivery of a Mandatory Redemption Notice, the Company will effect the Mandatory Redemption (the date of such redemption, the “ Mandatory Redemption Date ”) in accordance with the Escrow Agreement. For avoidance of doubt, the provisions of Section 4.03 of the Base Indenture relating to the means and timing of delivery of a notice of redemption shall not apply to a Mandatory Redemption.

Notwithstanding anything to the contrary contained in Article XIV of the Base Indenture, the provi sions of this Section 2 .0 5 may be waived or modified with the written consent of Holders of at least 90% in prin cipal amount of the Notes O utstanding.

Section 2.06 Registration Rights Agreement .   In addition to the rights set forth under the Indenture and this Second Supplemental Indenture, Holders of the Notes will have all the rights set forth in the Registration Rights Agreement, dated as of September 25 , 2015 , among the Company , J.P. Morgan Securities LLC , Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. (the “ Registration Rights Agreement ”), including the right to receive certain Additional Interest upon the occurrence of certain events as set forth in the Registration Rights A greement.

Section 2.07 Registe r ed Exchange Offer .  

(a) Upon the consummation of the Registered Exchange Offer in accordance with the Registration Rights Agreement, the Company will issue and, upon receipt of a Company Order in accordance with Section 3.03 of the Indenture, the Trustee will authenticate   one or more Global Securities or Definitive Notes, as directed by the Holders of the Notes to be exchanged, not bearing the restricted notes legend in an aggregate principal amount equal to the principal amount of the beneficial interests in the Notes that are Initial Securities tendered for acceptance by a Person other than the Company or an Affiliate thereof in accordance with the Registered Exchange Offer and accepted for exchange in the Registered Exchange Offer, in accordance with Appendix A to the Base Indenture.

(b) All Exchange Securities issued and authenticated in accordance with Section 2.07 (a) shall be part of the same series as any Outstanding Notes and shall vote and consent, together with any Outstanding Notes as one class, on all matters that require their vote or consent under the Indenture or this Second Supplemental Indenture, except in the case of any matter that affects only the Outstanding Notes or only the Exchange Securities.

ARTICLE III

MISCELLANEOUS PROVISIONS

Section 3.01 Confirmation of Indenture The Base Indenture, as supplemented and amended by this Second Supplemental Indenture, is in all respects ratified and confirmed, and the Base Indenture,

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this Second Supplemental Indenture and all indentures supplemental thereto with respect to the Notes shall be read, taken and construed as one and the same instrument.

Section 3.02 Severability If any provision in this Second Supplemental Indenture or in the Notes shall be held to be invalid, illegal or unenforceable under applicable law, then the remaining provisions in this Second Supplemental Indenture or in the Notes shall be construed as though such invalid, illegal or unenforceable provision were not contained herein.

Section 3.03 Conflicts with Base Indenture In the event that any provision of this Second Supplemental Indenture limits, qualifies or conflicts with the express provisions of the Base Indenture, such provision of the Second Supplemental Indenture shall prevail.

Section 3.04 Benefits of Indenture Nothing in this Second Supplemental Indenture expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or to give to, any Person other than the parties hereto and their successors and the Holders of the Notes any benefit or any right, remedy or claim under or by reason of this Second Supplemental Indenture or the Base Indenture or any covenant, condition, stipulation, promise or agreement hereof or thereof, and all covenants, conditions, stipulations, promises and agreements contained herein or therein shall be for the sole and exclusive benefit of the parties hereto and their successors and of the Holders of the Notes.

Section 3.05 Counterparts This Second Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.     The exchange of copies of this Second Supplemental Indenture and of signature pages by facsimile or electronic ( i.e. , “pdf” or “tif”) transmission shall constitute effective execution and delivery of this Second Supplemental Indenture as to the parties hereto and may be used in lieu of the original Second Supplemental Indenture for all purposes.  Signatures of the parties hereto transmitted by facsimile or electronic ( i.e. , “pdf” or “tif”) transmission shall be deemed to be their original signatures for all purposes.

Section 3.06 Governing Law; Waiver of Trial by Jury This Second Supplemental Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.

EACH OF THE PARTIES HERE TO, AND EACH HOLDER OF A NOTE BY ITS ACCEPTANCE THEREOF, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECOND SUPPLEMENTAL INDENTURE OR THE NOTES.

Section 3.07 Effect of Second Supplemental Indenture .   This Second Supplemental Indenture is a supplemental indenture within the   meaning of Section 2.0 1 of the Base Indenture, and the Base Indenture shall be rea d together with this Second Supplemental Indenture and   shall have the same effect over the Notes of this series , in the same manner as if the provisions of the   Ba se Indenture and this Second Supplemental Indenture were c ontained in the same instrument .  

Section 3.08 The Trustee The Trustee makes no representations as to the validity, adequacy  or sufficiency of this Second Supplemental Indenture or of the Notes.  The recitals and statements herein and in the Notes (except in the Trustee’s certificate of authentication) are deemed to be those of the Company and not those of the Trustee, and the Trustee assumes no responsibility for their correctness.

 

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[Signatures on following page]

 

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IN WITNESS WHEREOF, the parties have caused this Second Supplemental Indenture to be

d u ly executed as of the date first written above.

 

FRONTIER COMMUNICATIONS CORPORATION ,  

as Issuer

By:     /s/ John M. Jureller
Name: John M. Jureller
Title: EVP, Chief Financial Officer

THE BANK OF NEW YORK MELLON,
as Trustee

By:     /s/ Laurence J. O’Brien  
Name: Laurence J. O’Brien
Title: Vice President

 

 


 

EXHIBIT A

[FORM OF FACE OF INITIAL NOTE ]

[ Global Notes Legend ]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE   OF THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW   YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,   EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME   OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED   REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH   OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY   TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY   PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,   HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,   BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH   SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL   BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET   FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

 

[[FOR REGULATION S GLOBAL NOTE ONLY] UNTIL 40 DAYS AFTER THE LATER OF   COMMENCEMENT OR COMPLETION OF THE OFFERING, AN OFFER OR SALE OF   SECURITIES WITHIN THE UNITED STATES BY A DEALER (AS DEFINED IN THE SECURITIES   ACT) MAY VIOLATE THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IF   SUCH OFFER OR SALE IS MADE OTHERWISE THAN IN ACCORDANCE WITH RULE 144A   THEREUNDER.]

 

[ Restricted Notes Legend ]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF   ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION   HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE   DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT   FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE   HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS   PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE   DATE (THE ‘‘RESALE RESTRICTION TERMINATION DATE’’) THAT IS, IN THE CASE OF RULE 144A NOTES,   ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF, THE ORIGINAL ISSUE DATE OF THE   ISSUANCE OF ANY ADDITIONAL NOTES AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE   OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), OR, IN   THE CASE OF REGULATION S NOTES, 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF   AND THE DATE ON WHICH THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) WAS FIRST   OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN RULE 902 OF REGULATION S) IN   RELIANCE ON REGULATION S, ONLY (A) TO THE ISSUER OR ANY

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SUBSIDIARY THEREOF, (B) PURSUANT TO   A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)   FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE   SECURITIES ACT (‘‘RULE 144A’’), TO A PERSON IT REASONABLY BELIEVES IS A ‘‘QUALIFIED   INSTITUTIONAL BUYER’’ AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR   THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER   IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.   PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER   THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION   REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS’ AND THE TRUSTEE’S RIGHT PRIOR   TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY   OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH   OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE   RESTRICTION TERMINATION DATE.

[ Additional Restricted Notes Legend for Notes Offered in Reliance of Regulation S]

BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.

[Definitive Notes Legend]

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

 

 

 

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FORM OF 10.500 % SENIOR NOTES DUE 2022  
Frontier Communications Corporation  
10.500 % Senior Notes Due 2022

PRINCIPAL AMOUNT: $

_______________________________

CUSIP:

_______________________________

ISIN:

_______________________________

No.:

Frontier Communications Corporation, a Delaware corporation (the Company, which term includes any successor thereto under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of      DOLLARS ($ ) (or such other principal amount as shall be set forth in the Schedule of Exchanges of Interest in the Global Note at tached hereto) on September 15 ,   2022 , or on such earlier date as the principal hereof may become due in accordance with the provisions of this Note.

Interest Rate: 10.500 % per annum.

Interest Payment Dates: March 15 and September 15 of each year, commencing on March 15, 2016 .

Record Dates: March 1 and September 1 .

Reference is made to the further provisions of this Note set forth on the reverse hereof Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee under the Indenture referred to on the reverse hereof.

 

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IN WITNESS WHEREOF, Frontier Communications Corporation has caused this Note to be duly executed.

FRONTIER COMMUNICATIONS CORPORATION

By: ______________________________________
Name:
Title:

 

Dated:

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TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

Date of authentication: THE BANK O F NEW YORK MELLON,

     as Trustee

By: ____________________________________
Authorized Signatory

 

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[FORM OF REVERSE OF INITIAL NOTE ]  
FRONTIER COMMUNICATIONS CORPORATION  
10.500 % Senior Notes Due 2022

This Note is one of a duly authorized issue of debt securities of the Company of the series designated as the “ 10.500 % Senior Notes due 2022 ” (the Notes ”), all issued or to be issued under and pursuant to an Indenture, dated as of September 25 , 201 5 (the Base Indenture ”), duly executed and delivered by and between the Company and The Bank of New York Mellon, as trustee (the Trustee, which term includes any successor trustee), as supplemented by the Second Supplemental Indenture, dated as of September 25 , 201 5 (the Second Supplemental Indenture ”), duly executed and delivered by and between the Company and the Trustee The Base Indenture as supplemented and amended by the Second Supplemental Indenture is referred to herein as the Indenture .     Capitalized terms used herein and not otherwise defined shall have the meanings given them in the Indenture To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

1. Interest The Company promises to pay interest on the principal amount of this Note at a rate of 10.500 % per annum and shall pay the Additional Interest, if any, payable pursuant to the Registration Rights Agreement The date from which interest shall accrue on the Notes shall be September 25, 2015 , or the most recent Interest Payment Date   to which interest has been paid or provided for The Company will pay interest and Additional Interest, if any, semi - annually in arrears on March 15 and September 15 of each year, beginning March 15 , 201 6 In any case in which an Interest Payment Date , Redemption Date, M aturity or other payment date is not a Business Day as defined in the Indenture at a Place of Payment, payment may be made at that place on the next succeeding day that is a Business Day Any payment made on such Business Day will have the same force and effect as if made on the date on which the payment is due, and no interest shall accrue for the intervening period Interest shall be computed on the basis of a 360 - day year of twelve 30 - day months.

2. Method of Payment The Company shall pay interest and Additional Interest, if any, on the Notes (except Defaulted Interest), if any, to the Persons in whose name such Notes are registered at the close of business on the Record Date referred to on the face of this Note immediately preceding the related Interest Payment Date , even if such Notes are canceled, repurchased or redeemed on or after such Record Date and on or before such Interest Payment Date Payment of interest and Additional Interest, if any, on the Notes shall be made, in the currency of the United States of America that at the time is legal tender for payment of public and private debts, at the Corporate Trust Office or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address shall appear in the Register or, in accordance with arrangements satisfactory to the Paying Agent, by wire transfer to an account designated by the Holder.

3. Paying Agent, Authenticating Agent and Registrar Initially, The Bank of New York Mellon will act as Paying Agent, Authenticating Agent and Registrar The Company may change or appoint any Paying Agent or Registrar without notice to any Holder The Company may act in any such capacity.

4. Indenture The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (“ TIA ”), as in effect on the date the Indenture is qualified The Notes are subject to all such terms, and Holders are referred to the Indenture and TIA for a statement of such terms The Notes are unsecured general obligations of the Company and constitute the series designated on the face of this Note as the “ 10.500 % Senior Notes due 2022 ,” initially limited to $ 2,000,000,000 in aggregate principal amount The Company will furnish to   any Holder upon written request and without charge a copy of the Base Indenture, the Second

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Supple m ental Indenture and the Registration Rights Agreement Requests may be made to:   Frontier Communications Corporation ,   401 Merritt 7 ,   Norwalk ,   Connecticut 06851 , Attn: Mark D. Nielsen , Esq.

5. Optional Redemption

(a) The Notes may be redeemed at the Company’s election, in whole or in part, at any time prior to June 15, 2022 (three months prior to the maturity date of the Notes) at a redemption price equal to the greater of:

(1)

100% of the principal amount of the Notes to be redeemed then Outstanding; and

(2)

as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the R edemption D ate on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 50 basis points;

 

plus, in either of the above cases, accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

 

(b) The Notes may be redeemed at the Company’s election, in whole or in part, at any time on or after June 15,  2022 (three months prior to the maturity date of the Notes), at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

6. Mandatory Redemption . If (a) the Release has not occurred on or prior to the Escrow End Date or (b) if the Company has notified the Trustee in writing of the Company’s announcement that the Verizon Purchase Agreement has been terminated or that it will not pursue the consummation of the Verizon Acquisition, the Company will redeem all of the Notes (the “ Mandatory Redemption ”) at the Mandatory Redemption Price. The “Mandatory Redemption Price” will be a price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, from September 25, 2015 to, but not including, the Mandatory Redemption Date (as defined below). Notice of the occurrence of a Mandatory Redemption shall be delivered by the Company (a “ Mandatory Redemption Notice ”) promptly to the Trustee and the Escrow Agent. Concurrently with the delivery of the Mandatory Redemption Notice, the Company shall request the Trustee to, at the Company’s expense, deliver (in accordance with the procedures of the Depository or otherwise by first-class mail to each Holder’s registered address) a notice that a Mandatory Redemption is to occur. Within two B usiness D ays (or such other minimum period as may be required by the Depositary) after the Company’s delivery of a Mandatory Redemption Notice, the Company will effect the Mandatory Redemption (the date of such redemption, the “ Mandatory Redemption Date ”) in accordance with the Escrow Agreement. For avoidance of doubt, the provisions of Section 4.03 of the Base Indenture relating to the means and timing of delivery of a notice of redemption shall not apply to a Mandatory Redemption.

 

Notwithstanding anything to the contrary contained in Article XIV of the Base Indenture, the provisions of Section 2.0 5 of the Second Supplemental Indenture may be waived or modified with the written consent of Holders of at least 90% in principal amount of the Notes Outstanding.

Other than as set for th in Section 2.0 5 of the Second Supplemental Indenture , the Company will not be required to make any mandatory redemption or sinking fund payments with respect to the Notes.

7. Repurchase at the Option of Holder

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(a) If there is a Change of Control Triggering Event, the Company will be required to make a   Change of Control Offer to each Holder to repurchase all or any part (equal to $2,000 or an integral multiple   of $1,000 in excess thereof) of such Holder’s Notes at a purchase price in cash equal to 101% of the   aggregate principal amount thereof plus accrued and unpaid interest on the Notes repurchased to, but not   including, the date of purchase, subject to the rights of Holders on the relevant record date to receive interest   due on the relevant Interest Payment Date for periods prior to such repurchase date pursuant to Section   6.14 of the Base Indenture. Within 30 days following any Change of Control Triggering Event, the   Company will send a notice to each Holder and the Trustee describing the transaction or transactions and   identify the ratings decline that together constitute the Change of Control Triggering Event, offering to   repurchase Notes on the Change of Control Payment Date specified in the notice, which date will be no   earlier than 30 days and no later than 60 days from the date such notice is sent and setting forth the procedures   governing the Change of Control Offer as required by the Indenture.

 

(b) If the Company or a Restricted Subsidiary of the Company consummates any Asset   Sales, within twenty days of each date on which the aggregate amount of Excess Proceeds exceeds $100.0   million, the Company shall apply the entire aggregate amount of unutilized Excess Proceeds to make an Asset S ale Offer pursuant to Section 6.14 of the Base Indenture   to all Holders of Notes and all holders of other Pari Passsu Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem   with the proceeds of sales of assets to purchase the maximum principal amount of Notes (including   any Additional Notes) and purchase or redeem such other Pari P assu Indebtedness that may be purchased   or redeemed out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal   amount of the Notes and such other Pari P assu Indebtedness that may be purchased or redeemed   with Excess Proceeds thereof plus accrued and unpaid interest thereon to, but not including, the date of   consummation of the purchase, in accordance with the procedures set forth in the Indenture. To the extent   that the aggregate amount of Notes (including any Additional Notes) and other Pari P assu Indebtedness   tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Restricted   Subsidiary) may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture.   If the aggregate principal amount of Notes and other P ari P assu Indebtedness tendered in response   to such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes   and the Company shall select such other P ari P assu Indebtedness to be purchased or redeemed on a pro   rata basis unless otherwise required by law or applicable stock exchange or depositary requirements.   Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the   Company prior to any related purchase date and may elect to have such Notes purchased by completing   the form entitled “Option of Holder to Elect Purchase” attached to the Notes.

 

8.   N otice of R edemption . Notice of redemption will be sent at least 30 days (or, if   any Global Notes are outstanding, such shorter period as may be permitted by the eligibility rules of the   Depositary) but no t more than 60 days before the R edemption D ate to each Holder whose Notes are to be   redeemed, except that redemption notices may be sent or maile d more than 60 days prior to a R edemption   D ate if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of   the Indenture. Notes in denominations larger than $2,000 may be redeemed in part but only in whole   multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed.

 

9 . Denominations, Transfer, Exchange The Notes are in registered form without coupons in the denominations of $ 2,000 and integral multiple s of $ 1,000 in excess thereof The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture The Notes may be presented for exchange or for registration of transfer (duly endorsed or with the form of transfer endorsed thereon duly executed if so required by the Company or the Registrar) at the office of the Registrar or at the office of any transfer agent designated by the Company for such purpose.   Also, the Company need not exchange or register the transfer of any Notes (i) for a period beginning   at the opening of business 15

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days immediately preceding the sending of notice of redemption of   Notes selected for redemption and ending at the close of business on the day such notice is sent or (ii)   during the period between a record date and the corresponding Interest Payment Date.

10 . Registration Rights In addition to the rights set forth under the Indenture and the Second Supplemental Indenture, Holders of this Security will have all the rights set forth in the Registration Rights Agreement, dated as of September 25, 2015 , among the Company , J.P. Morgan Securities LLC , Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. (the “ Registration Rights Agreement ”), including the right to receive Additional Interest pursuant to the Registration Rights Agreement.

11 . Persons Deemed Owners The registered Holder may be treated as its owner for all purposes.

12 . Amendments, Supplements and Waivers The Indenture and the Notes may be amended or supplemented as provided in the Indenture Any consent or waiver by the Holders as provided in the Indenture shall be conclusive and binding upon such Holders and upon all future Holders and holders of any security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon the Notes.

13 . Defaults and Remedies The Events of Default relating to the Notes are defined in Sec tion 7 .01 of the Base Indenture Upon the occurrence of an Event of Default, the rights and obligations of the Company, the Trustee and the Holders shall be as set forth in the applicable provisions of the Indenture.

14 . No Recourse Against Others No recourse under or upon any obligation, covenant or agreement contained in the Indenture or the Notes, or because of any indebtedness evidenced thereby, shall be had against any incorporator as such, or against any past, present or future stockholder, officer, director or employee, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as part of the consideration for the issue hereof.

15 . Authentication This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee.

16 . Governing Law The Base Indenture, the Second Supplemental Indenture and this Note shall be governed by, and construed in accordance with, the laws of the State of New York.

17 . CUSIP and ISIN Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP and ISIN numbers to be printed on the Notes, and the Trustee may use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

 

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ASSIGNMENT

To assign this Security, fill in the form below: I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint agent to transfer this Security on the books of the Company The agent may substitute another to act for him.

Date: Your Signature:

Sign exactly as your name appears on the other side of this Security.

 

    Signature Guarantee:

 

 

 

 

 

 

 

 

Signature must be guaranteed                                                                        Signature

 

SIGNATURE GUARANTEE

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“ STAMP ”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 6.14   or Section 6.15 of the Base Indenture, check the box below:

◻ Section 6.14 ◻ Section 6.15

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 6.14   or Section 6.15 of the Base Indenture, state the amount you elect to have purchased:

$

 

 

 

Date:

Your Signature:

______________________________

 

 

(Sign exactly as your name appears on the face of this Note)

 

 

 

 

Tax Identification No:

______________________________

 

 

(Sign exactly as your name appears on the face of this Note)

 

 

 

______________________________

 

SIGNATURE GUARANTEE

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“ STAMP ”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

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CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF   TRANSFER RESTRICTED NOTES

 

This certificate relates to $ principal amount of Notes held in definitive form by the undersigned.   The undersigned has requested the Trustee by written order to exchange or register the transfer of   a Note or Notes.

 

In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to   the expiration of the period referred to in Rule 144 under the Securities Act, the undersigned confirms that   such Notes are being transferred in accordance with its terms:

 

CHECK ONE BOX BELOW

 

    (1) to the Company; or

 

    (2) to the Registrar for registration in the name of the Holder, without transfer; or

 

    (3) pursuant to an effective registration statement under the Securities Act of 1933; or

 

    (4) inside the United States to a “qualified institutional buyer” (as defined in Rule 144A   under the Securities Act of 1933) that purchases for its own account or for the account   of a qualified institutional buyer to whom notice is given that such transfer is being   made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule   144A under the Securities Act of 1933; or   _  

 

    (5) outside the United States in an offshore transaction within the meaning of Regulation S   under the Securities Act in compliance with Rule 904 under the Securities Act of 1933;

or

    (6) pursuant to another available exemption from registration provided by Rule 144 under   the Securities Act of 1933.

 

Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced   by this certificate in the name of any Person other than the registered holder thereof; provided, however,   that if box (4), (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the   Notes, such legal opinions, certifications and other information as the Company has reasonably requested   to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject   to, the registration requirements of the Securities Act of 1933.

 

______________________________________

                 Your Signature

 

 

______________________________________

Signature Guarantee :   Signature of Signature Guarantee:

 

Date: ____________________

Signature must be guaranteed by

a participant in a recognized signature

guaranty medallion program or other

signature guarantor acceptable to the

Trustee

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TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

 

The undersigned represents and warrants that it is purchasing this Note for its own account or an   account with respect to which it exercises sole investment discretion and that it and any such account is a   “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is   aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received   such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has   determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s   foregoing representations in order to claim the exemption from registration provided by Rule   144A.

 

Dated: _____________________ NOTICE: To be executed by an executive officer

 

 

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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*

The following exchanges of a part of this Global Note for an interest in another Global Note or   for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in   this Global Note, have been made:

 

 

Date

 

 

 

 

Date of Exchange

Amount of decrease in principal amount of this Global Note

Amount of increase in principal amount of this Global Note

Principal amount of this  Global Note following such  decrease (or increase)

Signature of authorized

officer of Trustee or

Notes Custodian

 

 

 

 

 

 

 

 

 

 

 

 

_____________________________

* Insert in Global Notes.

 

 

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Exhibit 4.4

EXECUTION VERSION

THIRD SUPPLEMENTAL INDENTURE
Dated as of
September 25, 2015  
b etween
FRONTIER COMMUNICATIONS CORPORATION  
as Company
and
THE BANK OF NEW YORK MELLON
as Trustee
11.000 % SENIOR NOTES DUE 2025

THIRD SUPPLEMENTAL INDENTURE dated as of September 25 , 201 5 between Frontier Communications Corporation, a Delaware corporation (the Company ”), and The Bank of New York Mellon, as trustee (the Trustee ”).

WITNESSETH:

WHEREAS, the Company and the Trustee executed and delivered an Indenture dated as of September 25 , 201 5 (the Base Indenture ”) to provide for the issuance of debentures, notes, bonds or other evidences of indebtedness in an unlimited aggregate principal amount to be issued from time to time in one or more series (such Base Indenture, as supplemented and amended by this Third Supplemental Indenture, herein referred to as the Indenture ”);

WHEREAS, the Company has duly authorized the issuance of $ 3,600,000,000 aggregate princ i pal amount of 11.000 % Senior Notes due 2025   (the Notes ”);

WHEREAS, the Company has duly authorized the execution and delivery of this Third Supplemental Indenture pursuant to Section 1 4 .01 of the Base Indenture to establish the terms and the form of the Notes in accordance with Sections 2.01, 3.01 and 3.03 of the Bas e Indenture;

WHEREAS, pursuant to Section 14 .0 3 of the Base Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture and the Company hereby requests that the Trustee join with the Company in the execution of this Supplemental Indenture; and

WHEREAS, all things necessary to make this Third Supplemental Indenture a valid and legally binding agreement of the Company, in accordance with its terms, have been done.

NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

That, in consideration of the premises and the purchase of the Notes by the Holders thereof for the equal and proportionate benefit of all of the present and future Holders of the Notes, each party agrees and covenants as follows:

ARTICLE I

SCOPE AND DEFINITIONS

Section 1.01 Scope The changes, modifications and supplements to the Base Indenture effected by this Third Supplemental Indenture shall be applicable only with respect to, and govern the terms of, the Notes and shall not apply to any other series of Securities that may be issued under the Base

 

 


 

Indenture unless a supplemental indenture with respect to such other series of Securities specifically incorporates such changes, modifications and supplements.

Section 1.02 Definitions .

(a) Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Base Indenture.

(b) As used herein, the following additional defined terms shall have the following meanings with respect to the Notes only and be equally applicable to both the singular and the plural forms of any of the terms herein defined:

Additional Notes has the meaning provided in Section 2.01(c)

Adjusted Treasury Rate ” means, with respect to any R edemption D ate:

(1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15(519)” or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or

(2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such R edemption D ate.

The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the R edemption D ate.

Base Indenture has the meaning provided in the recitals hereof.

Comparable Treasury Issue ” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the applicable notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such notes (“ Remaining Life ”).

Comparable Treasury Price ” means, for any Redemption Date, (1) the average of four Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if the Independent Investment Banker obtains fewer than four such Reference Treasury Dealer Quotations the average of all such quotations.

Escrow Account ” has the meaning assigned to such term in the Escrow Agreement.

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Escrow Agent ” means MUFG Union Bank, N.A., in its capacity as escrow agent.

Escrowed Funds ” has the meaning assigned to such term in the Escrow Agreement.

Escrow End Date ” means (x) August 6, 2016 or (y) such earlier date as the Company shall notify the Trustee in writing of the Company’s announcement that the Verizon Purchase Agreement has been terminated or that it will not pursue the consummation of the Verizon Acquisition.

  Independent Investment Banker ” means one of the Reference Treasury Dealers appointed by the Company.

Initial Notes has the meaning provided in Section 2.01(c).

Mandatory Redemption ” has the meaning provided in Section 2.0 5 .

Mandatory Redemption Date ” has the meaning provided in Section 2.0 5 .

Mandatory Redemption Notice ” has the meaning provided in Section 2.0 5 .

Notes has the meaning provided in the recitals hereof.

Registration Rights Agreement has the meaning provided in Section 2.0 6 .

Reference Treasury Dealer ” means any of the primary U.S. Government securities dealers in New York City.

Reference Treasury Dealer Quotations ” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.

Release ” mean s the release of the Escrowed Funds to the Company from the Escrow Account upon satisfaction of the conditions set forth in the Escrow Agreement .

Third Supplemental Indenture ” means this instrument.

Section 1.03 Rules of Construction For all purposes of this Third Supplemental Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a) The words herein ,   hereof and hereunder and other words of similar import refer to this Third Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision.

(b) References to Article or Section or other subdivision herein are references to an Article, Section or other subdivision of this Third Supplemental Indenture, unless the context otherwise requires.

(c) The words including and words of similar import when used in this Indenture shall mean “including, without limitation .  

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(d) References to any agreement, instrument, statute or regulation defined or referred to herein or in any instrument establishing the terms of the Notes (or executed in connection therewith) are references to such agreement, instrument, statute or regulation as from time to time amended, modified, supplemented or replaced, including (in the case of agreements or instruments) by waiver or consent and by succession of comparable successor agreements, instruments, statutes or regulations;

(e) or ” is not exclusive; and

(f) will ” shall be interpreted to express a command.

ARTICLE II

THE NOTES

Section 2.01 Terms of the Notes The Notes are hereby created and designated as a separate series of Securities under the Base Indenture The following terms relate to the Notes:

(a) The Notes shall constitute a separate series of Securities under the Base Indenture having the title “ 11.000 % Senior Notes due 2025 .”

(b) The Notes shall be issued at a price of 100 % of the principal amount thereof, other than any offering discounts pursuant to the initial offering and resale of the Notes.

(c) The aggregate principal amount of the Notes (the Initial Notes ”) that may be initially authenticated and delivered under the Indenture shall be $ 3,600,000,000 The Company may from time to time, without the consent of the Holders of the Notes, issue additional Notes (in any such case Additional Notes ”) having the same terms and conditions as the Initial Notes in all respects (or in all respects except for the Issue Date, the issue price or the first Interest Payment Date) Any Additional Notes and the Initial Notes shall constitute a single series under the Indenture, provided that if such Additional Notes are not fungible with the Initial Notes for U.S. federal income tax purposes, such Additional Notes shall not have the same CUSIP, ISIN or other identifying number as the Initial Notes All references to the Notes shall include the Initial Notes and any Additional Notes unless the context otherwise requires The aggregate principal amount of each of the Additional Notes shall be unlimited.

(d) The entire outstanding principal of the Notes shall be payable on September 15 ,   2025 .

(e) The rate at which the Notes shall bear interest shall be 11.000 % per year The date from which interest shall accrue on the Notes shall be September 25 , 201 5 , or the most recent Interest Payment Date   to which interest has been paid or provided for The Interest Payment Date s   for the Notes shall be March 15 and September 15 of each year, commencing March 15 , 201 6 Interest shall be payable on each Interest Payment Date   to the Holders of record at the close of business on the March 1 and September 1 prior to each Interest Payment Date The basis upon which interest shall be calculated shall be that of a 360 - day year comprised of twelve 30 - day months.

(f) The Notes shall be issuable in whole in the form of one or more registered Global Securities, and the Depository for such Global Securities shall be DTC The Notes shall be substantially in the form attached hereto as Exhibit A, the terms of which are herein incorporated

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by reference The Notes shall be denominated in U.S. Dollars and shall be issuable in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.

(g) The Notes may be redeemed at the option of the Company prior to the date of Stated Maturity for payment of principal on the Notes, as provided in Section 2.0 4 .

(h) The Notes will not have the benefit of any sinking fund.

(i) Except as provided herein, the Holders of the Notes shall have no special rights in addition to those provided in the Base Indenture upon the occurrence of any particular events.

(j) The Notes will be senior unsecured obligations of the Company, and will rank :   (i)   equal in right of payment with all of the Company’s existing and future senior I ndebtedness ,   (ii) effectively junior to all of the Company’s existing and future senior Secured Indebtedness (including Indebtedness under our Senior Credit Facilities) to the extent of the value of the assets securing such Indebtedness, (iii) structurally junior to all existing and future Indebtedness and other liabilities and commitments of the Company’s Subsidiaries (including Trade Payables and Capital Lease Obligations); and   (iv)   senior in right of payment to the Company’s existing and future S ubordinated I ndebtedness , if any .

(k) The terms and provisions of Appendix A of the Base Indenture shall apply to the   Notes of this series .

 

Section 2.02 Global Securities .   The Notes issued in global form will be substantially in   the form of Exhibit A hereto (including the Global Security Legend thereon and the “Schedule of Exchanges   of Interests in the Global Security ” attached thereto). Notes of this series issued in definitive form will be   substantially in the form of Exhibit A hereto (but without the Global Security Legend thereon and without the   Schedule of Exchanges of Interests in the Global Security ” attached thereto). Each Global Security will represent   such of the outstanding Notes of this s eries as will be specified therein and each shall provide that it   represents the aggregate principal amoun t of outstanding Notes of this s eries from time to time endorsed   thereon and that the aggregate principal amount of outstanding Notes of this series represented thereby   may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions.

Any endorsement of a Global Security to reflect the amount of any increase or decrease in the aggregate   principal amoun t of outstanding Notes of this s eries represented thereby will be made by the Trustee or   the Notes Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder   thereof.

 

Section 2.03 Transfer and Exchange .

The Notes of this s eries shall be issued in registered form and shall be transferable only upon the   surrender of a Note of this series for registration of transfer and in compliance with Appendix A of the   Base Indenture.

 

When Notes of this series are presented to the Registrar or a co-registrar with a request to register   a transfer or to exchange them for an equal principal amount of Notes of this series of other denominations,   the Registrar will register the transfer or make the exchange as requested if its requirements for   such transactions are met. To permit registrations of transfers and exchanges, the Company shall execute   and the Trustee shall authenticate Notes of this series at the Registrar’s request. A Holder of Notes of   this series may transfer or exchange Notes of this series only in accordance with the

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Indenture. Upon   any transfer or exchange, the Registrar and the Trustee may require a Holder of Notes of this series ,   among other things, to furnish appropriate endorsements or transfer documents. No service charge shall   be made for any registration of transfer or exchange (except as otherwise expressly permitted herein), but   the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental   charge payable in connection therewith.

 

Prior to due presentment of any Note of this series for registration of transfer, the Company, the   Trustee, any agent of the Company or the Trustee, the Paying Agent and the Registrar may deem and treat   the Person in whose name a Note of this series is registered as the absolute owner of such Note for all   purposes, including for the purpose of receiving payment of principal of, and any premium and any interest,   if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and   none of the Company, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the   contrary.

 

Any holder of a beneficial interest in a Global Security of this series shall, by acceptance of such   beneficial interest, agree that transfers of beneficial interests in such Global Security may be effected only   through a book-entry system maintained by (a) the holder of such Global Security (or its agent) or (b) any   holder of a beneficial interest in such Global Security , and that ownership of a beneficial interest in such   Global Security shall be required to be reflected in a book entry.

 

All Notes of this series issued upon any transfer or exchange pursuant to the terms of the Indenture   shall evidence the same debt and shall be entitled to the same benefits under the Indenture as such   Notes surrendered upon such transfer or exchange.

 

Section 2.04 Optional Redemption .

(a) The provisions of Article IV of the Base Indenture, as amended by the provisions of this Third Supplemental Indenture, shall apply to the Notes.

(b) The Notes may be redeemed at the Company’s election, in whole or in part, at any time prior to June 15, 2025   (three months prior to the maturity date of the Notes) at a redemption price equal to the greater of:

(1)

100% of the principal amount of the Notes to be redeemed then Outstanding; and

(2)

as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the R edemption D ate on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 50 basis points;

plus, in either of the above cases, accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

(c) The Notes may be redeemed at the Company’s election, in whole or in part, at any time on or after June 15,  2025 (three months prior to the maturity date of the Notes), at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

Section 2.05 Mandatory Redemption If (a) the Release has not occurred on or prior to the Escrow End Date or (b) if the Company has notified the Trustee in writing of the Company’s

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announcement that the Verizon Purchase Agreement has been terminated or that it will not pursue the consummation of the Verizon Acquisition , the Company will redeem all of the Notes (the “ Mandatory Redemption ”) at the Mandatory Redemption Price. The “Mandatory Redemption Price” will be a price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, from September 25, 2015 to , but not including, the Mandatory Redemption Date (as defined below). Notice of the occurrence of a Mandatory Redemption shall be delivered by the Company (a “ Mandatory Redemption Notice ”) promptly to the Trustee and the Escrow Agent. Concurrently with the delivery of the Mandatory Redemption Notice, the Company shall request the Trustee to, at the Company’s expense, deliver (in accordance with the proce dures of the Deposito ry or otherwise by first-class mail to each Holder’s registered address) a notice that a Mandatory Redemption is to occur. Within two B usiness D ays (or such other minimum period as may be required by the Depositary) after the Company’s delivery of a Mandatory Redemption Notice, the Company will effect the Mandatory Redemption (the date of such redemption, the “ Mandatory Redemption Date ”) in accordance with the Escrow Agreement. For avoidance of doubt, the provisions of Section 4.03 of the Base Indenture relating to the means and timing of delivery of a notice of redemption shall not apply to a Mandatory Redemption.

Notwithstanding anything to the contrary contained in Article XIV of the Base Indenture, the provi sions of this Section 2 .0 5 may be waived or modified with the written consent of Holders of at least 90% in prin cipal amount of the Notes O utstanding.

Section 2.06 Registration Rights Agreement .   In addition to the rights set forth under the Indenture and this Third Supplemental Indenture, Holders of the Notes will have all the rights set forth in the Registration Rights Agreement, dated as of September 25 , 2015 , among the Company , J.P. Morgan Securities LLC , Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. (the “ Registration Rights Agreement ”), including the right to receive certain Additional Interest upon the occurrence of certain events as set forth in the Registration Rights A greement.

Section 2.07 Registe r ed Exchange Offer .  

(a) Upon the consummation of the Registered Exchange Offer in accordance with the Registration Rights Agreement, the Company will issue and, upon receipt of a Company Order in accordance with Section 3.03 of the Indenture, the Trustee will authenticate   one or more Global Securities or Definitive Notes, as directed by the Holders of the Notes to be exchanged, not bearing the restricted notes legend in an aggregate principal amount equal to the principal amount of the beneficial interests in the Notes that are Initial Securities tendered for acceptance by a Person other than the Company or an Affiliate thereof in accordance with the Registered Exchange Offer and accepted for exchange in the Registered Exchange Offer, in accordance with Appendix A to the Base Indenture.

(b) All Exchange Securities issued and authenticated in accordance with Section 2.07 (a) shall be part of the same series as any Outstanding Notes and shall vote and consent, together with any Outstanding Notes as one class, on all matters that require their vote or consent under the Indenture or this Third Supplemental Indenture, except in the case of any matter that affects only the Outstanding Notes or only the Exchange Securities.

ARTICLE III

MISCELLANEOUS PROVISIONS

Section 3.01 Confirmation of Indenture The Base Indenture, as supplemented and amended by this Third Supplemental Indenture, is in all respects ratified and confirmed, and the Base Indenture,

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this Third Supplemental Indenture and all indentures supplemental thereto with respect to the Notes shall be read, taken and construed as one and the same instrument.

Section 3.02 Severability If any provision in this Third Supplemental Indenture or in the Notes shall be held to be invalid, illegal or unenforceable under applicable law, then the remaining provisions in this Third Supplemental Indenture or in the Notes shall be construed as though such invalid, illegal or unenforceable provision were not contained herein.

Section 3.03 Conflicts with Base Indenture In the event that any provision of this Third Supplemental Indenture limits, qualifies or conflicts with the express provisions of the Base Indenture, such provision of the Third Supplemental Indenture shall prevail.

Section 3.04 Benefits of Indenture Nothing in this Third Supplemental Indenture expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or to give to, any Person other than the parties hereto and their successors and the Holders of the Notes any benefit or any right, remedy or claim under or by reason of this Third Supplemental Indenture or the Base Indenture or any covenant, condition, stipulation, promise or agreement hereof or thereof, and all covenants, conditions, stipulations, promises and agreements contained herein or therein shall be for the sole and exclusive benefit of the parties hereto and their successors and of the Holders of the Notes.

Section 3.05 Counterparts This Third Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.     The exchange of copies of this Third Supplemental Indenture and of signature pages by facsimile or electronic ( i.e. , “pdf” or “tif”) transmission shall constitute effective execution and delivery of this Third Supplemental Indenture as to the parties hereto and may be used in lieu of the original Third Supplemental Indenture for all purposes.  Signatures of the parties hereto transmitted by facsimile or electronic ( i.e. , “pdf” or “tif”) transmission shall be deemed to be their original signatures for all purposes.

Section 3.06 Governing Law; Waiver of Trial by Jury This Third Supplemental Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.

EACH OF THE PARTIES HERE TO, AND EACH HOLDER OF A NOTE BY ITS ACCEPTANCE THEREOF, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS THIRD SUPPLEMENTAL INDENTURE OR THE NOTES.

Section 3.07 Effect of Third Supplemental Indenture .   This Third Supplemental Indenture is a supplemental indenture within the   meaning of Section 2.0 1 of the Base Indenture, and the Base Indenture shall be rea d together with this Third Supplemental Indenture and   shall have the same effect over the Notes of this series , in the same manner as if the provisions of the   Ba se Indenture and this Third Supplemental Indenture were c ontained in the same instrument .  

Section 3.08 The Trustee The Trustee makes no representations as to the validity, adequacy  or sufficiency of this Third Supplemental Indenture or of the Notes.  The recitals and statements herein and in the Notes (except in the Trustee’s certificate of authentication) are deemed to be those of the Company and not those of the Trustee, and the Trustee assumes no responsibility for their correctness.

 

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[Signatures on following page]

 

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IN WITNESS WHEREOF, the parties have caused this Third Supplemental Indenture to be duly executed as of the date first written above.

FRONTIER COMMUNICATIONS CORPORATION , as Issuer

By:   /s/ John M. Jureller  
Name: John M. Jureller
Title: EVP, Chief Financial Officer

THE BANK OF NEW YORK MELLON,
as Trustee

By:   /s/ Laurence J. O’Brien  
Name: Laurence J. O’Brien
Title: Vice President

 

 


 

EXHIBIT A

[FORM OF FACE OF INITIAL NOTE ]

[ Global Notes Legend ]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE   OF THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW   YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,   EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME   OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED   REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH   OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY   TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY   PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,   HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,   BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH   SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL   BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET   FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

 

[[FOR REGULATION S GLOBAL NOTE ONLY] UNTIL 40 DAYS AFTER THE LATER OF   COMMENCEMENT OR COMPLETION OF THE OFFERING, AN OFFER OR SALE OF   SECURITIES WITHIN THE UNITED STATES BY A DEALER (AS DEFINED IN THE SECURITIES   ACT) MAY VIOLATE THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IF   SUCH OFFER OR SALE IS MADE OTHERWISE THAN IN ACCORDANCE WITH RULE 144A   THEREUNDER.]

 

[ Restricted Notes Legend ]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF   ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION   HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE   DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT   FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE   HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS   PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE   DATE (THE ‘‘RESALE RESTRICTION TERMINATION DATE’’) THAT IS, IN THE CASE OF RULE 144A NOTES,   ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF, THE ORIGINAL ISSUE DATE OF THE   ISSUANCE OF ANY ADDITIONAL NOTES AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE   OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), OR, IN   THE CASE OF REGULATION S NOTES, 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF   AND THE DATE ON WHICH THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) WAS FIRST   OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN RULE 902 OF REGULATION S) IN   RELIANCE ON REGULATION S, ONLY (A) TO THE ISSUER OR ANY

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SUBSIDIARY THEREOF, (B) PURSUANT TO   A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)   FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE   SECURITIES ACT (‘‘RULE 144A’’), TO A PERSON IT REASONABLY BELIEVES IS A ‘‘QUALIFIED   INSTITUTIONAL BUYER’’ AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR   THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER   IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.   PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER   THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION   REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS’ AND THE TRUSTEE’S RIGHT PRIOR   TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY   OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH   OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE   RESTRICTION TERMINATION DATE.

[ Additional Restricted Notes Legend for Notes Offered in Reliance of Regulation S]

BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.

[Definitive Notes Legend]

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

 

 

 

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FORM OF 11.000 % SENIOR NOTES DUE 2025  
Frontier Communications Corporation  
11.000 % Senior Notes Due 2025

PRINCIPAL AMOUNT: $

_______________________________

CUSIP:

_______________________________

ISIN:

_______________________________

No.:

Frontier Communications Corporation, a Delaware corporation (the Company, which term includes any successor thereto under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of      DOLLARS ($ ) (or such other principal amount as shall be set forth in the Schedule of Exchanges of Interest in the Global Note at tached hereto) on September 15 ,   2025 , or on such earlier date as the principal hereof may become due in accordance with the provisions of this Note.

Interest Rate: 11.000 % per annum.

Interest Payment Dates: March 15 and September 15 of each year, commencing on March 15, 2016 .

Record Dates: March 1 and September 1 .

Reference is made to the further provisions of this Note set forth on the reverse hereof Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee under the Indenture referred to on the reverse hereof.

 

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IN WITNESS WHEREOF, Frontier Communications Corporation has caused this Note to be duly executed.

FRONTIER COMMUNICATIONS CORPORATION

By: _______________________________________
Name:
Title:

 

Dated:

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TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

Date of authentication: THE BANK O F NEW YORK MELLON,

      as Trustee

 

By: ______________________________________
Authorized Signatory

 

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[FORM OF REVERSE OF INITIAL NOTE ]  
FRONTIER COMMUNICATIONS CORPORATION  
11.000 % Senior Notes Due 2025

This Note is one of a duly authorized issue of debt securities of the Company of the series designated as the “ 11.000 % Senior Notes due 2025 ” (the Notes ”), all issued or to be issued under and pursuant to an Indenture, dated as of September 25 , 201 5 (the Base Indenture ”), duly executed and delivered by and between the Company and The Bank of New York Mellon, as trustee (the Trustee, which term includes any successor trustee), as supplemented by the Third Supplemental Indenture, dated as of September 25 , 201 5 (the Third Supplemental Indenture ”), duly executed and delivered by and between the Company and the Trustee The Base Indenture as supplemented and amended by the Third Supplemental Indenture is referred to herein as the Indenture .     Capitalized terms used herein and not otherwise defined shall have the meanings given them in the Indenture To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

1. Interest The Company promises to pay interest on the principal amount of this Note at a rate of 11.000 % per annum and shall pay the Additional Interest, if any, payable pursuant to the Registration Rights Agreement The date from which interest shall accrue on the Notes shall be September 25, 2015 , or the most recent Interest Payment Date   to which interest has been paid or provided for The Company will pay interest and Additional Interest, if any, semi - annually in arrears on March 15 and September 15 of each year, beginning March 15 , 201 6 In any case in which an Interest Payment Date , Redemption Date, M aturity or other payment date is not a Business Day as defined in the Indenture at a Place of Payment, payment may be made at that place on the next succeeding day that is a Business Day Any payment made on such Business Day will have the same force and effect as if made on the date on which the payment is due, and no interest shall accrue for the intervening period Interest shall be computed on the basis of a 360 - day year of twelve 30 - day months.

2. Method of Payment The Company shall pay interest and Additional Interest, if any, on the Notes (except Defaulted Interest), if any, to the Persons in whose name such Notes are registered at the close of business on the Record Date referred to on the face of this Note immediately preceding the related Interest Payment Date , even if such Notes are canceled, repurchased or redeemed on or after such Record Date and on or before such Interest Payment Date Payment of interest and Additional Interest, if any, on the Notes shall be made, in the currency of the United States of America that at the time is legal tender for payment of public and private debts, at the Corporate Trust Office or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address shall appear in the Register or, in accordance with arrangements satisfactory to the Paying Agent, by wire transfer to an account designated by the Holder.

3. Paying Agent, Authenticating Agent and Registrar Initially, The Bank of New York Mellon will act as Paying Agent, Authenticating Agent and Registrar The Company may change or appoint any Paying Agent or Registrar without notice to any Holder The Company may act in any such capacity.

4. Indenture The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (“ TIA ”), as in effect on the date the Indenture is qualified The Notes are subject to all such terms, and Holders are referred to the Indenture and TIA for a statement of such terms The Notes are unsecured general obligations of the Company and constitute the series designated on the face of this Note as the “ 11.000 % Senior Notes due 2025 ,” initially limited to $ 3,600,000,000 in aggregate principal amount The Company will furnish to   any Holder upon written request and without charge a copy of the Base Indenture, the Third Supplemental  

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Indenture and the Registration Rights Agreement Requests may be made to:   Frontier Communications Corporation ,   401 Merritt 7 ,   Norwalk ,   Connecticut 06851 , Attn: Mark D. Nielsen , Esq.

5. Optional Redemption

(a) The Notes may be redeemed at the Company’s election, in whole or in part, at any time prior to June 15, 2025 (three months prior to the maturity date of the Notes) at a redemption price equal to the greater of:

(1)

100% of the principal amount of the Notes to be redeemed then Outstanding; and

(2)

as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the R edemption D ate on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 50 basis points;

 

plus, in either of the above cases, accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

 

(b) The Notes may be redeemed at the Company’s election, in whole or in part, at any time on or after June 15,  2025 (three months prior to the maturity date of the Notes), at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to the date of redemption on the Notes to be redeemed.

6. Mandatory Redemption . If (a) the Release has not occurred on or prior to the Escrow End Date or (b) if the Company has notified the Trustee in writing of the Company’s announcement that the Verizon Purchase Agreement has been terminated or that it will not pursue the consummation of the Verizon Acquisition, the Company will redeem all of the Notes (the “ Mandatory Redemption ”) at the Mandatory Redemption Price. The “Mandatory Redemption Price” will be a price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, from September 25, 2015 to, but not including, the Mandatory Redemption Date (as defined below). Notice of the occurrence of a Mandatory Redemption shall be delivered by the Company (a “ Mandatory Redemption Notice ”) promptly to the Trustee and the Escrow Agent. Concurrently with the delivery of the Mandatory Redemption Notice, the Company shall request the Trustee to, at the Company’s expense, deliver (in accordance with the procedures of the Depository or otherwise by first-class mail to each Holder’s registered address) a notice that a Mandatory Redemption is to occur. Within two B usiness D ays (or such other minimum period as may be required by the Depositary) after the Company’s delivery of a Mandatory Redemption Notice, the Company will effect the Mandatory Redemption (the date of such redemption, the “ Mandatory Redemption Date ”) in accordance with the Escrow Agreement. For avoidance of doubt, the provisions of Section 4.03 of the Base Indenture relating to the means and timing of delivery of a notice of redemption shall not apply to a Mandatory Redemption.

 

Notwithstanding anything to the contrary contained in Article XIV of the Base Indenture, the provisions of Section 2.0 5 of the Third Supplemental Indenture may be waived or modified with the written consent of Holders of at least 90% in principal amount of the Notes Outstanding.

Other than as set for th in Section 2.0 5 of the Third Supplemental Indenture , the Company will not be required to make any mandatory redemption or sinking fund payments with respect to the Notes.

7. Repurchase at the Option of Holder

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(a) If there is a Change of Control Triggering Event, the Company will be required to make a   Change of Control Offer to each Holder to repurchase all or any part (equal to $2,000 or an integral multiple   of $1,000 in excess thereof) of such Holder’s Notes at a purchase price in cash equal to 101% of the   aggregate principal amount thereof plus accrued and unpaid interest on the Notes repurchased to, but not   including, the date of purchase, subject to the rights of Holders on the relevant record date to receive interest   due on the relevant Interest Payment Date for periods prior to such repurchase date pursuant to Section   6.14 of the Base Indenture. Within 30 days following any Change of Control Triggering Event, the   Company will send a notice to each Holder and the Trustee describing the transaction or transactions and   identify the ratings decline that together constitute the Change of Control Triggering Event, offering to   repurchase Notes on the Change of Control Payment Date specified in the notice, which date will be no   earlier than 30 days and no later than 60 days from the date such notice is sent and setting forth the procedures   governing the Change of Control Offer as required by the Indenture.

 

(b) If the Company or a Restricted Subsidiary of the Company consummates any Asset   Sales, within twenty days of each date on which the aggregate amount of Excess Proceeds exceeds $100.0   million, the Company shall apply the entire aggregate amount of unutilized Excess Proceeds to make an Asset S ale Offer pursuant to Section 6.14 of the Base Indenture   to all Holders of Notes and all holders of other Pari Passsu Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem   with the proceeds of sales of assets to purchase the maximum principal amount of Notes (including   any Additional Notes) and purchase or redeem such other Pari P assu Indebtedness that may be purchased   or redeemed out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal   amount of the Notes and such other Pari P assu Indebtedness that may be purchased or redeemed   with Excess Proceeds thereof plus accrued and unpaid interest thereon to, but not including, the date of   consummation of the purchase, in accordance with the procedures set forth in the Indenture. To the extent   that the aggregate amount of Notes (including any Additional Notes) and other Pari P assu Indebtedness   tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Restricted   Subsidiary) may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture.   If the aggregate principal amount of Notes and other P ari P assu Indebtedness tendered in response   to such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes   and the Company shall select such other P ari P assu Indebtedness to be purchased or redeemed on a pro   rata basis unless otherwise required by law or applicable stock exchange or depositary requirements.   Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the   Company prior to any related purchase date and may elect to have such Notes purchased by completing   the form entitled “Option of Holder to Elect Purchase” attached to the Notes.

 

8.   N otice of R edemption . Notice of redemption will be sent at least 30 days (or, if   any Global Notes are outstanding, such shorter period as may be permitted by the eligibility rules of the   Depositary) but no t more than 60 days before the R edemption D ate to each Holder whose Notes are to be   redeemed, except that redemption notices may be sent or maile d more than 60 days prior to a R edemption   D ate if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of   the Indenture. Notes in denominations larger than $2,000 may be redeemed in part but only in whole   multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed.

 

9 . Denominations, Transfer, Exchange The Notes are in registered form without coupons in the denominations of $ 2,000 and integral multiple s of $ 1,000 in excess thereof The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture The Notes may be presented for exchange or for registration of transfer (duly endorsed or with the form of transfer endorsed thereon duly executed if so required by the Company or the Registrar) at the office of the Registrar or at the office of any transfer agent designated by the Company for such purpose.   Also, the Company need not exchange or register the transfer of any Notes (i) for a period beginning   at the opening of business 15

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days immediately preceding the sending of notice of redemption of   Notes selected for redemption and ending at the close of business on the day such notice is sent or (ii)   during the period between a record date and the corresponding Interest Payment Date.

10 . Registration Rights In addition to the rights set forth under the Indenture and the Third Supplemental Indenture, Holders of this Security will have all the rights set forth in the Registration Rights Agreement, dated as of September 25, 2015 , among the Company , J.P. Morgan Securities LLC , Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. (the “ Registration Rights Agreement ”), including the right to receive Additional Interest pursuant to the Registration Rights Agreement.

11 . Persons Deemed Owners The registered Holder may be treated as its owner for all purposes.

12 . Amendments, Supplements and Waivers The Indenture and the Notes may be amended or supplemented as provided in the Indenture Any consent or waiver by the Holders as provided in the Indenture shall be conclusive and binding upon such Holders and upon all future Holders and holders of any security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon the Notes.

13 . Defaults and Remedies The Events of Default relating to the Notes are defined in Sec tion 7 .01 of the Base Indenture Upon the occurrence of an Event of Default, the rights and obligations of the Company, the Trustee and the Holders shall be as set forth in the applicable provisions of the Indenture.

14 . No Recourse Against Others No recourse under or upon any obligation, covenant or agreement contained in the Indenture or the Notes, or because of any indebtedness evidenced thereby, shall be had against any incorporator as such, or against any past, present or future stockholder, officer, director or employee, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as part of the consideration for the issue hereof.

15 . Authentication This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee.

16 . Governing Law The Base Indenture, the Third Supplemental Indenture and this Note shall be governed by, and construed in accordance with, the laws of the State of New York.

17 . CUSIP and ISIN Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP and ISIN numbers to be printed on the Notes, and the Trustee may use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

 

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ASSIGNMENT

To assign this Security, fill in the form below: I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint agent to transfer this Security on the books of the Company The agent may substitute another to act for him.

Date: Your Signature:

Sign exactly as your name appears on the other side of this Security.

 

Signature Guarantee:

 

 

 

 

Signature must be guaranteed Signature

 

SIGNATURE GUARANTEE

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“ STAMP ”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 6.14   or Section 6.15 of the Base Indenture, check the box below:

◻ Section 6.14 ◻ Section 6.15

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 6.14   or Section 6.15 of the Base Indenture, state the amount you elect to have purchased:

$

 

 

 

Date:

Your Signature:

_______________________________

 

 

(Sign exactly as your name appears on the face of this Note)

 

 

 

 

Tax Identification No:

_______________________________

 

 

(Sign exactly as your name appears on the face of this Note)

 

 

 

_______________________________

 

SIGNATURE GUARANTEE

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“ STAMP ”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

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CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF   TRANSFER RESTRICTED NOTES

 

This certificate relates to $ principal amount of Notes held in definitive form by the undersigned.   The undersigned has requested the Trustee by written order to exchange or register the transfer of   a Note or Notes.

 

In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to   the expiration of the period referred to in Rule 144 under the Securities Act, the undersigned confirms that   such Notes are being transferred in accordance with its terms:

 

CHECK ONE BOX BELOW

 

    (1) to the Company; or

 

    (2) to the Registrar for registration in the name of the Holder, without transfer; or

 

    (3) pursuant to an effective registration statement under the Securities Act of 1933; or

 

    (4) inside the United States to a “qualified institutional buyer” (as defined in Rule 144A   under the Securities Act of 1933) that purchases for its own account or for the account   of a qualified institutional buyer to whom notice is given that such transfer is being   made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule   144A under the Securities Act of 1933; or   _  

 

    (5) outside the United States in an offshore transaction within the meaning of Regulation S   under the Securities Act in compliance with Rule 904 under the Securities Act of 1933;

or

    (6) pursuant to another available exemption from registration provided by Rule 144 under   the Securities Act of 1933.

 

Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced   by this certificate in the name of any Person other than the registered holder thereof; provided, however,   that if box (4), (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the   Notes, such legal opinions, certifications and other information as the Company has reasonably requested   to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject   to, the registration requirements of the Securities Act of 1933.

 

______________________________________

                 Your Signature

 

 

______________________________________

Signature Guarantee : Signature of Signature Guarantee:

 

Date: ____________________

Signature must be guaranteed by

a participant in a recognized signature

guaranty medallion program or other

signature guarantor acceptable to the

Trustee

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TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

 

The undersigned represents and warrants that it is purchasing this Note for its own account or an   account with respect to which it exercises sole investment discretion and that it and any such account is a   “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is   aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received   such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has   determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s   foregoing representations in order to claim the exemption from registration provided by Rule   144A.

 

Dated: _____________________ NOTICE: To be executed by an executive officer

 

 

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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*

The following exchanges of a part of this Global Note for an interest in another Global Note or   for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in   this Global Note, have been made:

 

 

Date

 

 

 

 

Date of Exchange

Amount of decrease in principal amount of this Global Note

Amount of increase in principal amount of this Global Note

Principal amount of this  Global Note following such  decrease (or increase)

Signature of authorized

officer of Trustee or

Notes Custodian

 

 

 

 

 

 

 

 

 

 

 

 

 

* Insert in Global Notes.

 

 

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                                                         Exhibit 31.1

 

CERTIFICATIONS

 

I, Daniel McCarthy , certify that:

 

    1.  I  have  reviewed  this  quarterly  report  on  Form  10- Q  of  Frontier Communications Corporation ;

 

    2. Based on my knowledge, this report does not contain any untrue statement   of a  material  fact or omit to  state a  material  fact  necessary  to make the   statements made, in light of the circumstances  under which such statements were   made, not misleading with respect to the period covered by this report;

 

    3. Based on my knowledge,  the financial  statements,  and other  financial   information included in this report, fairly present in all material respects the   financial  condition,  results of operations and cash flows of the registrant as   of, and for, the periods presented in this report;

 

    4. The  registrant's  other  certifying  officer and I are  responsible for   establishing and maintaining  disclosure  controls and procedures (as defined in   Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal  control over financial   reporting  (as defined in Exchange Act Rules  13a-15(f) and  15d-15(f))  for the   registrant and have:

 

         a) Designed such disclosure  controls and  procedures,  or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant,  including its consolidated  subsidiaries,  is made  known to us by  others  within  those entities,  particularly  during the  period in which  this  report is being prepared;

 

         b) Designed such internal control over financial reporting,  or caused such internal  control over financial reporting to be designed under our   supervision,  to provide reasonable  assurance regarding the reliability of financial  reporting  and  the  preparation  of  financial  statements  for external  purposes  in  accordance  with  generally   accepted   accounting principles;

 

         c) Evaluated the effectiveness of the registrant's disclosure controls and  procedures  and  presented  in this report our  conclusions  about the effectiveness of the disclosure  controls and procedures,  as of the end of the period covered by this report based on such evaluation; and

 

         d)  Disclosed in this report any change in the  registrant's  internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the  registrant's  fourth fiscal quarter in the case of an annual report) that has materially affected,  or is reasonably likely to materially  affect,  the  registrant's  internal  control over financial reporting; and

 


 

    5. The registrant's other certifying officer and I have disclosed, based on   our most recent evaluation of internal control over financial reporting,  to the   registrant's  auditors  and the audit  committee  of the  registrant's  board of   directors (or persons performing the equivalent functions):

 

         a) All significant  deficiencies and material weaknesses in the design or  operation  of  internal  control  over  financial  reporting  which are reasonably  likely to adversely affect the registrant's  ability to record, process, summarize and report financial information; and

 

         b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

 

 1

 

Date:  November 5 , 2015         

/s/ Daniel McCarthy

 

Daniel McCarthy

 

President and Chief Executive Officer

 

 

 

                                                                  

                                  

 

 


                                               Exhibit 31.2

                                                                             

CERTIFICATIONS

 

I, John M. Jureller , certify that:

 

    1.  I  have  reviewed  this  quarterly  report  on  Form  10- Q  of  Frontier Communications Corporation ;

 

    2. Based on my knowledge, this report does not contain any untrue statement   of a  material  fact or omit to  state a  material  fact  necessary  to make the   statements made, in light of the c ircumstances  under which such statements were   made, not misleading with respect to the period covered by this report;

 

    3. Based on my knowledge,  the financial  statements,  and other  financial   information included in this report, fairly present in all material respects the   financial  condition,  results of operations and cash flows of the registrant as   of, and for, the periods presented in this report;

 

    4. The  registrant's  other  certifying  officer and I are  responsible for   establishing and maintaining  disclosure  controls and procedures (as defined in   Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal  control over financial   reporting  (as defined in Exchange Act Rules  13a-15(f) and  15d-15(f))  for the   registrant and have:

 

         a) Designed such disclosure  controls and  procedures,  or caused such   disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant,  including its consolidated  subsidiaries,  is made  known to us by  others  within  those entities,  particularly  during the  period in which  this  report is being prepared;

 

         b) Designed such internal control over financial reporting,  or caused such internal  control over  financial  reporting to be designed  under our supervision,  to provide reasonable  assurance regarding the reliability of financial  reporting  and  the  preparation  of  financial  statements  for external  purposes  in  accordance  with  generally   accepted   accounting principles;

 

         c) Evaluated the effectiveness of the registrant's disclosure controls and  procedures  and  presented  in this report our  conclusions  about the effectiveness of the disclosure  controls and procedures,  as of the end of the period covered by this report based on such evaluation; and

 

         d)  Disclosed in this report any change in the  registrant's  internal   control over financial reporting that occurred during the registrant's most recent fiscal quarter (the  registrant's  fourth fiscal quarter in the case of an annual report) that has materially affected,  or is reasonably likely to materially  affect,  the  registrant's  internal  control over financial reporting; and

 


 

    5. The registrant's other certifying officer and I have disclosed, based on   our most recent evaluation of internal control over financial reporting,  to the   registrant's  auditors  and the audit  committee  of the  registrant's  board of   directors (or persons performing the equivalent functions):

 

         a) All significant  deficiencies and material weaknesses in the design or  operation  of  internal  control  over  financial  reporting  which are reasonably  likely to adversely affect the registrant's  ability to record, process, summarize and report financial information; and

 

         b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

 

 

 

Date:  November 5 , 2015

/s/ John M. Jureller

 

John M. Jureller

 

Executive Vice President and Chief Financial Officer

 

 

 

       

                                               

                               

 

 


                                                           Exhibit 32.1

 

 

 

CERTIFICATION S PURSUANT TO

18 U.S.C. SECTION 1350 ,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Quarterly Report of Frontier Communications Corporation (the "Company") on Form 10- Q for the period ended September 30 , 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we ,   Daniel McCarthy ,   President and Chief Executive Officer and John Jureller, Executive Vice President and Chief Financial Officer of t he Company, certify, pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

    (1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the S ecurities Exchange Act of 1934; and

 

    (2)  The  information  contained  in the  Report  fairly  presents,  in all  material respects,  the financial  condition and results of operations of the Company.

 

 

 

 

 

/s/ Daniel McCarthy

 

/s/ John M. Jureller

Daniel McCarthy

 

John M. Jureller

President and Chief Executive Officer

 

Executive Vice President and Chief Financial Officer

November 5 , 2015

 

November 5 , 2015

 

 

This certification is made solely for purpose of 18 U.S.C. Section 1350, subject   to the knowledge standard contained therein, and not for any other purpose.

 

A signed  original of this written  statement  required by Section 906, or other   document authenticating, acknowledging, or otherwise adopting the signature s that   appears in typed form within the  electronic  version of this written  statement   required by Section 906, has been  provided to Frontier  Communications  Corporation   and will be retained by Frontier  Communications  Corporation and  furnished  to the   Securities and Exchange Commission or its staff upon request.