CTC COMMUNICATIONS CORP.
360 Second Avenue
Waltham, MA 02154
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of CTC Communications Corp.
Notice is hereby given that the Annual Meeting of Stockholders of
CTC Communications Corp. (the "Company") will be held at the offices of the
Company, 360 Second Avenue, Waltham, Massachusetts 02154 on October 20,
1997 at 9:30 a.m., local time, for the following purposes, all of which are
more completely set forth in the accompanying Proxy Statement:
1. To elect as directors the four (4) persons listed in the
accompanying Proxy Statement;
2. To approve an amendment to the Company's 1996 Stock Option
Plan to increase by 1,000,000 the number of shares of
Common Stock that may be issued pursuant to that plan;
3. To ratify the appointment of Ernst & Young as the
independent accountants of the Company for the fiscal year
ending March 31, 1998; and
4. To consider and transact any other business that may
lawfully come before the meeting or any adjournment
thereof.
The Board of Directors has fixed the close of business on August
29, 1997 as the record date for the determination of stockholders entitled
to vote at the Annual Meeting and to receive notice thereof. Accordingly,
only stockholders of record on such date will be entitled to vote at the
Annual Meeting. The stock transfer books of the Company will not be
closed.
Please sign the enclosed proxy and return it in the enclosed
envelope.
By Order of the Board of Directors
Robert J. Fabbricatore, Chairman
September 9, 1997
Mailed at Boston, Massachusetts
IMPORTANT
STOCKHOLDERS ARE REQUESTED TO DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED
PROXY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND,
IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED, A POSTAGE-PAID
ENVELOPE IS PROVIDED FOR MAILING IN THE UNITED STATES. YOU ARE ENTITLED TO
REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY WRITTEN NOTICE TO
THE COMPANY. ALSO, IF YOU ATTEND THE MEETING AND VOTE IN PERSON, THE PROXY
WILL NOT BE USED.<PAGE>
<PAGE>
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS OF
CTC COMMUNICATIONS CORP.
TO BE HELD OCTOBER 20, 1997
Approximate Date of Mailing to Stockholders:
September 11, 1997
TIME AND PLACE OF MEETING
This Proxy Statement is furnished to stockholders by the Board of
Directors of CTC Communications Corp., a Massachusetts Corporation (the
"Company"), for solicitation of Proxies for use at the 1997 Annual Meeting of
Stockholders to be held on October 20, 1997 at 9:30 a.m., and at all
adjournments thereof, for the purposes set forth in the attached Notice of
Annual Meeting.
The Company's principal executive offices are located at 360 Second
Avenue, Waltham, Massachusetts, 02154 (617-466-8080).
Proxies in the form enclosed are solicited on behalf of the Board of
Directors. Any stockholder giving a proxy in such form has the power to
revoke it at any time before it is exercised by filing a later proxy with the
Company, by attending the Annual Meeting and voting in person, or by
notifying the Company of the revocation in writing to its Clerk at 360 Second
Avenue, Waltham, MA 02154. Any such proxy, if received in time for voting
and not revoked, will be voted at the Annual Meeting in accordance with the
directions of the stockholder. Any proxy which fails to specify a choice
with respect to the matters to be acted upon will be voted for the proposals.
VOTING RIGHTS AND VOTE REQUIRED
As of August 29, 1997 (the "Record Date"), the Company had
outstanding and entitled to vote 9,895,287 shares of Common Stock (the
"Common Stock"). There is no other class of Common Stock of the Company
outstanding. Only stockholders of record at the close of business on the
Record Date are entitled to vote at the Annual Meeting. Each outstanding
share entitles the record holder to one (1) vote on the matters to be voted
upon at the Annual Meeting. The stock transfer books will not be closed for
the purposes of such vote.
The holders of a majority in interest of all Common Stock issued,
outstanding and entitled to vote at a stockholders' meeting, present in
person or by proxy, constitute a quorum pursuant to the Company's By-Laws.
In the absence of a quorum, the Annual Meeting may be postponed from time to
time until stockholders holding the requisite amount are present or
represented by proxy.
Abstentions and broker "non-votes" are counted as present and
entitled to vote for purposes of determining a quorum. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote on
a particular proposal because the nominee does not have discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner.
A plurality of the votes duly cast is required for the election of
Directors (i.e., the nominees receiving the greatest number of votes will be
elected). Abstentions and broker "non-votes" are not counted for purposes of
the election of Directors.
<PAGE>
<PAGE>
The affirmative vote by the holders of a majority of shares of Common
Stock present in person or represented by proxy and voting on the matter is
required to approve any other matter to be acted upon at the Annual Meeting.
An abstention is counted as a vote against and a broker "non-vote" is not
counted for purposes of approving other matters to be acted upon at the
Annual Meeting.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information as of June 23,
1997 with respect to the Common Stock beneficially owned by each Director,
Nominee for Director and named Executive Officer of the Company, by all of
the Directors and Executive Officers of the Company as a group, and by each
person known by the management of the Company to own beneficially more than
five (5%) percent of the outstanding shares of the Common Stock. Based upon
the information furnished by the beneficial owners of the Common Stock listed
below, the Company believes that each such stockholder exercises sole voting
and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned of Class
- --------------------------------------- ------------------- ---------
<S> <C> <C>
Robert J. Fabbricatore (1)(2) 2,732,750 27.5%
Van Wagoner Capital Management, Inc.(3) 545,350 5.5%
Philip J. Richer (4) 362,773 3.7%
Henry Hermann (5) 206,588 2.1%
Richard J. Santagati (6) 78,000 *
J. Richard Murphy (7) 11,000 *
Steven P. Milton (8) 408,932 4.1%
John D. Pittenger (9) 216,588 2.2%
David E. Mahan (10) 61,000 *
All Executive Officers and Directors
as a Group (eight persons)(11) 4,077,631 40.7%
- ------------------------------
<FN>
* = Less than 1%.
(1) Mr. Fabbricatore's address is c/o CTC Communications Corp., 360 Second
Avenue, Waltham, MA 02154.
(2) Includes 62,498 shares owned by Mr. Fabbricatore as trustee of a trust
for his children and 1,133,239 shares as a general partner of a family
partnership; also includes 16,776 shares issuable upon exercise of the vested
portions of stock options at $2.98 per share.
(3) Van Wagoner Capital Management, Inc.'s address is One Bush Street, Suite
1150, San Francisco, CA 94104.
(4) Mr. Richer is not standing for re-election as a director.
(5) Includes 9,750 shares held by Mr. Hermann's spouse and 3,000 shares
issuable upon the exercise of currently exercisable options at $2.708 per
share.
(6) Includes 3,000 shares issuable upon the exercise of currently
exercisable options at $2.708 per share.
(7) Includes 1,000 shares owned by Mr. Murphy as trustee of a trust for his
spouse and 10,000 shares issuable upon the exercise of currently exercisable
options at $6.125 per share.
(8) Includes 4,500 shares owned by Mr. Milton as trustee of a trust for his
children and 18,000 shares issuable upon the exercise of currently
exercisable options at $2.708 per share.
(9) Includes 18,000 shares issuable upon the exercise of currently
exercisable options at $2.708 per share.
(10) Includes 25,000 shares issuable upon the exercise of currently
exercisable options at $10.125 per share.
(11) Includes the shares described in footnotes (2) through (10) above.
</FN>
</TABLE>
2
<PAGE>
<PAGE>
PROPOSAL 1:
ELECTION OF DIRECTORS
Unless the authority to do so is withheld, the enclosed Proxy will
be voted for the election of the Nominees named below to hold office until
the next Annual Meeting of the Stockholders and until their successors shall
be duly elected and qualified. In the event any of the Nominees should be
unwilling or unable to serve as a Director, the Proxy will be voted for such
substitute Nominee as the Board of Directors may designate or in the absence
of such designation in accordance with the best judgment of the person or
persons acting under the Proxy. Management is not aware of any nominee who
is unable or will decline to serve as a Director. There are no arrangements
or understandings between any of the Directors of the Company and any other
person pursuant to which such person was selected as a Director of the
Company.
The following table sets forth the name and age of each Nominee, the
period during which he has served as Director and the other capacities, if
any, in which he currently serves the Company:
Other Capacities
Period Served in Which
Name Age as Director Currently Serving
- -------------------------- --- -------------- ------------------
Robert J. Fabbricatore (1) 55 Since 1980 Chairman and
Chief Executive
Officer
Richard J. Santagati (1)(2)(4) 53 Since 1991 None
J. Richard Murphy (3)(4) 53 Since 1995 None
Henry Hermann (2)(3) 55 Since 1996 Consultant
- ------------------------
(1) Current member of the Stock Option Committee.
(2) Current member of the Compensation Committee.
(3) Current member of the Audit Committee.
(4) Current member of the Nominating Committee.
Mr. Fabbricatore, a founder of the Company and a Director since its
inception in 1980, became Chairman of the Board of Directors in March 1983
and served as President from October 1993 to August 1995. Mr. Fabbricatore
also served as Treasurer of the Company from April 1987 until May 1988.
Prior to April 1, 1986, Mr. Fabbricatore did not devote a substantial portion
of his time to the Company's business.
Mr. Santagati became a director of the Company in September 1991.
He has been the President of Merrimack College in North Andover,
Massachusetts since 1994. Mr. Santagati was a partner of Lighthouse
Management, Inc., a private investment firm located in Boston, Massachusetts
from 1991 to 1993 and, from 1991 to February 1994, the Chairman of the Board,
Chief Executive Officer and President of Artel Communications Corp., a
publicly held data communications firm located in Hudson, Massachusetts.
From 1986 to 1991, Mr. Santagati was the Chief Executive Officer and a member
of the Executive Committee of Gaston & Snow, a Boston, Massachusetts based
law firm. From 1983 to 1986, Mr. Santagati was employed by NYNEX Corp.,
first as Vice President of Marketing, and then as President and Chairman of
NYNEX Business Information Systems Co. From 1977 to 1983, Mr. Santagati held
a number of executive level positions with New England Telephone, including
Vice President of Marketing and Assistant Vice President of Sales. Mr.
Santagati is a member of the Board of Trustees of Lawrence General Hospital.
He is also a director of ESP, Inc., a privately held communications company
located in Hingham, Massachusetts.
3
<PAGE>
<PAGE>
Mr. Murphy became a Director of the Company in August 1995. Mr.
Murphy has been the Director of the Financial Consulting Group of Moody,
Cavanaugh and Company, LLP, a North Andover, Massachusetts public accounting
firm, since April 1996. Since 1992, Mr. Murphy has also been President and
sole stockholder of Bradford Capital Corporation, an investment banking and
corporate finance firm located in North Andover, Massachusetts. Mr. Murphy
was an officer, director and principal stockholder from 1990 to 1995 of
Arlington Data Corporation, a systems integration company located in
Haverill, Massachusetts; since 1992 of Arlington Data Consultants, Inc., a
company engaged in the installation and maintenance of computer systems and
hardware; and, since 1994 of Computer Emporium, Inc., a company engaged in
processing parking violations for municipalities. These three companies are
privately-held affiliated companies and are located in Haverill,
Massachusetts. From 1989 to 1991 Mr. Murphy was an officer, director and
principal stockholder of Financial Perspectives Incorporated, an investment
banking and corporate finance firm located in North Andover, Massachusetts.
Mr. Murphy was President and Chief Executive Officer of Shawmut Arlington
Trust Company in Lawrence, Massachusetts, from 1988 to 1989 and from 1968 to
1988 held a variety of management positions, the most recent being President
and Chief Executive Officer with the Arlington Trust Company, also in
Lawrence, Massachusetts. From 1987 to 1995, Mr. Murphy was a trustee of
Merrimack College in North Andover, Massachusetts and from 1994 to 1995
served as Chairman of the Board of Trustees. Mr. Murphy is a trustee of Holy
Family Hospital, a director and Clerk of Mary Immaculate Health Care
Services, located in Lawrence, Massachusetts, and a member of Covenant Health
Systems, Inc., a Lexington, Massachusetts based network of religious
sponsored providers of long term care and geriatric services. He is also a
director of Stickney & Poor Spice Company, Inc., a privately held food
manufacturing and distributing company located in Chelmsford, Massachusetts.
Mr. Hermann became a director of the Company in September 1996. Since
May 1997, he has been employed by Kuhns Brothers & Company, Inc., a
securities brokerage firm, as a principal and Executive Vice President. For
the previous nine years, he was employed by WR Lazard, Laidlaw and Luther,
Inc., a securities brokerage firm, as Vice President, Securities Analyst and
Portfolio Manager. Mr. Hermann has been an NASD Board of Arbitrators Member
since 1991. Mr. Hermann is a Chartered Financial Analyst with over 30 years
experience as an investment professional. Mr. Hermann has provided financial
consulting services to the Company since 1993.
During the fiscal year ended March 31, 1997, the Board of Directors
held five meetings. Each current Director participated in all of such
meetings during the period for which he was a director. The Board of
Directors also took action on two occasions by unanimous written consent.
Committees of the Board
Stock Option Committee. The Stock Option Committee is comprised of
Messrs. Fabbricatore, Santagati and Richer and administers the Company's
stock benefit plans. The Stock Option Committee took action on one occasion
during the fiscal year ended March 31, 1997.
Compensation Committee. The Compensation Committee is comprised of
Messrs. Santagati and Hermann and acts upon the compensation of such persons
as are determined by the Board. During the fiscal year ended March 31, 1997,
the Compensation Committee held four meetings.
Audit Committee. The Audit Committee is comprised of Messrs. Murphy
and Hermann. The Audit Committee meets with management to consider the
adequacy of the Company's internal controls and the objectivity of financial
reporting; the Committee also meets with the independent auditors and with
appropriate Company financial personnel about these matters. The Committee
recommends to the Board the appointment of the independent auditors, subject
to ratification by the stockholders at the Annual Meeting. The independent
4
<PAGE>
<PAGE>
auditors have restricted access to the Committee. During the fiscal year ended
March 31, 1997, the Audit Committee held one meeting.
Nominating Committee. The Nominating Committee is comprised of
Messrs. Santagati, Richer and Murphy. The Nominating Committee is
responsible for recommending candidates for nomination to the Board and
reviewing and making recommendations regarding compensation of Directors who
are not employees of the Company. The Nominating Committee took action on
one occasion during the fiscal year ended March 31, 1997. The Nominating
Committee is authorized to consider nominees recommended by security holders
of the Company. Security holders wishing to propose director candidates for
consideration by the Committee may do so by writing to the Clerk of the
Company, giving the candidate's name, biographical data and qualifications.
All members of the committees of the Board of Directors attended all
of their respective committee meetings.
Executive Officers
The following table sets forth the name and age of each executive
officer of the Company and the office and period during which he has held
such office.
<TABLE>
<CAPTION>
Period Served as
Name Age Office Executive Officer
<S> <C> <C> <C>
Robert J. Fabbricatore 55 Chairman, Chief Executive Officer Since 1980
Steven P. Milton 43 President, Chief Operating Officer Since 1995
John D. Pittenger 44 Vice President-Finance, Chief Since 1989
Financial Officer, Treasurer and Clerk
David E. Mahan 56 Vice President-Market Planning and Since 1996
Development
</TABLE>
Currently, there is no fixed term of office for any executive officer
and all officers serve at the discretion of the Board of Directors. Each
person selected to become an executive officer has consented to act as such
and there are no arrangements or understandings between the executive
officers or any other persons pursuant to which he was or is to be selected
as an officer.
Mr. Milton has been employed by the Company since 1984 and has served
as President and Chief Operating Officer since August 1995. Prior to that,
he held various positions within the Company including Branch Manager,
District Manager, Regional Manager and, most recently, Vice President-Sales
and Marketing.
Mr. Pittenger has served as Treasurer, Chief Financial Officer and
Clerk of the Company since August 1989 and as Vice President-Finance since
September 1991. Since 1980, Mr. Pittenger has been Treasurer and a director
of Comm-Tract Corp., a company which installs and services voice and data
communications systems.
Mr. Mahan joined the Company in October 1995 as Vice President-Market
Planning and Development and in June 1996 Mr. Mahan became an executive
officer of the Company. From 1982 to 1995, Mr. Mahan held a number of senior
management level positions with NYNEX, most recently Vice President-Sales
Channel Management.
For a description of the business background of Mr. Fabbricatore see
"Nominees for Directors".
5
<PAGE>
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Philip J. Richer, a director of the Company, failed to file a Form 4
on a timely basis on one occasion with respect to the January 28, 1997 sale
of 5,500 shares of the Company's Common Stock at a selling price of $8.00 per
share. The required Form 4 with respect to said transaction was filed with
the Securities and Exchange Commission on March 6, 1997.
EXECUTIVE COMPENSATION
Board Compensation Committee Report on Executive Compensation
During the fiscal year ended March 31, 1997, decisions regarding
executive compensation were made by the Compensation Committee and the Stock
Option Committee. The Compensation Committee is currently comprised of two
independent non-employee directors. The Stock Option Committee is comprised
of Mr. Fabbricatore and Mr. Richer, a former officer of the Company, and one
independent non-employee director. The Compensation Committee and the Stock
Option Committee are referred to collectively as the "Committee." The
Committee is charged with establishing and administering the policies and
plans which govern compensation for executive officers, including those
individuals listed in the compensation tables in this proxy statement. In
the case of any executive officers who are also members of the Board of
Directors, the Committee makes recommendations which are subject to approval
by non-employee members of the Board. At the 1997 annual meeting of the
Board of Directors, to be held immediately following the Annual Meeting of
Stockholders, the Compensation Committee and the Stock Option Committee will
be combined into one committee, the Compensation and Personnel Committee,
which will assume the functions of both committees and will be comprised
solely of two or more non-employee directors.
Compensation Policies. The Company's executive compensation
philosophy is to provide compensation opportunities for its officers which
are competitive within the Company's industry and community so that the
Company can attract and retain high quality executives and to align the
interests of the Company's executives and its stockholders by providing for
payment of a significant portion of executive compensation in the form of
bonuses based on the Company's sales performance. Thus, the value generated
for the Company's stockholders is a key factor in determining the value
ultimately received by the executive officers.
Base Salary. Base salaries for executive officers are established
at levels considered appropriate in light of the scope of the duties and
responsibilities for each officer's position. Annual increases are provided
in base salary to further protect the Company's vested interest due to their
prior service and key strategic roles.
Bonus. Each executive officer receives a bonus conditional upon the
achievement of certain quarterly performance goals set by management. During
the three fiscal years ended March 31, 1997, the Company has exceeded the
performance goals. The establishment of performance goals is believed by the
Committee to be the most objective measurement of executive performance
during the relevant period, where the overriding objective of the Company is
to build its business by increasing sales.
Stock Options. Incentive stock options are granted to executive
officers at the discretion of the Stock Option Committee. Stock options are
granted with an exercise price equal to the fair market value of the
Company's common stock on the date of the grant. Stock options become
exercisable in full in installments over periods of three or more years and
have terms of up to ten years from the date of the grant. Such stock options
thus provide incentive for the creation of stockholder value over the long
term since the full benefit of the option cannot be realized unless an
appreciation in the price of the Company's common stock occurs over a
specified number of years and the executive officer remains employed for the
periods required for the stock options to become exercisable.
6
<PAGE>
<PAGE>
CEO Compensation. During the fiscal years ended March 31, 1997, 1996
and 1995 the Company's most highly compensated officer was Robert J.
Fabbricatore, Chairman of the Board and Chief Executive Officer, who received
a base salary of $240,000 and bonuses aggregating $60,000.
Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code denies publicly held companies a deduction for
compensation paid to a named executive officer in a taxable year to the
extent it exceeds $1 million per officer, unless the compensation qualifies
as "performance based compensation." The Committee has no present policy in
respect of Section 162(m) because compensation paid to any named executive
officer of the Company does not reach $1 million.
The Compensation Committee and Stock Option Committee:
Robert J. Fabbricatore, Richard J. Santagati, Henry Hermann, Philip J. Richer
The following table provides certain summary information concerning
the compensation paid or accrued by the Company to or on behalf of the
Company's Chief Executive Officer and each of the other named executive
officers of the Company (collectively, the "named executive officers") for
services rendered in all capacities for the Company for the fiscal years
ended March 31, 1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
---------------------------- Compensation All
Other ------------ Other
Annual Awards, Compensation
Name and Principal Salary Bonus Compen- Options ($)(4)
Position Year ($)(1) ($)(2) sation($) (#)(3) -------------
- ------------------ ---- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Fabbricatore, 1997 240,000 60,000 - 0 18,075
Chairman and Chief 1996 240,000 60,000 - 0 16,100
Executive Officer 1995 240,000 60,000 1,500 124,306 11,636
Steven P. Milton, 1997 100,000 40,000 5,200 0 4,075
President and Chief 1996 100,000 40,000 5,200 0 4,200
Operating Officer 1995 100,000 52,000 5,200 126,750 4,440
David E. Mahan, Vice 1997 100,000 40,000 5,004 0 4,075
President - Market 1996(5) 50,000 20,000 2,500 100,000 0
Planning & Development
John D. Pittenger, 1997 86,100 34,000 - 0 3,437
Vice President - Finance 1996 84,800 32,000 - 0 3,504
Chief Financial Officer, 1995 83,600 26,000 1,200 54,750 3,228
Treasurer and Clerk
- ---------------------
<FN>
(1) For the fiscal year ended March 31, 1997, Messrs. Fabbricatore, Milton, Mahan and Pittenger's salaries
included pre-tax contributions made by such officers to the CTC Communications Corp. 401(k) Savings Plan.
(2) Includes bonuses accrued for Messrs. Fabbricatore, Milton, Mahan and Pittenger for the fiscal year
ended March 31, 1997 in the amounts of $15,000, $10,000, $10,000 and $10,000 respectively, which were paid
during the first quarter of Fiscal 1998.
(3) No options or stock appreciation rights were granted to any named executive officer during the fiscal
year ended March 31, 1997.
(4) All Other Compensation includes 50% matching contributions in the amounts of $4,500, $4,075, $4,075
and $3,437 accrued on behalf of Messrs. Fabbricatore, Milton, Mahan and Pittenger, respectively, to the CTC
Communications Corp. 401(k) Savings Plan. Also included is the actuarial benefit in the amount of
approximately $13,575 on the "split-dollar" life insurance policy for the benefit of Mr. Fabbricatore.
(5) Mr. Mahan commenced employment with the Company on October 1, 1995.
</FN>
</TABLE>
7
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<PAGE>
The Company made no grants of stock options or stock appreciation
rights to any named executive officer during the fiscal year ended March 31,
1997.
The following table sets forth information concerning option
exercises and option holdings for the fiscal year ended March 31, 1997 with
respect to the named executive officers. The Company had no outstanding
stock appreciation rights at March 31, 1997.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value
Realized
(Market
price at Value of Unexercised in-
exercise the-money options at FY-
Shares less Number of Securities End (Market price of
acquired on exercise Underlying Unexercised shares at FY-End ($7.25)
exercise(#) price ($) Options at FY-End (1) less exercise price) (1)
----------- ---------- -------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Fabbricatore - - 16,778 16,778 $71,642 $71,642
Steven P. Milton - - 18,000 18,000 $81,738 $81,738
David E. Mahan - - 25,000 75,000 - -
John D. Pittenger - - 18,000 18,000 $81,738 $81,738
<FN>
(1) All shares and amounts, as necessary, have been adjusted to reflect the 25% Common Stock dividend
effected in March 1995, the three-for-two stock split effected in July 1995 and the two-for-one stock split
effected in October 1995.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider Participation
Robert J. Fabbricatore, the Company's Chairman and Chief Executive
Officer, and Philip J. Richer, a former executive officer of the Company, are
members of the Company's Stock Option Committee.
The Company made no Long-Term Incentive Plan Awards during the fiscal
year ended March 31, 1997. The Company has no defined benefit or actuarial
plan. The Company did not, during the fiscal year ended March 31, 1997,
adjust or amend the exercise price of any options previously awarded to any
of the named executive officers.
Directors' Compensation
Directors of the Company who are employees do not receive
remuneration for services as directors. Directors who are not employees
receive an annual retainer of $4,250 and are paid a fee of $750 per meeting
for each meeting attended. On January 31, 1997, the Company granted to Mr.
Hermann a stock option to purchase 10,000 shares of its Common Stock at a
purchase price of $8.25 per share upon his becoming a director of the
Company.
8
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Transactions with Management and Related Transactions
The Company leases from trusts, of which Robert J. Fabbricatore, the
Company's Chairman and Chief Executive Officer, is a beneficiary, office
space in Springfield, Massachusetts and southern New Hampshire. Rental
payments under the leases totalled approximately $133,000 in Fiscal 1997.
The Company subleases part of its Waltham facility at its cost to Comm-Tract
Corp., a company in which Mr. Fabbricatore is a principal stockholder.
Sublease income totalled $80,416 for Fiscal 1997. The Company also contracts
with Comm-Tract Corp. for the installation of telephone lines and for the
service and maintenance of equipment marketed by the Company. During Fiscal
1997, Comm-Tract Corp. provided the Company with services, inventory and
equipment aggregating $97,190. The Company believes that the payments to Mr.
Fabbricatore and Comm-Tract Corp. are comparable to the costs for such
services, inventory and equipment, and for rentals of similar facilities,
which the Company would be required to pay to unaffiliated individuals in
arms-length transactions.
In connection with the exercise of Company stock options in Fiscal
1995, Steven P. Milton was advanced the sum of $135,825 by the Company, which
remained outstanding at March 31, 1997. The loan is payable on demand and
bears interest at 8.0% per annum.
Performance Graph
The following table shows a comparison of cumulative total return to
stockholders for the Company's Common Stock, the Nasdaq Composite Index and
the Nasdaq Telecommunications Index for the period March 31, 1992 through
March 31, 1997. Assumes $100 invested on March 31, 1992 in CTC Common Stock,
the Nasdaq Composite Index and the Nasdaq Telecommunications Index.
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
CTC Communications Corp.
900
800 #
700
600
500 #
400
300
#
200 +* +*
* +*
100 #+* +* +
# #
0
1992 1993 1994 1995 1996 1997
---------------------------------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
# = CTC Communications Corp. 100 61 46 259 814 531
+ = Nasdaq Stock Market (US Companies) 100 115 124 138 187 208
* = Nasdaq Telecommunications Stocks 100 133 160 161 213 192
SIC 4800-4899 US & Foreign
9
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Board Recommendation
The Board of Directors recommends that the stockholders vote FOR the
election of the Nominees named above. Since the members of the Board of
Directors and the Company's executive officers together own approximately 40%
of the outstanding shares of Common Stock, election of such Nominees is
probable.
PROPOSAL 3:
AMENDMENT TO THE COMPANY'S 1996 STOCK OPTION PLAN
The Company presently maintains the CTC Communications Corp. 1996
Stock Option Plan (the "1996 Option Plan"), which was originally adopted by
the Company's stockholders on September 26, 1996. On August 18, 1997, the
Board of Directors adopted an amendment to the 1996 Option Plan to increase
the number of shares of Common Stock issuable under the 1996 Option Plan by
1,000,000 to 1,750,000. During the last 12 months, the number of employees
eligible to participate in the 1996 Option Plan has increased substantially,
and the number of shares heretofore made available for the 1996 Option Plan's
purpose has been depleted. As of June 30, 1997, options to purchase 748,500
shares had been granted and are outstanding under the 1996 Option Plan. The
proposed amendment changes only the number of shares available under the 1996
Option Plan; the other provisions of the 1996 Option Plan are not affected by
the proposed amendment.
Key Provisions
The key provisions of the 1996 Option Plan are as follows:
Eligibility. All employees and directors of the Company and
its subsidiaries, and consultants and advisors thereto, are eligible
to receive options under the 1996 Option Plan. Options granted under
the 1996 Option Plan to employees may be designated as "incentive
stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or may be
designated as options not intended to ISOs ("non-qualified stock
options"). Options granted to directors who are not full-time
employees of the Company or its subsidiaries and to consultants and
advisors will be non-qualified stock options. Approximately 240
individuals were eligible to receive options under the 1996 Option
Plan as of June 30, 1997.
Term of 1996 Option Plan. No option may be granted under
the 1996 Option Plan after July 31, 2006.
Administration. The 1996 Option Plan is administered by the
Stock Option Committee of the Board of Directors (the "Committee")
which determines the persons to whom, and the times and prices at
which, an option will be granted, the number of shares subject to the
option and the terms and provisions of the option agreement, and
which interprets and construes the terms of the 1996 Option Plan.
At the 1997 annual meeting of the Board of Directors, to be held
immediately following the Annual Meeting of Stockholders, a new
committee, the Compensation and Personnel Committee, will be
organized and will assume the responsibilities of the Stock Option
Committee in administering the 1996 Stock Option Plan.
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Term of Options. All options terminate on the earliest of:
(a) the expiration of the term specified in the option document,
which may not exceed ten years from the date of grant; (b) the date
an option holder's employment or service with the Company or its
subsidiaries terminates for any reason other than disability, death
or as set forth in clauses (d) and (e) below); (c) the expiration of
one year from the date an option holder's employment or service with
the Company or its subsidiaries terminates by reason of such option
holder's disability or death; (d) the date upon which a determination
is made by the Committee that the option holder has breached his
employment or service contract with the Company or its subsidiaries,
has been engaged in any sort of disloyalty to the Company or its
subsidiaries or has disclosed trade secrets or confidential
information of the Company or its subsidiaries; or (e) the date set
by the Committee to be an accelerated expiration date in the event
of a liquidation or dissolution of the Company or its subsidiaries.
The Committee, in its discretion, may provide for additional
limitations on the term of any option.
Option Price. The option price for non-qualified options
may be less than, equal to or greater than the fair market value of
the shares subject to the option on the date that the option is
granted, and for ISOs shall be at least 100% of the fair market value
of the shares subject to the option on the date that the option is
granted.
Certain Rules for Certain Stockholders. If an ISO is
granted to an employee who then owns, directly or by attribution
under the Code, shares possessing more than 10% of the total combined
voting power of all classes of shares of the Company's capital stock,
the term of the option may not exceed five years and the option price
must be at least 110% of the fair market value of the shares on the
date that the option is granted.
Limitation on ISO Grants. To the extent that the aggregate
fair market value of the shares of Common Stock (determined at the
time the ISO is granted) with respect to which ISOs under all stock
option plans of the Company and its subsidiaries are exercisable for
the first time by an option holder during any calendar year exceed
$100,000, such options shall be treated as non-qualified options.
Payment. An option holder may pay for shares covered by an
option in cash or by certified or cashier's check payable to the
order of the Company, by payment through a broker in accordance with
Regulation T of the Federal Reserve Board or by such other mode of
payment as the Committee may approve, including payment in whole or
in part in shares of the Company's Common Stock, based on the fair
market value of such Common Stock at the time of payment.
Option Document; Restriction on Transferability. All
options will be evidenced by a written option document containing
provisions consistent with the 1996 Option Plan and such other
provisions as the Committee deems appropriate. No option granted
under the 1996 Option Plan may be transferred, except by will, the
laws of descent and distribution or pursuant to a qualified domestic
relations order, as defined by the Code or in Title I of the Employee
Retirement Income Security Act of 1974, as amended.
Provisions Relating to a "Change of Control."
Notwithstanding any other provision of the 1996 Option Plan, upon the
occurrence of a "Change of Control," all options granted pursuant to
the 1996 Option Plan will become immediately exercisable.
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A "Change of Control" will occur under the 1996 Option Plan upon
requisite approval by stockholders (or, if such approval is not required, by
the Board of Directors) of a plan of liquidation or dissolution or the sale
of substantially all of the assets of the Company. Subject to certain
exceptions, a "Change of Control" will also occur upon requisite approval by
the Company's and the other constituent corporation's stockholders (or, if
such approval is not required, by the respective Boards of Directors) of the
merger or consolidation of the Company with or into such other constituent
corporation. In addition, a Change of Control will occur if certain
entities, persons or groups specified in the 1996 Option Plan have become
beneficial owners of or have obtained voting control over more than 30% of
the outstanding shares of the Company's Common Stock or on the first day upon
which a majority of the Board of Directors consists of persons who have been
members of the Board for less than two years, unless the nomination for
election of each new director who was not a director at the beginning of such
period was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period.
Amendments to option documents and the 1996 Option Plan.
Subject to the provisions of the 1996 Option Plan, the Committee may
amend an option document, subject to the option holder's consent if
the amendment is not favorable to the option holder or is not being
made pursuant to provisions of the 1996 Option Plan relating to
acceleration of the expiration date in the event of liquidation or
dissolution of the Company. The Board of Directors may amend the
1996 Option Plan from time to time in such manner as it may deem
advisable without further action by the Company's stockholders except
to the extent required under applicable law.
Tax Aspects of the 1996 Option Plan. The following
discussion is intended to briefly summarize the general principles
of federal income tax law applicable to options granted under the
1996 Option Plan. A recipient of an ISO will not recognize taxable
income upon either the grant or exercise of an ISO. The option
holder will recognize long-term capital gain or loss on a disposition
of the shares acquired upon exercise of an ISO, provided the option
holder does not dispose of those shares within two years from the
date the ISO was granted or within one year after the shares were
transferred to such option holder. Currently, for regular federal
income tax purposes, long-term capital gains are taxed at lower rates
than ordinary income. If the option holder satisfies both of the
foregoing holding periods, then the Company will not be allowed a
deduction by reason of the grant or exercise of an ISO.
As a general rule, if the option holder disposes of the shares before
satisfying both holding period requirements (a "disqualifying disposition"),
the gain recognized by the option holder on the disqualifying disposition
will be taxed as ordinary income to the extent of the difference between
(i) the lesser of the fair market value of the shares on the date of exercise
or the amount received for the shares in the disqualifying disposition; and
(ii) the adjusted basis of the shares, and the Company will be entitled to a
deduction in that amount. The gain (if any) in excess of the amount
recognized as ordinary income on a disqualifying disposition will be long-
term or short-term capital gain, depending on the length of time the option
holder held the shares prior to the disposition.
The amount by which the fair market value of a share at the time of
exercise exceeds the option price will be included in the computation of such
option holder's "alternative minimum taxable income" in the year the option
holder exercises the ISO. Currently, the alternative minimum tax rate is
24%. If an option holder pays alternative minimum tax with respect to the
exercise of an ISO, then the amount of such tax paid will be allowed as a
credit against regular tax liability in subsequent years. The option
holder's basis in the shares for purposes of the alternative minimum tax will
be adjusted when income is included in alternative minimum taxable income.
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A recipient of a non-qualified stock option will not recognize
taxable income at the time of grant, and the Company will not be allowed a
deduction by reason of the grant. Such an option holder will recognize
ordinary income in the taxable year in which the option holder exercises the
non-qualified stock option, in an amount equal to the excess of the fair
market value of the shares received upon exercise at the time of exercise of
such options over the exercise price of the option, and the Company will be
allowed a deduction in that amount. Upon disposition of the shares subject
to the option, an option holder will recognize long-term or short-term
capital gain or loss, depending upon the length of time the shares were held
prior to disposition, equal to the difference between the amount realized on
disposition and the option holder's basis in the shares subject to the option
(which basis ordinarily is the fair market value of the shares subject to the
option on the date the option was exercised).
The preceding discussion is based upon federal tax laws and
regulations in effect on the date of this Proxy Statement, which are subject
to change, and does not purport to be a complete description of the federal
tax aspects of the 1996 Option Plan. Option holders may also be subject to
state and local taxes in connection with the grant or exercise of options
granted under the 1996 Option Plan and the sale or other disposition of
shares acquired upon exercise of options.
The following table sets forth certain information as of as of June
30, 1997 with respect to the 1996 Option Plan as to (i) each named executive
officer of the Company, (ii) all current executive officers as a group,
(iii) all current directors who are not executive officers as a group,
(iv) each nominee for election as a director, and (iv) all employees,
including all current officers who are not executive officers, as a group.
The benefits and amounts that will be received by the foregoing persons under
the 1996 Option Plan are not otherwise presently determinable.
New Plan Benefits - 1996 Option Plan
<TABLE>
<CAPTION>
Market Value of
Per Share Common Stock on
Name # of Options (1) Exercise Price Expiration Date Date of Grant
<S> <C> <C> <C> <C>
Robert J. Fabbricatore, Chairman 75,000 (2) $8.1818 May 16, 2002 $7.438
and Chief Executive Officer
Steven P. Milton, President and 75,000 (2) $7.438 May 16, 2002 $7.438
Chief Operating Officer
David E. Mahan, Vice President - 80,000 (2) $7.438 May 16, 2002 $7.438
Market Planning and Development
John D. Pittenger 40,000 (2) $7.438 May 16, 2002 $7.438
Vice President-Finance, Treasurer,
Chief Financial Officer and Clerk
Richard J. Santagati 15,000 (3) $7.438 May 16, 2001 $7.438
J. Richard Murphy 10,000 (3) $7.438 May 16, 2001 $7.438
Henry Hermann 10,000 (3) $7.438 May 16, 2001 $7.438
10,000 (2) $8.25 January 31, 2002 $8.25
All current executive officers 270,000 $7.438-$8.1818 May 16, 2002 $7.438
a group (four persons)
All current directors who are not 45,000 $7.438-$8.25 May 16, 2001- $7.438-
executive officers as a group January 31, 2002 $8.25
(three persons)
All employees, including all 433,500 $6.875-$16.25 Sept. 11, 2001- $6.875-
current officers who are not May 16, 2002 $16.25
executive officers, as a group
(84 persons)
<FN>
(1) All of the options were granted during the fiscal year ended March 31, 1997 or the fiscal year ending March 31, 1998.
(2) These options vest 25% on the first through fourth anniversary of the date of grant.
(3) These options vest 33-1/3% on the first through third anniversary of the date of grant.
</FN>
</TABLE>
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Board Recommendation
The Board of Directors recommends that stockholders vote FOR the
Amendment to the 1996 Option Plan. Unless instructed to the contrary, the
enclosed proxy will be voted in favor of the proposed Amendment. The
affirmative vote by the holders of a majority of the shares of Common Stock
present in person or represented by proxy and entitled to vote on the matter
is required to approve the adoption of the proposed Amendment to the 1996
Option Plan. Since members of the Board of Directors and the Company's
executive officers together own approximately 40% of the outstanding shares
of Common Stock, approval of the proposed Amendment is probable.
PROPOSAL 3:
RATIFICATION OF ERNST & YOUNG AS INDEPENDENT ACCOUNTANTS
The Board of Directors has concluded that the continued employment
of Ernst & Young will be in the Company's best interest and recommends that
the appointment of Ernst & Young as the Company's independent public
accountants for the fiscal year ending March 31, 1998 be ratified and
approved.
Representatives of Ernst & Young are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
Ernst & Young (and its predecessor Ernst & Whinney) has served as
independent public accountants for the Company continuously since January
1988. The Company has been advised by Ernst & Young that neither the firm
nor any of its partners has any material direct or any indirect financial
interest in the Company.
Board Recommendation
The Board of Directors recommends that the Stockholders vote FOR
approval of the appointment of Ernst & Young as independent public
accountants. Unless instructed to the contrary, the enclosed proxy will be
voted for the appointment of such accountants. The affirmative vote by the
holders of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote on the matter is required to ratify
the appointment of Ernst & Young as independent accountants. Since members
of the Board of Directors and the Company's executive officers together own
approximately 40% of the outstanding shares of Common Stock, ratification of
such appointment is probable.
EXPENSE OF SOLICITATION
All costs connected with the solicitation of Proxies will be borne
by the Company. Brokers and other persons holding stock for the benefit of
others will be reimbursed for their expenses in forwarding Proxies and
accompanying material to the beneficial owners of such stock and obtaining
their Proxies. Solicitation will be made by mail, telephone, telecopier or
otherwise, and some of the Directors, officers and regular employees of the
Company may assist in the solicitation without additional compensation.
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STOCKHOLDERS' PROPOSALS
If a stockholder wishes to present a proposal to be voted on the 1998
Annual Meeting, the proponent must, at the time the proposal is submitted, be
a record or beneficial owner of at least one (1%) percent or One Thousand
($1,000.00) Dollars in market value of the class of securities entitled to
vote at the meeting and have held such securities for at least one (1) year,
and such stockholder must continue to own such securities through the date on
which the 1998 Annual Meeting is held. The proposal, in order to be included
in the management proxy statement, must be received at the Company's
executive offices no later than June 22, 1998. In order to remove any
question as to the date on which a proposal was received by the Board of
Directors, it is suggested that proposals be submitted by certified mail,
return receipt requested.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
The Board of Directors knows of no other matters which may be
presented at the Annual Meeting, but if other matters do properly come before
the Annual Meeting, it is intended that the persons named in the Proxy will
vote according to their best judgment.
Stockholders are requested to date, sign and return the Proxy in the
enclosed envelope, to which no postage need be affixed if mailed in the
United States. If you attend the Annual Meeting, you may revoke your Proxy
at that time and vote in person if you so desire, otherwise your Proxy will
be voted for you.
By Order of the Board of Directors
Robert J. Fabbricatore, Chairman
September 9, 1997
Waltham, Massachusetts
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PROXY
CTC COMMUNICATIONS CORP.
1997 ANNUAL MEETING OF STOCKHOLDERS
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Leonard R. Glass and John D.
Pittenger and each of them, the true and lawful attorneys and agents for
the undersigned, with full power of substitution, for and in the name of
the undersigned, to act for the undersigned and vote all stock the
undersigned is entitled to vote at the 1997 Annual Meeting of Stockholders
of CTC Communications Corp. to be held on Monday, October 20, 1997 at 9:30
a.m., local time, at the offices of the Company, 360 Second Avenue,
Waltham, Massachusetts, and at any and all adjournments thereof, on the
matters listed on the reverse side of this card.
The undersigned hereby acknowledges receipt of the Annual Report
to Stockholders for the Fiscal Year ended March 31, 1997, Proxy Statement
and Notice of Annual Meeting dated September 9, 1997.
PLEASE VOTE AND SIGN ON OTHER SIDE
AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
(Please sign exactly as your name appears on your stock certificate. If
stock is registered in more than one name, each holder should sign. When
signing as an attorney, administrator, executor, guardian or trustee,
please add your title as such. If executed by a corporation or
partnership, the Proxy should be signed in full corporate or partnership
name by a duly authorized officer or partner as applicable.)
Has your address changed? Do you have any comments?
______________________________ _______________________________
_____________________________ _______________________________
______________________________ _______________________________<PAGE>
<PAGE>
[X] PLEASE MARK VOTES CTC COMMUNICATIONS CORP.
AS IN THIS EXAMPLE
(1) Election of the following nominees for the Board of Directors to
serve until the Annual Meeting of Stockholders in 1998 and until each
successor is duly elected and qualified;
FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT [ ]
ROBERT J. FABBRICATORE RICHARD J. SANTAGATI
J. RICHARD MURPHY HENRY HERMANN
Instruction: To withhold authority to vote for any Individual
nominee, check the "For All Except" box and strike a line through the
nominee's name in the list above. Unless authority to vote for all
foregoing nominees is withheld, this proxy will be deemed to confer
authority to vote for every nominee whose name is not struck.
(2) Proposal to approve an amendment to the Company's 1996 Stock
Option Plan to increase the authorized shares of Common Stock that may be
issued pursuant to that plan from 750,000 shares to 1,750,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) Ratify the appointment of Ernst & Young LLP as the independent
accountants of the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) In their discretion, on any other matters which may properly come
before the meeting or any adjournment thereof.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Mark the box at right if comments or address change have been noted on the
reverse side of this card. [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ITEMS 1, 2 AND 3.
Please be sure to sign and date this Proxy. Date________________
Stockholder sign here_____________________________
Co-owner sign here________________________________
