SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by Registrant [X]
Filed by a Party other than Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
CTC COMMUNICATIONS CORP.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the Appropriate Box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined)
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Copies of all communications to:
LEONARD R. GLASS, ESQ.
Law Offices of Leonard R. Glass, P.A.
45 Central Ave, P.O. Box 579
Tenafly, New Jersey 07670-0579
(201) 894-9300
<PAGE>
[CTC Communications Corp. Letterhead]
October 23, 1998
To the Stockholders of CTC Communications Corp.
Please join us at our annual meeting on November 16, 1998. The meeting will
be held at our headquarters, 360 Second Ave., Waltham, MA 02154 at 9:30 a.m.
EST. Following the business portion of the meeting, the Company will be
giving a presentation on its new Competitive Local Exchange Carrier ("CLEC")
strategy and will offer a questions and answer period after the presentation.
Any inquiries regarding this meeting should be directed to John Pittenger,
Director of Investor Relations, at (781) 466-1302
We look forward to seeing you on November 16th.
Warmest Regards,
Robert J. Fabbricatore
Chairman of the Board
<PAGE>
CTC COMMUNICATIONS CORP.
360 Second Ave.
Waltham, Massachusetts 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 November 16, 1998
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 two persons to the Board of Directors to serve as Class I
Directors for three-year terms, and until their respective successors are
elected and qualified;
2. To approve the Company's 1998 Incentive Plan;
3. To ratify the appointment of Ernst & Young LLP as the independent
accountants of the Company for the fiscal year ending March 31, 1999; 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 October 9,
1998 as the record date for the determination of stockholders entitled to
vote at the Meeting and to receive notice thereof. Accordingly, only
stockholders of record on such date will be entitled to vote at the 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
October 23, 1998
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>
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS OF
CTC COMMUNICATIONS CORP.
TO BE HELD NOVEMBER 16, 1998
Approximate Date of Mailing to Stockholders:
October 26, 1998
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 1998 Annual Meeting
of Stockholders to be held on November 16, 1998 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 (781-466-8080).
Proxies in the form enclosed are solicited on behalf of the Company's
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
dated proxy with the Company, by attending the meeting and voting in
person, or by notifying the Company of the revocation in a later dated
writing to its Clerk at 360 Second Ave., Waltham, MA 02154. Any such
proxy, if received in time for voting and not revoked, will be voted at the
meeting in accordance with the instructions indicated on the proxy. If no
instructions are indicated on a properly executed proxy, the shares
represented by that proxy will be voted as recommended by the Board of
Directors.
VOTING RIGHTS AND VOTE REQUIRED
As of October 9, 1998 (the "Record Date"), the Company had
outstanding and entitled to vote 10,004,134 shares of Common Stock (the
"Common Stock") and 666,666 shares of Series A Convertible Preferred Stock
(the "Series A Preferred Stock"). There are no other outstanding classes
of Common Stock or Preferred Stock of the Company. Only stockholders of
record at the close of business on the Record Date are entitled to vote at
the Annual Meeting. Each outstanding share of Common Stock entitles the
record holder to one (1) vote. Each holder of shares of Series A Preferred
Stock is entitled to such number of votes for the Series A Preferred Stock
held by such holder equal to the lesser of (i) the whole number of shares
of the Company's Common Stock issuable upon conversion and exercise of all
shares of Series A Preferred Stock and warrants held by such holder and
(ii) the number of shares of Series A Preferred Stock held by such holder
multiplied by 2.476 (a total of 1,526,829 votes for all such Series A
Preferred Stockholders). The holders of the Common Stock and Series A
Preferred Stock vote together as a single class.
The holders of a majority interest of all of the Common Stock and
Preferred Stock issued, outstanding and entitled to vote at the 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.
Consistent with state law and under the Company's by-laws, a majority
of the shares entitled to be cast on a particular matter, present in person
or represented by proxy, constitutes a quorum as to such matter. Votes cast
by proxy or in person at the Annual Meeting will be counted by persons
appointed by the Company to act as election inspectors for the meeting. The
two nominees for election as directors at the Annual Meeting who receive
the greatest number of votes properly cast for the election of directors
shall be elected directors. Approval of the 1998 Incentive Plan and the
ratification of Ernst & Young as accountants for the company for the fiscal
year ending March 31, 1999 requires the affirmative vote of a majority of
the shares present, in person or by proxy and entitled to vote.
The election inspectors will count the total number of votes cast
"for" approval of proposals, other than the election of directors, for
purposes of determining whether sufficient affirmative votes have been
cast. The election inspectors will count shares represented by proxies that
withhold authority to vote for a nominee for election as a director or that
reflect abstentions and "broker non-votes" (i.e., shares represented at the
meeting held by brokers or nominees as to which (i) instructions have not
been received from the beneficial owners or persons entitled to vote and
(ii) the broker or nominee does not have the discretionary voting power on
a particular matter) as shares that are present and entitled to vote on the
matter for purposes of determining the presence of a quorum. Neither
abstentions nor broker non-votes have any effect on the outcome of voting
on any of the proposals.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information as of September 30,
1998 with respect to each stockholder known by the Company to beneficially
own more than 5% of the outstanding shares of the Company's Common Stock, the
beneficial ownership of the Company's Common Stock by each Nominee for
Director, by each continuing Director and by each Named Executive Officer (as
defined below) of the Company, and by all of the Directors and Executive
Officers of the Company as a group. Based on the information furnished by
the beneficial owners of the Common Stock listed below, the Company believes
that, except as described below, each such stockholder exercises sole voting
and investment power with respect to the shares beneficially owned.
Name and Address Number of Shares Percentage
of Beneficial Owner Beneficially Owned of Class
Robert J. Fabbricatore(1) 2,759,891 27.5%
Spectrum Equity Investors II, L.P.(2) 1,558,600 13.5%
Henry Hermann, CFA(4) 215,922 2.2%
Richard J. Santagati(5) 84,500 *
J. Richard Murphy(6) 19,334 *
Ralph C. Sillari(7) 3,834 *
Kevin J. Maroni(2) 1,558,135 13.5%
Robert A. Nicholson(2)(3) 1,559,553 13.5%
Steven P. Milton(8) 436,682 4.3%
David E. Mahan(9) 162,100 1.6%
Michael H. Donnellan(10) 118,588 1.2%
Anthony J. Vermette(11) 109,307 1.1%
All directors and executive
officers as a group
(14 persons)(12) 5,832,932 49.1%
- ---------------
Less than 1%.
(1) 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 43,917 shares issuable upon exercise of
options exercisable within 60 days of September 30, 1998. Mr.
Fabbricatore's address is c/o CTC Communications Corp., 360 Second
Avenue, Waltham, Massachusetts 02154.
(2) Includes 187,066 shares issuable upon the exercise of warrants
exercisable within 60 days of September 30, 1998 and 1,371,534 shares
issuable upon conversion of Series A Preferred Stock as of September
30, 1998. As general partners of Spectrum Equity Investors II, L.P.
("Spectrum"), Mr. Maroni, Mr. Nicholson, Mr. Collatos and Brion B.
Applegate may be deemed to be beneficial owners of the shares
beneficially owned by Spectrum. The address of Spectrum and its general
partners is One International Place, 29th Floor, Boston, Massachusetts
02110.
(3) Includes 83 shares issuable upon the exercise of warrants exercisable
within 60 days of September 30, 1998 and 870 shares issuable upon
conversion of Series A Preferred Stock as of September 30, 1998. The
address of Spectrum and its general partners is One International
Place, 29th Floor, Boston, Massachusetts 02110.
(4) Includes 9,750 shares held by Mr. Hermann's spouse and 10,334 shares
issuable upon the exercise of options exercisable within 60 days of
September 30, 1998.
(5) Includes 9,500 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1998.
(6) Includes 18,334 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1998.
(7) Includes 3,334 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1998.
(8) Includes 4,500 shares owned by Mr. Milton as trustee of a trust for his
children and 45,750 shares issuable upon the exercise of options
exercisable within 60 days of September 30, 1998.
(9) Includes 95,000 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1998.
(10) Includes 98.876 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1998.
(11) Includes 83,399 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1998.
(12) Includes the shares described in footnotes (1) through (11) above.
PREFERRED STOCK
As of September 30, 1998, Spectrum owned 657,555 of the 666,666 shares, or
98.6 of the outstanding Series A Preferred Stock of the Company.
PROPOSAL 1:
ELECTION OF DIRECTORS
As provided in the Company's Amended and Restated By-laws ("By-laws"),
the Company's Board of Directors must consist of not less than three nor
more than eleven members, as determined by the Board of Directors, and that
the Board of Directors is classified into three classes, as nearly as equal
in number as possible, so that each Director (after a transitional period)
will serve for three years, with one class of directors being elected each
year. The Board has set the number of Directors at seven, and is currently
comprised of two Class I Directors, two Class II Directors and three Class
III Directors.
The Class I Directors, whose terms of office expire in 1998, are
Henry Hermann and Ralph C. Sillari. Messrs. Hermann and Sillari have been
nominated to stand for re-election as Class I Directors at the Annual
Meeting to hold office until 2001 and until their respective successors are
elected and qualified.
J. Richard Murphy and Richard J. Santagati, presently serving as
Class II Directors for terms expiring in 1999 and until their respective
successors are elected and qualified, will continue in office .
Robert J. Fabbricatore, Kevin J. Maroni and William P. Collatos are
presently serving as Class III Directors. Mr. Fabbricatore and Mr. Maroni
will continue in office, and Mr. Collatos has indicated that he will not
continue as a Director after the Annual Meeting. Mr. Robert A. Nicholson,
as a designee of the Series A Preferred Stockholders, as been appointed to
replace Mr. Collatos as a Class III Director to serve with Mr. Fabbricatore
and Mr. Maroni for the term expiring in 2000 and until their respective
successors are elected and qualified.
It is intended that all shares represented by a proxy in the
accompanying form will be voted for the election of Henry Hermann and Ralph
C. Sillari as Class I Directors for a three year term unless otherwise
specified in such proxy. In the event either of the nominees shall be
unable to serve as Director, votes will be cast, pursuant to the authority
granted in the enclosed proxy, for such person or persons as may be
designated by the Board of Directors. The Board of Directors has no reason
to believe that the nominees will decline to serve as Director.
The following table sets forth the name and age of each Director
continuing to serve after the Annual Meeting and each Nominee for Director,
the period during which he has served as Director and the other capacities
in which he currently serves the Company:
<TABLE>
<CAPTION>
Period Other Capacities
Served as in which
Name Age Director Currently Serving
<S> <C> <C> <C>
Robert J. Fabbricatore 55 Since 1980 Chairman and
Chief Executive
Officer
Richard J. Santagati 54 Since 1991 None
J. Richard Murphy 53 Since 1995 None
Henry Hermann, CFA 56 Since 1996 Consultant
Ralph C. Sillari 43 Since 1997 None
Kevin J. Maroni 35 Since 1998 None
Robert A. Nicholson 30 As of 11/16/98 None
- -----------------
</TABLE>
Class I Directors Standing for Election
Mr. Hermann became a director of the Company in September 1996. Since
November 1997, he has operated Hermann Companies, a financial services
company engaged in portfolio management, securities analysis and financial
consulting. Mr. Hermann is registered as an Investment Advisor with the
State of Texas, a Chartered Financial Analyst and, as an independent
contractor, offers general securities through Brokers Transaction Services.
From May 1997 to November 1997, he was employed by Kuhns Brothers &
Company, Inc., 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 has provided financial consulting services
to the Company since 1993.
Mr. Sillari became a director of the Company in October 1997. Since
1991, Mr. Sillari has been employed by Fleet National Bank where he is
currently an Executive Vice President in the Business and Entrepreneurial
Services Division located in Boston, Massachusetts.
Class II Directors Whose Terms Expire in 1999
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. Mr. Santagati also
serves as a director of Celebrity Solutions, Inc., a publicly held software
company.
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. Mr. Murphy was an officer, director and principal
stockholder (ii) from 1990 to 1995 of Arlington Data Corporation, a systems
integration company located in Amesbury, Massachusetts; (ii) from 1992 to
1996 of Arlington Data Consultants, Inc., a company engaged in the
installation and maintenance of computer systems and hardware; and (iii)
from 1994 to 1996 of Computer Emporium, Inc., a company engaged in
processing parking violations for municipalities. In June 1996, Arlington
Data Corporation filed for bankruptcy under Chapter 11 of the Bankruptcy
Code.
Class III Directors Whose Terms Expire in 2000
Mr. Robert 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. Robert
Fabbricatore is the brother of Thomas Fabbricatore, Vice President -
Regulatory and Electronic Media.
Mr. Maroni became a director of the Company in April 1998 as a one of
the two designees of the Series A Preferred Stockholders. Mr. Maroni is a
General Partner of Spectrum Equity Investors II, L.P. ("Spectrum") which he
joined in 1994. Spectrum is a leading private equity fund which manages
$360 million of capital for investment in the communications and media
industries. Prior to joining Spectrum, he served as Manager, Finance and
Development at Time Warner Telecommunications, where he was involved in
corporate development projects. Mr. Maroni is a director of Pathnet, Inc.,
Formus Communications, Inc., WNP Communications, Inc. and American Cellular
Corp.
Mr. Nicholson as the designee of the Series A Preferred Stockholders,
is the Class III Director replacing Mr. Collatos, who is not standing for
reelection. Mr. Nicholson joined Spectrum in 1995 as a Vice President, and
became a Partner of Spectrum in July 1998. Spectrum is a leading private
equity fund which manages $360 million of capital for investment in the
communications and media industries. Prior to joining Spectrum, Mr.
Nicholson was an Associate Consultant and then Consultant at Bain & Company
(1990-1993), a leading strategy consulting firm, where he was responsible
for strategy and operations projects in the communications industry. Mr.
Nicholson currently serves as a Director of 3460983 Canada Inc., a Canadian
competitive local exchange carrier. Mr. Nicholson received an MBA with
high distinction from Harvard University in 1995 and a bachelor's degree
with honors, cum laude, from Williams College in 1990.
Voting Agreement
Pursuant to a Voting Agreement dated April 10, 1998 between Robert J.
Fabbricatore and certain of his affiliates and Spectrum, Mr. Fabbricatore
and certain of his affiliates agreed to vote at each annual or special
meeting at which directors of the Company are to be elected all of the
shares of Common Stock held by them in favor of two persons designated by a
majority of the outstanding shares of Series A Preferred Stock as nominees
for directors, subject to certain limitations based on the number of shares
of Series A Preferred Stock outstanding at any time. As of the record
date, Spectrum owned 657,555 of the 666,666 shares, or 98.6%, of the Series
A Preferred Stock outstanding.
Kevin J. Maroni and William P. Collatos, general partners of Spectrum and
designees of the Series A Preferred Stockholders, were elected Class III
directors of the Registrant effective April 10, 1998. Mr. Collatos has
elected not to continue as a Director after the 1998 Annual Meeting of
Stockholders, and Mr. Nicholson has been named as the designee of the
Series A Preferred Stockholders to serve in Mr. Collatos' place.
Certain Relationships 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 totaled approximately $133,000 for the fiscal
year ended March 31, 1998 ("Fiscal 1998") and approximately $66,000 for the
six months ended September 30, 1998. 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 totaled $119,416
for Fiscal 1998 and approximately $80,000 for the six months ended
September 30, 1998. 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 1998 and the six months
ended September 30, 1998, Comm-Tract Corp. provided the Company with
services, inventory and equipment aggregating $233,034 and approximately
$157,000 respectively. The Company believes that the payments to the trusts
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 the fiscal
year ended March 31, 1995, Steven P. Milton was advanced the sum of
$135,825 by the Company, which remained outstanding at September 30, 1998.
The loan is payable on demand and bears interest at 8.0% per annum.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission (the
''Commission'') initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten percent shareholders are required
by Commission regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and, with respect to its officer and
directors, written representations that no other reports were required,
during Fiscal 1998, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were
complied with. In making the foregoing statement, the Company has relied on
the written representations of its directors and officers and copies of the
reports that have been filed with the Commission.
Committees of the Board of Directors
The Company has established an Audit Committee, Compensation Committee
and a Nominating Committee.
The Audit Committee consists of Messrs. Murphy and Hermann. The Audit
Committee is responsible for reviewing the internal accounting controls of
the Company, meeting and conferring with the Company's certified public
accountants and reviewing the results of the accountants' auditing
engagement. During the fiscal year ended March 31, 1998, the Audit
Committee held one meeting.
The Compensation Committee consists of Messrs. Maroni, Santagati and
Murphy. The Compensation Committee establishes compensation and benefits
for the Company's senior executives. The Committee also determines the
number and terms of stock options granted to employees, directors and
consultants of the Company under the Company's stock option plans. During
the fiscal year ended March 31, 1998, the Compensation Committee held three
meetings.
The Nominating Committee consists of Messrs. Santagati, Murphy and
Sillari. The Nominating Committee recommends candidates for nomination to
the Board of Directors. The Committee also reviews and makes
recommendations regarding compensation for non-employee directors. The
Nominating Committee does not consider nominees recommended by security
holders. During the fiscal year ended March 31, 1998, the Nominating
Committee held two meetings.
During the fiscal year ended March 31, 1998, the Board of Directors
held 11 meetings and took action by unanimous written consent on three
occasions. All directors and committee members attended their respective
meetings.
Director Compensation
Directors of the Company who are employees do not receive compensation
for their services as directors. Directors who are not employees receive an
annual retainer of $10,000. On May 16, 1997, the Company granted to Messrs.
Hermann, Murphy and Santagati stock options to purchase 10,000, 10,000 and
15,000 shares, respectively, of its Common Stock at a purchase price of
$7.44 per share. On October 20, 1997, the Company granted to Mr. Sillari 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. These
options were repriced on March 20, 1998 to $7.19 per share.
Executive Officers and Significant Employees
The following table sets forth the name and age of each executive
officer and significant employee of the Company and the office held.
<TABLE>
<CAPTION>
Name Age Current Office Held
<S> <C> <C>
Robert J. Fabbricatore 55 Chairman, Chief Executive
Officer
Steven P. Milton 44 President, Chief Operating
Officer
Steven C. Jones 35 Executive Vice President,
Chief Financial Officer and
Director of
Corporate Development
John D. Pittenger 45 Executive Vice President-
Finance and Administration,
Treasurer and Clerk
David E. Mahan 56 Vice President-Marketing
and Strategic Planning
Michael H. Donnellan 44 Vice President-Operations
Thomas Fabbricatore 39 Vice President-Regulatory
and Electronic Media
Anthony D. Vermette 37 Vice President-Sales
Frederick Kunzi 47 Vice President and Chief
Technology Officer
Jeffrey C. Lavin 42 Vice President-Corporate
Development
</TABLE>
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. Jones joined the Company in early 1998 and has served as an
Executive Vice President and Chief Financial Officer since April 1998. From
1994 to April 1998, Mr. Jones worked in the telecommunications investment
banking division of Merrill Lynch & Co., most recently as a Vice President.
From 1991 to 1994, Mr. Jones was an Associate at BT Securities Corp.
Mr. Pittenger has served as Executive Vice President-Finance and
Administration since April 1998 and as Treasurer and Clerk of the Company
since August 1989. Mr. Pittenger served as Vice President-Finance from
1991 until April 1998, and as Chief Financial Officer from 1989 to April
1998.
Mr. Mahan joined the Company in October 1995 as Vice President-
Marketing and Strategic Planning and in June 1996 became an executive
officer of the Company. Prior to joining the Company, Mr. Mahan held a
number of senior management level positions with NYNEX, most recently as
Vice President-Sales Channel Management from 1993 to 1995.
Mr. Donnellan has been employed by the Company since 1988 in a number
of positions. He was named Vice President-Operations in 1995 and became an
executive officer of the Company in October 1997.
Mr. Thomas J. Fabbricatore joined the Company in 1982. He was named
Vice President-Regulatory and Electronic Media in 1991 and became an
executive officer of the Company in October 1997. Thomas Fabbricatore is
the brother of Robert J. Fabbricatore.
Mr. Vermette has been employed by the Company in a variety of positions
since 1987. Mr. Vermette was named Vice President-Sales in 1996 and became
an executive officer in October 1997.
Mr. Kunzi joined the Company as a Vice President and Chief Technology
Officer in September 1998. Mr. Kunzi has over 25 years experience in
information technology. From 1985 to September 1998, he was employed by
Digital Equipment Corporation, most recently as Senior Manager, Global
Network Services where he was responsible for Digital's worldwide
enterprise network infrastructure serving over 60,000 domestic and
international clients.
Mr. Lavin joined the Company in June 1998 as Vice President-Corporate
Development. Mr. Lavin has 19 years of sales and operational management
experience in the telecommunications industry. From December 1996 to May
1998, Mr. Lavin was Vice President of Sales, Americas/Asia Pacific for
NovaSoft Systems, Inc., a software development corporation providing
enterprise document and workflow management solutions for Fortune 500
companies. From 1979 to 1996, Mr. Lavin was employed by Comlink
Incorporated, a communication network integrator, most recently as Senior
Vice President. Following the acquisition of Comlink in 1996 by Williams
Communications, Mr. Lavin served as Vice President and General Manager of
Network Systems Integration.
For a description of the business background of Mr. Robert
Fabbricatore see "Class III Directors Whose Terms Expire in 2000" above.
OPTION REPRICING
The Company has had one option repricing since its inception. On
March 20, 1998, all options with an exercise price in excess of $7.00 per
share were repriced to provide for a $7.19 exercise price. The following
table sets forth certain information regarding the repricing of options
held by the Company's Chief Executive Officer and each of the four other
most highly paid executive officers of the Company ("Named Executive
Officers"):
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE EXERCISE EXPIRATION
UNDERLYING OF STOCK PRICE AT NEW DATE OF
REPRICED AT TIME OF TIME OF EXERCISE REPLACED
NAME DATE OPTIONS REPRICING REPRICING PRICE OPTIONS
- - -------------------- ----------- --------- --------- ---------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Fabbricatore 3/20/98 75,000 $7.19 $8.18 $7.91 5/16/02
Steven P. Milton 3/20/98 75,000 7.19 7.44 7.19 5/16/02
Anthony D. Vermette 3/20/98 50,000 7.19 7.44 7.19 5/16/02
Michael H. Donnellan 3/20/98 40,000 7.19 7.44 7.19 5/16/02
David E. Mahan 3/20/98 80,000 7.19 7.44 7.19 5/16/02
</TABLE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During the fiscal year ended March 31, 1998, the Compensation
Committee, then comprised of two independent non-employee directors, made
decisions regarding executive compensation. The Compensation Committee is
currently comprised of three independent non-employee directors. The
Compensation 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. The Compensation Committee also determines the number and terms
of stock options granted to employees, directors and consultants of the
Company under its stock option plans.
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, 1998, 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.
CEO Compensation. During the fiscal years ended March 31, 1998, 1997
and 1996 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 $1 million.
The Compensation Committee
J. Richard Murphy and Richard J. Santagati
Compensation Tables
The following summary compensation table sets forth information
concerning the compensation paid or accrued by the Company to or on behalf
of the Named Executive Officers during the fiscal year ended March 31,
1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------- -------------------------------------
Other Securities All
Annual Underlying Other
Name and Principal Salary Bonus Compensation Options Compen-
Position Year ($) ($) ($) (#)(1) sation(2)
- ------------------ ---- ------ ---- ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Fabbricatore, 1998 240,000 60,000 - 150,000 $19,550
Chairman and Chief 1997 240,000 60,000 - - 18,075
Executive Officer 1996 240,000 60,000 - - 16,100
Steven P. Milton, 1998 100,000 40,000 5,200 150,000 4,200
President and 1997 100,000 40,000 5,200 - 4,075
Chief Operating Officer 1996 100,000 40,000 5,200 - 4,200
Anthony D. Vermette, 1998 86,647 58,424 4,000 100,000 3,456
Vice President 1997 80,000 54,198 4,000 - 3,776
1996 80,000 28,000 4,000 - 3,240
Michael H. Donnellan, 1998 92,500 4,000 4,000 80,000 3,975
Vice President of 1997 80,000 32,000 4,000 - 3,360
Operations 1996 63,000 132,119 4,000 - 3,887
David E. Mahan 1998 100,000 40,000 5,004 260,000 4,075
Vice President-Market 1997 100,000 40,000 5,004 - 4,075
Planning & Development 1996(3) 50,000 20,000 2,500 100,000 -
<FN>
(1) On March 20, 1998, the Company repriced all previously granted options that had an exercise price
in excess of $7.00 per share. Includes 75,000, 75,000, 50,000, 40,000 and 180,000 shares underlying
options previously granted to Messrs. Fabbricatore, Milton, Vermette, Donnellan, and Mahan,
respectively, that were canceled as a result of the repricing.
(2) Includes 50% matching contributions in the amounts of $4,750, $4,200, $4,200, $3,456, $3,975 and
$4,075 accrued on behalf of Messrs. Fabbricatore, Milton, Vermette, Donnellan, and Mahan,
respectively, to the CTC Communications Corp. 401(k) Savings Plan. Also included is the actuarial
benefit in the amount of approximately $14,800 on the "split-dollar" life insurance policy for the
benefit of Mr. Fabbricatore.
(3) Mr. Mahan commenced employment with the Company on October 1, 1995.
</FN>
</TABLE>
The following table sets forth information concerning option grants and
option holdings for the fiscal year ended March 31, 1998 with respect to the
Named Executive Officers.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
% of Total Potential Realizable Value
Options/ at Assumed Annual Rates
No. of SARs of Stock Price
Securities Granted to Appreciation
Underlying Employees Exercise for Option Term
Options in Fiscal Price Expiration --------------------
Name Granted(#) Year ($/Sh) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Robert J. Fabbricatore 75,000(1) 3% $8.18 5/16/2002 $ 98,339 $284,788
75,000 3% 7.91 5/16/2002 95,033 275,216
Steven P. Milton 75,000(1) 3% 7.44 5/16/2002 154,124 340,573
75,000 3% 7.19 5/16/2002 148,943 329,126
Anthony D. Vermette 50,000(1) 2% 7.44 5/16/2002 102,749 227,049
50,000 2% 7.19 5/16/2002 99,296 219,417
Michael H. Donnellan 40,000(1) 1% 7.44 5/16/2002 82,199 181,639
40,000 1% 7.19 5/16/2002 79,436 175,534
David E. Mahan 80,000(1) 3% 7.44 5/16/2002 164,399 363,278
80,000 3% 7.19 5/16/2002 158,873 351,068
100,000 4% 7.19 10/02/2002 198,391 438,835
- ---------------------
<FN>
(1) Canceled as a result of option repricing.
</FN>
</TABLE>
The following table sets forth information cerning the exercise of options by
the Named Executive Officers during the fiscal year ended March 31, 1998 and
the March 31, 1998 aggregate value of unexercised options held by each of the
Named Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
acquired on Value Underlying Unexercised In-the-Money Options at
Name exercise (#) Realized($) Options at FY-End (1) Fiscal Year End ($)(1)(2)
- ---------------- ------------ ----------- -------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Fabbricatore - - 25,167 83,389 143,704 106,401
Anthony D. Vermette 13,251 142,484 59,649 69,500 412,913 209,731
Michael H. Donnellan - - 77,626 61,750 545,503 208,188
Steven P. Milton - - 27,000 84,000 161,487 166,329
David E. Mahan - - 50,000 130,000 75,000 195,000
- ------------
<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.
(2) Assumes a fair market value of the Common Stock of the Company at March 31, 1998 of $8.69 per share.
</FN>
</TABLE>
The Company made no Long-Term Incentive Plan Awards during the fiscal year
ended March 31, 1998. The Company has no defined benefit or actuarial plan.
Employment Agreement
Mr. Jones is currently employed as Executive Vice-President, Chief
Financial Officer and Director of Corporate Development pursuant to an
agreement dated as of February 27, 1998. The agreement provides for an
initial term of three years and will automatically be extended for additional
one-year periods on the anniversary of the Effective Date (as defined
therein) provided that neither Mr. Jones nor the Company gives notice of
termination 90 days prior to any such anniversary. Under this agreement, Mr.
Jones is entitled to receive an annual salary of $150,000. Mr. Jones is
eligible to receive an annual bonus of at least $75,000 based upon the
achievement of certain performance objectives. Pursuant to his employment
agreement, Mr. Jones was granted options to purchase 300,000 shares of Common
Stock exercisable at $7.06 per share and vesting over a three year period. If
the Company terminates Mr. Jones without cause, or Mr. Jones terminates the
agreement for (i) ''good reason'' as defined therein or (ii) in connection
with a change of control, Mr. Jones is entitled to a severance payment equal
to a lump sum amount in cash, equal to the sum of (i) two year's base salary
at the highest annual base salary then in effect and (ii) the greater of
twice his highest annual bonus or $150,000.
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, 1993 through
March 31, 1998. Assumes $100 invested on March 31, 1993 in CTC Communications
Corp. Common Stock, the Nasdaq Composite Index and the Nasdaq
Telecommunications Index.*
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
------ ------ ------ -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
CTC Communications Corp. 100.00 76.00 425.00 1335.00 870.00 1042.50
Nasdaq Stock Market (US Companies) 100.00 107.77 119.39 161.17 179.50 272.61
Nasdaq Telecommunications Stocks 100.00 88.89 91.00 122.36 112.97 217.35
</TABLE>
* The Nasdaq Telecommunications Index began trading in November 1993.
Board Recommendation
The Board of Directors recommends that the stockholders vote FOR the
election of the nominees named above.
PROPOSAL 2:
PROPOSAL TO APPROVE OF THE COMPANY'S 1998 INCENTIVE PLAN
For many years, the Company has utilized stock options in its overall
compensation program and stockholders have previously approved the Company's
1993 and 1996 Stock Option Plans. As of September 30, 1998, no shares were
available for the grant of future options under either the 1993 or the 1996
Stock Option Plan unless additional shares become available upon the lapse or
termination of options previously granted under the Plans.
On October 5, 1998, the Board of Directors adopted, subject to
stockholder approval, the CTC Communications Corp. 1998 Incentive Plan (the
"1998 Incentive Plan"). The Board of Directors believes that approval of the
1998 Incentive Plan will advance the interests of the Company by providing
eligible participants the opportunity to receive a broad variety of equity-
based and cash incentives ("Awards"). The 1998 Plan is intended to expand
upon the Company's existing stock option plans and increase the Company's
flexibility in awarding equity and non-equity incentives. A total of
1,500,000 shares of Common Stock have been reserved for issuance under the
1998 Incentive Plan, subject to adjustment as provided in the 1998 Incentive
Plan.
SUMMARY OF THE 1998 INCENTIVE PLAN
The following summary description of the 1998 Incentive Plan is
qualified in its entirety by reference to the full text of the 1998 Incentive
Plan attached to this proxy statement as Appendix A.
Administration. The 1998 Incentive Plan will be administered by the
Board of Directors or one or more committees (the "Administrator"), which in
the case of Awards granted to officers of the Company shall be comprised
solely of two or more outside directors (within the meaning of Section 162(m)
of the Internal Revenue Code ("Section 162(m)")). Subject to the terms of
the 1998 Incentive Plan, the Administrator has authority to interpret the
1998 Incentive Plan; determine eligibility for and grant Awards; determine,
modify or waive the terms and conditions of any Award; proscribe forms, rules
and procedures (which it may modify or waive); and otherwise do all things
necessary to carry out the purposes of the 1998 Incentive Plan. In the case
of any award intended to be eligible for the performance-based compensation
exception under Section 162(m), the Administrator shall exercise its
discretion consistent with qualifying the Award for such exception.
Eligibility and Participation. In general, the Administrator will
select participants in the 1998 Incentive Plan from among key employees of
the Company and its affiliates who, in the opinion of the Administrator, are
in a position to make a significant contribution to the success of the
Company or its affiliates. The Administrator also has discretion to include
as participants in the 1998 Incentive Plan members of the Company's Board of
Directors and other persons who provide services to the Company or its
affiliates. The maximum number of shares for which stock options may be
granted to any person in any calendar year, and the aggregate maximum number
of shares of Common Stock which may be delivered to any person pursuant to
Awards that are not stock options or stock appreciation rights are each
limited to 1,000,000. In addition, no more than $1 million may be paid to
any individual with respect to any single cash performance-based bonus, and
no more than $1 million in cash performance-based bonuses may be paid to any
individual with respect to performance periods ending in the same fiscal
year. No Award of an incentive stock option (as defined below) may be
granted under the 1998 Incentive Plan after November 16, 2008, but incentive
stock options previously granted may extend beyond such date.
Types of Awards. The Administrator, in its discretion, may award (i)
options to purchase Common Stock, (ii) stock appreciation rights, (iii)
restricted or unrestricted Common Stock, (iv) promises to deliver stock or
other securities in the future, (v) convertible securities, (vi) cash
bonuses, and (vii) cash bonuses or loans to help defray the costs of the
foregoing awards.
Performance Criteria. Awards under the 1998 Incentive Plan may be
conditioned upon satisfaction of specified performance criteria. In the case
of any such Award that is intended to qualify for the performance-based
compensation exception under Section 162(m) (an "Exempt Award"), the criteria
used in connection with the Award shall be objectively determinable measures
of performance relating to any of the following (determined either on a
consolidated basis or, as the context permits, on a divisional, subsidiary,
line of business, project or geographical basis or in combinations thereof):
(i) sales; revenues; assets; expenses; earnings before or after deduction for
all or any portion of interest, taxes, depreciation, amortization or other
items, whether or not on a continuing operations or an aggregate or per share
basis; return on equity, investment, capital or assets; one or more operating
ratios; borrowing levels, leverage ratios or credit rating; market share;
capital expenditures; cash flow; stock price; stockholder return; network
deployment; sales of particular products or services; customer acquisition,
expansion and retention; or any combination of the foregoing; or (ii)
acquisitions and divestitures (in whole or in part); joint ventures and
strategic alliances; spin-offs, split-ups and the like; reorganizations;
recapitalizations, restructurings, financings (issuance of debt or equity)
and refinancings; transactions that would constitute a change of control; or
any combination of the foregoing. In the case of an Exempt Award (other than
stock options or stock appreciation rights with an exercise price at least
equal to the fair market value of the underlying Common Stock on the date of
grant), the Administrator will preestablish the particular performance goals
in writing no later than 90 days after the commencement of the period of
service to which the performance relates (or earlier if so required under
applicable regulations) and will certify prior to payment whether the
performance goal or goals have been attained and such determination shall be
final and conclusive. If the performance goal with respect to an Exempt
Award is not attained, no other Award shall be provided in substitution.
Where rights under an Award depend in whole or in part on attainment of
performance objectives, actions by the Company that have an effect, however
material, on such performance objectives or on the likelihood that they will
be achieved will not be deemed an amendment or alteration of the Award.
Deductibility of Performance Awards. If the 1998 Incentive Plan is
approved by the stockholders, certain payments to executive officers under
the 1998 Incentive Plan will be eligible for treatment as "performance based"
compensation under Section 162(m). Section 162(m) generally limits to $1
million the annual corporate income tax deduction for compensation paid to
the chief executive officer or any of the four other highest paid executive
officers of a publicly-held corporation which is not "performance-based"
compensation. The 1998 Incentive Plan is intended to comply with Section
162(m) by allowing Awards granted under the 1998 Incentive Plan to qualify as
performance-based compensation. Under current regulations, in those cases
where an Award under the 1998 Incentive Plan would qualify for the Section
162(m) performance-based exception by reason of being conditioned upon one or
more of the specific performance criteria described above (see "Performance
Criteria"), continued availability of the exception will depend upon
reapproval by stockholders of the material terms of the performance criteria
not later than the first stockholder meeting that occurs in the fifth year
following the year in which the stockholders previously approved such terms.
Rules Applicable to Awards. The Company retains the right at any time
to extinguish rights under an Award in exchange for payment in cash, Common
Stock (subject to the limitation on the maximum number of shares available
with respect to Awards) or other property on such terms as the Administrator
determines, provided the holder of the Award consents to such exchange.
Except as the Administrator otherwise expressly provides, Awards may not be
transferred other than by will or by the laws of descent and distribution
and, during the lifetime of a participant, an Award requiring exercise may be
exercised only by the participant (or in the event of the participant's
incapacity, the person or persons legally appointed to act on the
participant's behalf). The Administrator may provide that upon the exercise
of an Award the participant will automatically receive a new Award of like
kind covering a number of shares of Common Stock equal to the number of
shares of Common Stock for which the first Award was exercised.
Vesting of Awards. The Administrator may determine the time or times
at which an Award will vest or become exercisable and the terms on which an
Award requiring exercise will remain exercisable. Unless the Administrator
expressly provides otherwise, immediately upon the cessation of the
participant's employment or other service relationship with the Company and
its affiliates, an Award requiring exercise will cease to be exercisable, and
all Awards to the extent not already fully vested will be forfeited, except
that: (A) all stock options and stock appreciation rights held by a
participant immediately prior to his or her death, to the extent then
exercisable, will remain exercisable by such participant's permitted
transferee, for the lesser of (i) a one-year period ending with the first
anniversary of the participant's death or (ii) the period ending on the
latest date on which such stock option or stock appreciation right could have
been exercised and shall thereupon terminate; (B) all stock options and stock
appreciation rights held by the participant immediately prior to the
cessation of the participant's employment or other service relationship for
reasons other than death and except as provided in (C) below, to the extent
then exercisable, will remain exercisable for the lesser of (i) a period of
three months or (ii) the period ending on the latest date on which such stock
option or stock appreciation rights could have been exercised, and shall
thereupon terminate; and (C) all stock options and stock appreciation rights
held by the participant whose cessation of employment or other service
relationship is determined by the Administrator in its sole discretion to
result for reasons which cast such discredit on the participant as to justify
immediate termination of the Award shall immediately terminate upon such
cessation.
Stock Options. The Administrator will determine the exercise price of
each stock option provided that each stock option intended to qualify for the
performance-based exception under Section 162(m) and each "incentive stock
option" ("ISO") within the meaning of Section 422 of the Internal Revenue
Code must have an exercise price equal to the fair market value of the Common
Stock subject to the stock option, determined as of the date of grant, except
that an ISO granted to a person who owns (or by application of attribution
rules is deemed to own) more than 10% of the total combined voting power of
all classes of stock of the Company will have an exercise price equal to at
least 110% of such fair market value.
Effect of Certain Transactions. In the event of a consolidation or
merger in which the Company is not the surviving corporation or which results
in the acquisition of substantially all the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of substantially
all the Company's assets or a dissolution or liquidation of the Company, all
outstanding Awards will vest and become exercisable immediately prior to the
covered transaction. Upon the consummation of such covered transaction, all
Awards outstanding and requiring exercise will be forfeited unless assumed by
an acquiring or surviving entity.
Equitable Adjustment. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's
capital structure, the Administrator will make appropriate adjustments to the
maximum number of shares that may be delivered under the 1998 Incentive Plan,
subject to the maximum share limits under the 1998 Incentive Plan, to the
number and kind of shares of stock or securities subject to Awards then
outstanding or subsequently granted, to any exercise prices relating to
Awards, and to any other provision of Awards affected by such change. The
Administrator also may make such adjustments to take into account other
distributions or events, if the Administrator determines that adjustments are
appropriate to avoid distortion in the operation of the 1998 Incentive Plan
and to preserve the value of Awards; provided, that no such adjustment shall
be made to the maximum share limits, or otherwise to an Award intended to be
eligible for the performance-based exception under Section 162(m), except to
the extent consistent with that exception, nor shall any change be made to
ISOs except to the extent consistent with their continued qualification under
Section 422 of the Internal Revenue Code.
Amendment. Subject to the Administrator's right to exercise its
discretion consistent with qualifying Awards for the performance-based
exception under Section 162(m), the Administrator may at any time or times
amend the 1998 Incentive Plan or any outstanding Award for any purpose which
may at any time be permitted by law, or may at any time terminate the 1998
Incentive Plan as to any further grants of Awards, provided that no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for
the 1998 Incentive Plan to continue to qualify under Section 422 of the
Internal Revenue Code or for Awards to be eligible for the performance-based
exception under Section 162(m).
Other Compensation. The existence of the 1998 Incentive Plan and the
grant of Awards will not affect the Company's right to pay other bonuses or
compensation, except as provided under the 1998 Incentive Plan.
PRICE OF COMMON STOCK
The closing price of the Common Stock on the Nasdaq National Market on
October 9, 1998 was $5.00.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax
consequences of the issuance and exercise of stock options awarded under the
1998 Incentive Plan and is based on the law as in effect on September 1,
1998. The summary does not address all federal tax consequences, nor does it
cover state, local or non-U.S. tax consequences.
In general, a participant realizes no taxable income on either the
grant or the vesting of a stock option. The exercise of a nonstatutory, or
non-qualified, option (i.e., an option that does not qualify as an ISO)
results in ordinary income (generally subject to withholding if the option is
awarded in connection with employment) equal to the difference (the "Option
Spread") between the value of the Common Stock purchased and the option
exercise price. A corresponding deduction is available to the Company. In
general, the ordinary income associated with the exercise is measured and
taken into account at the time of exercise. Any gain or loss recognized upon
a subsequent sale of Common Stock purchased under a nonstatutory option will
be a capital gain or loss, long-term or short-term, depending on the
applicable tax holding period for the shares sold.
The exercise of an ISO does not produce ordinary taxable income.
However, because the Option Spread constitutes "alternative minimum taxable
income" (measured and taken into account, in general, at the time of
exercise), exercise of an ISO may result in an alternative minimum tax
liability. In addition, shares purchased under an ISO ("ISO Shares") are
subject to special tax holding rules. If a participant holds on to ISO
Shares for at least two years from the date of the ISO grant and at least one
year after exercise, any gain or loss recognized for tax purposes upon a
subsequent sale of the shares will be a long-term capital gain or loss.
However, a disposition of ISO Shares by the participant within either of
these special holding periods (a so-called "disqualifying disposition")
results in ordinary compensation income in the year of the disposition equal,
in general, to the Option Spread at the time the option was exercised. The
ordinary income realized upon a disqualifying disposition of ISO Shares is
deductible to the Company but under the current Internal Revenue Service
position is not subject to withholding. Any additional gain recognized for
tax purposes in a disqualifying disposition will be taxed as short-term or
long-term capital gain.
An ISO that is exercised by the participant more than three months
following termination of employment (one year, if termination occurred by
reason of total and permanent disability) is treated for tax purposes as a
nonstatutory option. ISOs granted to a participant under the 1998 Incentive
Plan (together with ISOs granted to the participant under any other plans of
the Company and certain affiliates) are also treated as nonstatutory options
to the extent that, in the aggregate, they first become exercisable in any
calendar year for shares of Company stock having a fair market value
(determined at time of grant) in excess of $100,000.
Under the so-called "golden parachute" provisions of the Code, certain
Awards vested or paid in connection with a change of control of the Company
may also be non-deductible to the Company and may be subject to an additional
20% federal excise tax. Non-deductible "parachute payments" will in general
reduce the $1 million limit on deductible compensation under Section 162(m)
of the Code, to the extent such limit is applicable to remuneration paid
under the 1998 Incentive Plan or otherwise.
Board Recommendation
The Board of Directors recommends that stockholders vote FOR the 1998
Incentive Plan. Unless instructed to the contrary, the enclosed proxy will
be voted in favor of adopting the 1998 Incentive Plan.
PROPOSAL 3:
RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS
The Board of Directors has concluded that the continued employment of
Ernst & Young LLP will be in the Company's best interest and recommends that
the appointment of Ernst & Young LLP as the Company's independent public
accountants for the fiscal year ending March 31, 1999 be ratified and
approved.
Representatives of Ernst & Young LLP 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 LLP (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 LLP 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
ratification of the appointment of Ernst & Young LLP as independent public
accountants.
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, telegraph or otherwise, and
some of the directors, officers and regular employees of the Company may
assist in the solicitation without additional compensation.
STOCKHOLDERS' PROPOSALS
If a stockholder wishes to present a proposal to be voted on at the 1999
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 Two Thousand
($2,000.00) 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 1999 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 25, 1999. Under the Company's By-laws,
stockholders who wish to make a proposal at the 1999 Annual Meeting - other
than one that will be included in the management proxy statement - must
notify the Company no earlier than August 18, 1999 and no later than
September 17, 1999. Under recent changes to the Federal proxy rules, if a
stockholder who wishes to present such a proposal fails to notify the Company
by September 17, 1999, then the proxies that management solicits for the 1999
Annual Meeting will include discretionary authority to vote on the
stockholder's proposal in the event it is properly brought before the meeting
notwithstanding the Company's By-laws. 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
October 23, 1998
Waltham, Massachusetts
<PAGE>
APPENDIX A
CTC COMMUNICATIONS CORP.
1998 INCENTIVE PLAN
1. DEFINED TERMS
Exhibit A, which is incorporated by reference, defines the terms used
in the Plan and sets forth certain operational rules related to those terms.
2. GENERAL
The Plan has been established to advance the interests of the Company
by giving selected Employees, directors and other persons (including both
individuals and entities) who provide services to the Company or its
Affiliates Stock-based incentives or incentives based on Performance
Criteria.
3. ADMINISTRATION
The Administrator has discretionary authority, subject only to the
express provisions of the Plan, to interpret the Plan; determine eligibility
for and grant Awards; determine, modify or waive the terms and conditions of
any Award; prescribe forms, rules and procedures (which it may modify or
waive); and otherwise do all things necessary to carry out the purposes of
the Plan. Once an Award has been communicated in writing to a Participant,
the Administrator may not, without the Participant's consent, alter the
terms of the Award so as to affect adversely the Participant's rights under
the Award, unless the Administrator expressly reserved the right to do so in
writing at the time of such communication. In the case of any Award
intended to be eligible for the performance-based compensation exception
under Section 162(m), the Administrator shall exercise its discretion
consistent with qualifying the Award for such exception.
4. LIMITS ON AWARD UNDER THE PLAN
a. Number of Shares. A maximum of 1,500,000 shares of Stock may be
delivered in satisfaction of Awards under the Plan. For purposes of the
preceding sentence, the following shares shall not be considered to have
been delivered under the Plan: (i) shares remaining under an Award that
terminates without having been exercised in full; (ii) shares subject to an
Award, where cash is delivered to a Participant in lieu of such shares;
(iii) shares of Restricted Stock that have been forfeited in accordance
with the terms of the applicable Award; and (iv) shares held back, in
satisfaction of the exercise price or tax withholding requirements, from
shares that would otherwise have been delivered pursuant to an Award. The
number of shares of Stock delivered under an Award shall be determined net
of any previously acquired Shares tendered by the Participant in payment of
the exercise price or of withholding taxes.
b. Type of Shares. Stock delivered by the Company under the Plan
may be authorized but unissued Stock or previously issued Stock acquired by
the Company and held in treasury. No fractional shares of Stock will be
delivered under the Plan.
c. Option & SAR Limits. The maximum number of shares of Stock for
which Stock Options may be granted to any person in any calendar year, the
maximum number of shares of Stock subject to SARs granted to any person in
any calendar year and the aggregate maximum number of shares of Stock
subject to other Awards that may be delivered to any person in any calendar
year shall each be 1,000,000. For purposes of the preceding sentence, the
repricing of a Stock Option or SAR shall be treated as a new grant to the
extent required under Section 162(m). Subject to these limitations, each
person eligible to participate in the Plan shall be eligible in any year to
receive Awards covering up to the full number of shares of Stock then
available for Awards under the Plan.
d. Other Award Limits. No more than $1,000,000 may be paid to any
individual with respect to any Cash Performance Award. In applying the
limitation of the preceding sentence: (A) multiple Cash Performance Awards
to the same individual that are determined by reference to performance
periods of one year or less ending with or within the same fiscal year of
the Company shall be subject in the aggregate to one limit of such amount,
and (B) multiple Cash Performance Awards to the same individual that are
determined by reference to one or more multi-year performance periods ending
in the same fiscal year of the Company shall be subject in the aggregate to
a separate limit of such amount. With respect to any Performance Award
other than a Cash Performance Award or a Stock Option or SAR, the maximum
Award opportunity shall be 1,000,000 shares of Stock or their equivalent
value in cash, subject to the limitations of Section 4.c.
5. ELIGIBILITY AND PARTICIPATION
The Administrator will select Participants from among those key
Employees, directors and other individuals or entities providing services to
the Company or its Affiliates who, in the opinion of the Administrator, are
in a position to make a significant contribution to the success of the
Company and its Affiliates. Eligibility for ISOs is further limited to
those individuals whose employment status would qualify them for the tax
treatment described in Sections 421 and 422 of the Code.
6. RULES APPLICABLE TO AWARDS
a. ALL AWARDS
(1) Terms of Awards. The Administrator shall determine the
terms of all Awards subject to the limitations provided herein.
(2) Performance Criteria. Where rights under an Award depend
in whole or in part on satisfaction of Performance Criteria, actions by the
Company that have an effect, however material, on such Performance Criteria
or on the likelihood that they will be satisfied will not be deemed an
amendment or alteration of the Award.
(3) Alternative Settlement. The Company may at any time
extinguish rights under an Award in exchange for payment in cash, Stock
(subject to the limitations of Section 4) or other property on such terms as
the Administrator determines, provided the holder of the Award consents to
such exchange.
(4) Transferability Of Awards. Except as the Administrator
otherwise expressly provides, Awards may not be transferred other than by
will or by the laws of descent and distribution, and during a Participant's
lifetime an Award requiring exercise may be exercised only by the
Participant (or in the event of the Participant's incapacity, the person or
persons legally appointed to act on the Participant's behalf).
(5) Vesting, Etc. Without limiting the generality of Section
3, the Administrator may determine the time or times at which an Award will
vest (i.e., become free of forfeiture restrictions) or become exercisable
and the terms on which an Award requiring exercise will remain exercisable.
Unless the Administrator expressly provides otherwise, immediately upon the
cessation of the Participant's employment or other service relationship with
the Company and its Affiliates, an Award requiring exercise will cease to be
exercisable, and all Awards to the extent not already fully vested will be
forfeited, except that:
(A) all Stock Options and SARs held by a Participant immediately
prior to his or her death, to the extent then exercisable, will remain
exercisable by such Participant's executor or administrator or the person or
persons to whom the Stock Option or SAR is transferred by will or the
applicable laws of descent and distribution, for the lesser of (i) a one
year period ending with the first anniversary of the Participant's death or
(ii) the period ending on the latest date on which such Stock Option or SAR
could have been exercised without regard to this Section 6.a.(5) and shall
thereupon terminate;
(B) All Stock Options and SARs held by the Participant immediately
prior to the cessation of the Participant's employment or other service
relationship for reasons other than death and except as provided in (C)
below, to the extent then exercisable, will remain exercisable for the
lesser of (i) a period of three months or (ii) the period ending on the
latest date on which such Stock Option or SAR could have been exercised
without regard to this Section 6.a.(5), and shall thereupon terminate; and
(C) all Stock Options and SARs held by the Participant whose
cessation of employment or other service relationship is determined by the
Administrator in its sole discretion to result for reasons which cast such
discredit on the Participant as to justify immediate termination of the
Award shall immediately terminate upon such cessation.
Unless the Administrator expressly provides otherwise, a Participant's
"employment or other service relationship with the Company and its
Affiliates" will be deemed to have ceased, in the case of an employee
Participant, upon termination of the Participant's employment with the
Company and its Affiliates (whether or not the Participant continues in the
service of the Company or its Affiliates in some capacity other than that of
an employee of the Company or its Affiliates), and in the case of any other
Participant, when the service relationship in respect of which the Award was
granted terminates (whether or not the Participant continues in the service
of the Company or its Affiliates in some other capacity).
(6) Taxes. The Administrator will make such provision for the
withholding of taxes as it deems necessary. The Administrator may, but need
not, hold back shares of Stock from an Award or permit a Participant to
tender previously owned shares of Stock in satisfaction of tax withholding
requirements.
(7) Dividend Equivalents, Etc. The Administrator may provide
for the payment of amounts in lieu of cash dividends or other cash
distributions with respect to Stock subject to an Award.
(8) Rights Limited. Nothing in the Plan shall be construed as
giving any person the right to continued employment or service with the
Company or its Affiliates, or any rights as a shareholder except as to
shares of Stock actually issued under the Plan. The loss of existing or
potential profit in Awards will not constitute an element of damages in the
event of termination of employment or service for any reason, even if the
termination is in violation of an obligation of the Company or Affiliate to
the Participant.
(9) Section 162(m). In the case of an Award intended to be
eligible for the performance-based compensation exception under Section
162(m), the Plan and such Award shall be construed to the maximum extent
permitted by law in a manner consistent with qualifying the Award for such
exception. In the case of a Performance Award intended to qualify as
performance-based for the purposes of Section 162(m) (other than a Stock
Option or SAR with an exercise price at least equal to the fair market value
of the underlying Stock on the date of grant), the Committee shall in
writing preestablish one or more specific Performance Criteria no later than
90 days after the commencement of the period of service to which the
performance relates (or at such earlier time as is required to qualify the
Award as performance-based under Section 162(m)). Prior to payment of any
Performance Award (other than a Stock Option or SAR with an exercise price
at least equal to the fair market value of the underlying Stock on the date
of grant) intended to qualify as performance-based under Section 162(m), the
Committee shall certify whether the Performance Criteria have been attained
and such determination shall be final and conclusive. If the Performance
Criteria with respect to any such Award are not attained, no other Award
shall be provided in substitution of the Performance Award.
b. AWARDS REQUIRING EXERCISE
(1) Time And Manner Of Exercise. Unless the Administrator
expressly provides otherwise, (a) an Award requiring exercise by the holder
will not be deemed to have been exercised until the Administrator receives a
written notice of exercise (in form acceptable to the Administrator) signed
by the appropriate person and accompanied by any payment required under the
Award; and (b) if the Award is exercised by any person other than the
Participant, the Administrator may require satisfactory evidence that the
person exercising the Award has the right to do so.
(2) Exercise Price. The Administrator shall determine the
exercise price of each Stock Option provided that each Stock Option intended
to qualify for the performance-based exception under Section 162(m) of the
Code and each ISO must have an exercise price that is not less than the fair
market value of the Stock subject to the Stock Option, determined as of the
date of grant. An ISO granted to an Employee described in Section 422(b)(6)
of the Code must have an exercise price that is not less than 110% of such
fair market value.
(3) Payment Of Exercise Price, If Any. Where the exercise of
an Award is to be accompanied by payment, the Administrator may determine
the required or permitted forms of payment, subject to the following: (a)
all payments will be by cash or check acceptable to the Administrator, or,
if so permitted by the Administrator (with the consent of the optionee of an
ISO if permitted after the grant), (i) through the delivery of shares of
Stock which have been outstanding for at least six months (unless the
Administrator approves a shorter period) and which have a fair market value
equal to the exercise price, (ii) by delivery of a promissory note of the
person exercising the Award to the Company, payable on such terms as are
specified by the Administrator, (iii) by delivery of an unconditional and
irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price, or (iv) by any combination of
the foregoing permissible forms of payment; and (b) where shares of Stock
issued under an Award are part of an original issue of shares, the Award
shall require an exercise price equal to at least the par value of such
shares.
(4) Reload Awards. The Administrator may provide that upon
the exercise of an Award, either by payment of cash or (if permitted under
Section 6.b.(3) above) through the tender of previously owned shares of
Stock, the Participant or other person exercising the Award will
automatically receive a new Award of like kind covering a number of shares
of Stock equal to the number of shares of Stock for which the first Award
was exercised.
(5) ISOs. No ISO may be granted under the Plan after November
16, 2008, but ISOs previously granted may extend beyond that date.
c. AWARDS NOT REQUIRING EXERCISE
Awards of Restricted Stock and Unrestricted Stock may be made in
return for either (i) services determined by the Administrator to have a
value not less than the par value of the Awarded shares of Stock, or
(ii) cash or other property having a value not less than the par value of
the Awarded shares of Stock plus such additional amounts (if any) as the
Administrator may determine payable in such combination and type of cash,
other property (of any kind) or services as the Administrator may determine.
7. EFFECT OF CERTAIN TRANSACTIONS
a. MERGERS, ETC.
In the event of a Covered Transaction, all outstanding Awards shall
vest and if relevant become exercisable and all deferrals, other than
deferrals of amounts that are neither measured by reference to nor payable
in shares of Stock, shall be accelerated, immediately prior to the Covered
Transaction and upon consummation of such Covered Transaction all Awards
then outstanding and requiring exercise shall be forfeited unless assumed by
an acquiring or surviving entity or its affiliate as provided in the
following sentence. In connection with any Covered Transaction in which
there is an acquiring or surviving entity, the Administrator may provide for
substitute or replacement Awards from, or the assumption of Awards by, the
acquiring or surviving entity or its affiliates, any such substitution,
replacement or assumption to be on such terms as the Administrator
determines.
b. CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK
(1) Basic Adjustment Provisions. In the event of a stock
dividend, stock split or combination of shares, recapitalization or other
change in the Company's capital structure, the Administrator will make
appropriate adjustments to the maximum number of shares that may be
delivered under the Plan under Section 4.a. and to the maximum share limits
described in Section 4.b., and will also make appropriate adjustments to the
number and kind of shares of stock or securities subject to Awards then
outstanding or subsequently granted, any exercise prices relating to Awards
and any other provision of Awards affected by such change.
(2) Certain Other Adjustments. The Administrator may also make
adjustments of the type described in paragraph (1) above to take into
account distributions to common stockholders other than those provided for
in Section 7.a. and 7.b.(1), or any other event, if the Administrator
determines that adjustments are appropriate to avoid distortion in the
operation of the Plan and to preserve the value of Awards made hereunder;
provided, that no such adjustment shall be made to the maximum share limits
described in Section 4.c. or 4.d., or otherwise to an Award intended to be
eligible for the performance-based exception under Section 162(m), except to
the extent consistent with that exception, nor shall any change be made to
ISOs except to the extent consistent with their continued qualification
under Section 422 of the Code.
(3) Continuing Application of Plan Terms. References in the
Plan to shares of Stock shall be construed to include any stock or
securities resulting from an adjustment pursuant to Section 7.b.(1) or
7.b.(2) above.
8. LEGAL CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock
pursuant to the Plan or to remove any restriction from shares of Stock
previously delivered under the Plan until the Company's counsel has
approved all legal matters in connection with the issuance and delivery of
such shares; if the outstanding Stock is at the time of delivery listed on
any stock exchange or national market system, the shares to be delivered
have been listed or authorized to be listed on such exchange or system upon
official notice of issuance; and all conditions of the Award have been
satisfied or waived. If the sale of Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition
to exercise of the Award, such representations or agreements as counsel for
the Company may consider appropriate to avoid violation of such Act. The
Company may require that certificates evidencing Stock issued under the Plan
bear an appropriate legend reflecting any restriction on transfer applicable
to such Stock.
9. AMENDMENT AND TERMINATION
Subject to the last sentence of Section 3, the Administrator may at
any time or times amend the Plan or any outstanding Award for any purpose
which may at the time be permitted by law, or may at any time terminate the
Plan as to any further grants of Awards; provided, that (except to the
extent expressly required or permitted by the Plan) no such amendment will,
without the approval of the stockholders of the Company, effectuate a change
for which stockholder approval is required in order for the Plan to continue
to qualify under Section 422 of the Code and for Awards to be eligible for
the performance-based exception under Section 162(m).
10. NON-LIMITATION OF THE COMPANY'S RIGHTS
The existence of the Plan or the grant of any Award shall not in any
way affect the Company's right to Award a person bonuses or other
compensation in addition to Awards under the Plan.
11. GOVERNING LAW
The Plan shall be construed in accordance with the laws of the State
of Massachusetts.
EXHIBIT A
Definition of Terms
The following terms, when used in the Plan, shall have the meanings and be
subject to the provisions set forth below:
"Administrator": The Board or, if one or more has been appointed, the
Committee.
"Affiliate": Any corporation or other entity owning, directly or
indirectly, 50% or more of the outstanding Stock of the Company, or in which
the Company or any such corporation or other entity owns, directly or
indirectly, 50% of the outstanding capital stock (determined by aggregate
voting rights) or other voting interests.
"Award": Any or a combination of the following:
(i) Stock Options.
(ii) SARs.
(iii) Restricted Stock.
(iv) Unrestricted Stock.
(v) Deferred Stock.
(vi) Securities (other than Stock Options) that are convertible
into or exchangeable for Stock on such terms and
conditions as the Administrator determines.
(vii) Cash Performance Awards.
(viii) Performance Awards.
(ix) Grants of cash, or loans, made in connection with other
Awards in order to help defray in whole or in part the
economic cost (including tax cost) of the Award to the
Participant.
"Board": The Board of Directors of the Company.
"Cash Performance Award": A Performance Award payable in cash. The right
of the Company under Section 6.a.(3) to extinguish an Award in exchange for
cash or the exercise by the Company of such right shall not make an Award
otherwise not payable in cash a Cash Performance Award.
"Code": The U.S. Internal Revenue Code of 1986 as from time to time amended
and in effect, or any successor statute as from time to time in effect.
"Committee": One or more committees of the Board which in the case of
Awards granted to officers of the Company shall be comprised solely of two
or more outside directors within the meaning of Section 162(m). Any
Committee may delegate ministerial tasks to such persons (including
Employees) as it deems appropriate.
"Company": CTC Communications Corp.
"Covered Transaction": Any of (i) a consolidation or merger in which the
Company is not the surviving corporation or which results in the acquisition
of all or substantially all of the Company's then outstanding common stock
by a single person or entity or by a group of persons and/or entities acting
in concert, (ii) a sale or transfer of all or substantially all the
Company's assets, or (iii) a dissolution or liquidation of the Company.
"Deferred Stock": A promise to deliver Stock or other securities in the
future on specified terms.
"Employee": Any person who is employed by the Company or an Affiliate.
"ISO": A Stock Option intended to be an "incentive stock option" within the
meaning of Section 422 of the Code. No Stock Option Awarded under the Plan
will be an ISO unless the Administrator expressly provides for ISO
treatment.
"Participant": An Employee, director or other person providing services to
the Company or its Affiliates who is granted an Award under the Plan.
"Performance Award": An Award subject to Performance Criteria. The
Committee in its discretion may grant Performance Awards that are intended
to qualify for the performance-based compensation exception under Section
162(m) and Performance Awards that are not intended so to qualify.
"Performance Criteria": Specified criteria the satisfaction of which is a
condition for the exercisability, vesting or full enjoyment of an Award.
For purposes of Performance Awards that are intended to qualify for the
performance-based compensation exception under Section 162(m), a Performance
Criterion shall mean an objectively determinable measure of performance
relating to any of the following (determined either on a consolidated basis
or, as the context permits, on a divisional, subsidiary, line of business,
project or geographical basis or in combinations thereof): (i) sales;
revenues; assets; expenses; earnings before or after deduction for all or
any portion of interest, taxes, depreciation, amortization or other items,
whether or not on a continuing operations or an aggregate or per share
basis; return on equity, investment, capital or assets; one or more
operating ratios; borrowing levels, leverage ratios or credit rating; market
share; capital expenditures; cash flow; stock price; stockholder return;
network deployment; sales of particular products or services; customer
acquisition, expansion and retention; or any combination of the foregoing;
or (ii) acquisitions and divestitures (in whole or in part); joint ventures
and strategic alliances; spin-offs, split-ups and the like; reorganizations;
recapitalizations, restructurings, financings (issuance of debt or equity)
and refinancings; transactions that would constitute a change of control; or
any combination of the foregoing. A Performance Criterion measure and
targets with respect thereto determined by the Administrator need not be
based upon an increase, a positive or improved result or avoidance of loss.
"Plan": The CTC Communications Corp. 1998 Incentive Plan as from time to
time amended and in effect.
"Restricted Stock": An Award of Stock subject to restrictions requiring
that such Stock be redelivered to the Company if specified conditions are
not satisfied.
"Section 162(m)": Section 162(m) of the Code.
"SARs": Rights entitling the holder upon exercise to receive cash or Stock,
as the Administrator determines, equal to a function (determined by the
Administrator using such factors as it deems appropriate) of the amount by
which the Stock has appreciated in value since the date of the Award.
"Stock": Common Stock of the Company, par value $ .01 per share.
"Stock Options": Options entitling the recipient to acquire shares of Stock
upon payment of the exercise price.
"Unrestricted Stock": An Award of Stock not subject to any restrictions
under the Plan.
<PAGE>
PROXY
CTC COMMUNICATIONS CORP.
1998 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 1998 Annual Meeting of Stockholders
of CTC Communications Corp. to be held on Monday, November 16, 1998 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, 1998, Proxy Statement
and Notice of Annual Meeting dated October 23, 1998.
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 IN FAVOR OF BOTH NOMINEES TO SERVE AS CLASS I DIRECTORS AND IN FAVOR
OF PROPOSALS 2, 3 AND 4.
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>
[X] PLEASE MARK VOTES CTC COMMUNICATIONS CORP.
AS IN THIS EXAMPLE
(1) In favor of the following nominees as Class I Directors to
serve until the Annual Meeting of Stockholders in 2001 and until each
successor is duly elected and qualified;
FOR [ ] WITHHOLD [ ] FOR BOTH EXCEPT [ ]
HENRY HERMANN RALPH C. SILLARI
Instruction: To withhold authority to vote for either or both
nominees, check the "For Both Except" box and strike a line through the
nominee's name in the list above. Unless authority to vote for both
foregoing nominees is withheld, this proxy will be deemed to confer
authority to vote for each nominee whose name is not struck.
(2) Proposal to approve the 1998 Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) Proposal to 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. [ ]
Please be sure to sign and date this Proxy. Date________________
Stockholder sign here_____________________________
Co-owner sign here________________________________
