CTC COMMUNICATIONS CORP. EXHIBIT
4.1
1996 STOCK OPTION PLAN
1. Purpose. The CTC Communications Corp. 1996 Stock
Option Plan (the "Plan") is intended to recognize the
contributions made to the Company or an Affiliate by employees of
the Company or any Affiliate (as hereinafter defined), members of
the Board of Directors of the Company or an Affiliate, and
certain consultants and advisors to the Company or any Affiliate,
to provide such persons with additional incentive to devote
themselves to the future success of the Company or an Affiliate,
and to improve the ability of the Company or an Affiliate to
attract, retain, and motivate individuals upon whom the Company's
sustained growth and financial success depend, by providing such
persons with an opportunity to acquire or increase their
proprietary interest in the Company through receipt of rights to
acquire the Company's Common Stock, $.01 par value (the "Common
Stock").
2 Definitions. Unless the context clearly indicates
otherwise, the following terms shall have the following meanings:
(a) "Act" means the Securities Act of 1933, as
amended.
(b) "Affiliate" means a corporation which is a parent
corporation or a subsidiary corporation with respect to the
Company within the meaning of Section 424(e) or (f) of the Code.
(c) "Board of Directors" means the Board of Directors
of the Company.
(d) "Change of Control" shall have the meaning as set
forth in Section 9 of the Plan.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means the Board of Directors or the
committee designated by the Board of Directors in accordance with
the provisions set forth in Section 3 of the Plan.
(g) "Company" means CTC Communications Corp., a
Massachusetts corporation.
(h) "Disability" shall have the meaning set forth in
Section 22(e)(3) of the Code.
(i) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(j) "Fair Market Value" shall have the meaning set
forth in Subsection 8(b) of the Plan.
(k) "ISO" means an Option granted under the Plan which
is intended to qualify as an "incentive stock option" within the
meaning of Section 422(b) of the Code.
(l) "Non-Employee Director" shall have the meaning set
forth in Rule 16b-3.
(m) "Non-qualified Stock Option" means an Option
granted under the Plan which is not intended to qualify, or
otherwise does not qualify, as an "incentive stock option" within
the meaning of Section 422(b) of the Code.
(n) "Option" means either an ISO or a Non-qualified
Stock Option granted under the Plan.
(o) "Optionee" means a person to whom an Option has
been granted under the Plan, which Option has not been exercised
and has not expired or terminated.
(p) "Option Document" means the document described in
Section 8 of the Plan which sets forth the terms and conditions
of each grant of Options.
(q) "Option Price" means the price at which Shares may
be purchased upon exercise of an Option, as calculated pursuant
to Subsection 8(b) of the Plan.
(r) "Rule 16b-3" means Rule 16b-3 promulgated under
the Exchange Act.
(s) "Shares" means the shares of Common Stock of the
Company which are the subject of Options.
3. Administration of the Plan.
(a) Committee. The Plan shall be administered by the
Board of Directors or by a committee appointed by the Board
consisting of at least two Directors; provided, however, that any
options granted to directors and officers (within the meaning of
Section 16(a) under the Exchange Act) must be approved prior to
such grant by the Board of Directors or a committee consisting
solely of two "Non-Employee" directors.
(b) Meetings. The Committee shall hold meetings at
such times and places as it may determine. Acts approved at a
meeting by a majority of the members of the Committee or acts
approved in writing by the unanimous consent of the members of
the Committee shall be the valid acts of the Committee.
(c) Grants. The Committee shall from time to time, in
its discretion, direct the Company to grant Options pursuant to
the terms of the Plan. The Committee shall have plenary
authority to (i) determine the Optionees to whom, the times at
which, and the price at which Options shall be granted, (ii)
determine the type of Option to be granted and the number of
Shares subject thereto, and (iii) approve the form and terms and
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conditions of the Option Documents; all subject, however, to the
express provisions of the Plan. In making such determinations,
the Committee may take into account the nature of the Optionee's
services and responsibilities, the Optionee's present and
potential contribution to the Company's success and such other
factors as it may deem relevant. The interpretation and
construction by the Committee of any provisions of the Plan or of
any Option granted under it shall be final, binding and
conclusive.
(d) Exculpation. No member of the Board of Directors
shall be personally liable for monetary damages for any action
taken or any failure to take any action in connection with the
administration of the Plan or the granting of Options under the
Plan, provided that this Subsection 3(c) shall not apply to (i)
any breach of such member's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law,
and (iv) any transaction from which the member derived an
improper personal benefit.
(e) Indemnification. Service on the Committee shall
constitute service as a member of the Board of Directors of the
Company. Each member of the Committee shall be entitled without
further act on his part to indemnity from the Company to the
fullest extent provided by applicable law and the Company's
Certificate of Incorporation and/or By-laws in connection with or
arising out of any action, suit or proceeding with respect to the
administration of the Plan or the granting of Options thereunder
in which he or she may be involved by reason of his or her being
or having been a member of the Committee, whether or not he or
she continues to be a member of the Committee at the time of the
action, suit or proceeding.
(f) Limitation on Grants of Options to Consultants and
Advisors. With respect to the grant of Options to consultants
and advisors, bona fide services shall be rendered by consultants
and advisors.
4. Grants under the Plan. Grants under the Plan may be in
the form of a Non-qualified Stock Option, an ISO or a combination
thereof, at the discretion of the Committee.
5 Eligibility. All employees and members of the Board of
Directors of, and (subject to Section 3(f)) consultants and
advisors to, the Company or an Affiliate shall be eligible to
receive Options hereunder. The Committee, in its sole
discretion, shall determine whether an individual qualifies as an
employee, consultant or advisor.
6. Shares Subject to Plan. The aggregate maximum number
of Shares for which Options may be granted pursuant to the Plan
is seven hundred fifty thousand (750,000), subject to adjustment
as provided in Section 10 of the Plan. The Shares shall be
issued from authorized and unissued Common Stock or Common Stock
held in or hereafter acquired for the treasury of the Company.
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If an Option terminates or expires without having been fully
exercised for any reason, the Shares for which the Option was not
exercised may again be the subject of one or more Options granted
pursuant to the Plan.
7. Term of Plan.
(a) The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its
approval by the stockholders of the Company as set forth in
Section 7(b) below. The Plan shall continue in effect for a term
of ten (10) years, unless sooner terminated under Section 11 of
the Plan.
(b) Stockholder approval shall be obtained within 12
months of adoption of the Plan by the Board of Directors.
Stockholder approval may be obtained by a majority of the votes
case at a duly held stockholders' meeting at which a quorum
representing a majority of all outstanding voting stock is,
either in person or by proxy, present and voting.
8. Option Documents and Terms. Each Option granted under
the Plan shall be a Non-qualified Stock Option unless the Option
shall be specifically designated at the time of grant to be an
ISO for federal income tax purposes. If any Option designated as
an ISO is determined for any reason not to qualify as an
incentive stock option within the meaning of Section 422 of the
Code, such Option shall be treated as a Non-qualified Stock
Option for all purposes under the provisions of the Plan.
Options granted pursuant to the Plan shall be evidenced by the
Option Documents in such form as the Committee shall from time to
time approve, which Option Documents shall comply with and be
subject to the following terms and conditions and such other
terms and conditions as the Committee shall from time to time
require which are not inconsistent with the terms of the Plan.
(a) Number of Option Shares. Each Option Document
shall state the number of Shares to which it pertains. An
Optionee may receive more than one Option, which may include
Options which are intended to be ISO's and Options which are not
intended to be ISO's, but only on the terms and subject to the
conditions and restrictions of the Plan.
(b) Option Price. Each Option Document shall state
the Option Price which, for a Non-qualified Stock Option, may be
less than, equal to, or greater than the Fair Market Value of the
Shares on the date the Option is granted and, for an ISO, shall
be at least 100% of the Fair Market Value of the Shares on the
date the Option is granted as determined by the Committee in
accordance with this Subsection 8(b); provided, however, that if
an ISO is granted to an Optionee who then owns, directly or by
attribution under Section 424(d) of the Code, shares possessing
more than ten percent of the total combined voting power of all
classes of stock of the Company or an Affiliate, then the Option
Price shall be at least 110% of the Fair Market Value of the
Shares on the date the Option is granted. If the Common Stock is
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traded in a public market, then the Fair Market Value per share
shall be, if the Common Stock is listed on a national securities
exchange or included in the Nasdaq National Market System, the
last reported sale price thereof on the relevant date, or, if the
Common Stock is not so listed or included, the mean between the
last reported "bid" and "asked" prices thereof on the relevant
date, as reported on Nasdaq or, if not so reported, as reported
by the National Daily Quotation Bureau, Inc. or as reported in a
customary financial reporting service, as applicable and as the
Committee determines.
(c) Exercise. No Option shall be deemed to have been
exercised prior to the receipt by the Company of written notice
of such exercise and of payment in full of the Option Price for
the Shares to be purchased. Each such notice shall specify the
number of Shares to be purchased and shall (unless the Shares are
covered by a then current and effective registration statement or
qualified Offering Statement under Regulation A under the Act),
contain the Optionee's acknowledgment in form and substance
satisfactory to the Company that (a) such Shares are being
purchased for investment and not for distribution or resale
(other than a distribution or resale which, in the opinion of
counsel satisfactory to the Company, may be made without
violating the registration provisions of the Act), (b) the
Optionee has been advised and understands that (i) the Shares
have not been registered under the Act and are restricted
securities within the meaning of Rule 144 under the Act and are
subject to restrictions on transfer and (ii) the Company is under
no obligation to register the Shares under the Act or to take any
action which would make available to the Optionee any exemption
from such registration, (c) such Shares may not be transferred
without compliance with all applicable federal and state
securities laws, and (d) an appropriate legend referring to the
foregoing restrictions on transfer and any other restrictions
imposed under the Option Documents may be endorsed on the
certificates. Notwithstanding the foregoing, if the Company
determines that issuance of Shares should be delayed pending (A)
registration under federal or state securities laws, (B) the
receipt of an opinion of counsel satisfactory to the Company that
an appropriate exemption from such registration is available, (C)
the listing or inclusion of the Shares on any securities exchange
or an automated quotation system or (D) the consent or approval
of any governmental regulatory body whose consent or approval is
necessary in connection with the issuance of such Shares, the
Company may defer exercise of any Option granted hereunder until
any of the events described in this sentence has occurred.
(d) Medium of Payment. An Optionee shall pay for
Shares (i) in cash, (ii) by certified or cashier's check payable
to the order of the Company, (iii) by payment through a broker in
accordance with procedures permitted by Regulation T of the
Federal Reserve Board or (iv) by such other mode of payment as
the Committee may approve. Furthermore, the Committee may
provide in an Option Document that payment may be made in whole
or in part in shares of the Company's Common Stock. If payment
is made in whole or in part in shares of the Company's Common
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Stock, then the Optionee shall deliver to the Company
certificates registered in the name of such Optionee representing
the shares owned by such Optionee, free of all liens, claims and
encumbrances of every kind and having an aggregate Fair Market
Value on the date of delivery that is at least as great as the
Option Price of the Shares (or relevant portion thereof) with
respect to which such Option is to be exercised by the payment in
shares of Common Stock, endorsed in blank or accompanied by stock
powers duly endorsed in blank by the Optionee. In the event that
certificates for shares of the Company's Common Stock delivered
to the Company represent a number of shares in excess of the
number of shares required to make payment for the Option Price of
the Shares (or relevant portion thereof) with respect to which
such Option is to be exercised by payment in shares of Common
Stock, the stock certificate issued to the Optionee shall
represent (i) the Shares in respect of which payment is made, and
(ii) such excess number of shares. Notwithstanding the
foregoing, the Committee may impose from time to time such
limitations and prohibitions on the use of shares of the Common
Stock to exercise an Option as it deems appropriate.
(e) Termination of Options.
(i) No option shall be exercisable after the
first to occur of the following:
(A) Expiration of the Option term specified
in the Option Document, which shall occur on or before (1) ten
years from the date of grant, or (2) five years from the date of
grant of an ISO if the Optionee on the date of grant owns,
directly or by attribution under Section 424(d) of the Code,
shares possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or
of an Affiliate;
(B) The date the Optionee's employment or
service with the Company or its Affiliates terminates for any
reason other than disability or death or as otherwise specified
in Subsection 8(e)(i)(D) or 8(e)(i)(E) below;
(C) Expiration of one year from the date
such employment or service with the Company or its Affiliates
terminates due to the Optionee's Disability or death;
(D) A finding by the Committee, after full
consideration of the facts presented on behalf of both the
Company and the Optionee, that the Optionee has breached his
employment or service contract with the Company or an Affiliate,
or has been engaged in disloyalty to the Company or an Affiliate,
including, without limitation, fraud, embezzlement, theft,
commission of a felony or proven dishonesty in the course of his
employment or service, or has disclosed trade secrets or
confidential information of the Company or an Affiliate. In such
event, in addition to immediate termination of the Option, the
Optionee shall automatically forfeit all Shares for which the
Company has not yet delivered the share certificates upon refund
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by the Company of the Option Price. Notwithstanding anything
herein to the contrary, the Company may withhold delivery of
share certificates pending the resolution of any inquiry that
could lead to a finding resulting in a forfeiture.
(E) The date, if any, set by the Board of
Directors as an accelerated expiration date in the event of the
liquidation or dissolution of the Company.
(ii) Notwithstanding the foregoing, the Committee
may extend the period during which all or any portion of an
Option may be exercised to a date no later than the Option term
specified in the Option Document pursuant to Subsection
8(e)(i)(A), provided that any change pursuant to this Subsection
8(e)(ii) which would cause an ISO to become a Non-qualified Stock
Option may be made only with the consent of the Optionee.
(f) Transfers. No Option granted under the Plan may
be transferred, except by will or by the laws of descent and
distribution. During the lifetime of the person to whom an
Option is granted, such Option may be exercised only by him.
Notwithstanding the foregoing, a Non-qualified Stock Option may
be transferred pursuant to the terms of a "qualified domestic
relations order," within the meaning of Sections 401(a)(13) and
414(p) of the Code or within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, as amended.
(g) Limitation on ISO Grants. To the extent that the
aggregate fair market value of the shares of Common Stock
(determined at the time the ISO is granted) with respect to which
incentive stock options under all incentive stock option plans of
the Company or its Affiliates are exercisable for the first time
by the Optionee during any calendar year exceed $100,000, such
options shall be treated as options which are not ISOs.
(h) Other Provisions. Subject to the provisions of
the Plan, the Option Documents shall contain such other
provisions including, without limitation, provisions authorizing
the Committee to accelerate the exercisability of all or any
portion of an Option granted pursuant to the Plan, additional
restrictions upon the exercise of the Option or additional
limitations upon the term of the Option, as the Committee shall
deem advisable.
(i) Amendment. Subject to the provisions of the Plan,
the Committee shall have the right to amend Option Documents
issued to an Optionee, subject to the Optionee's consent if such
amendment is not favorable to the Optionee, except that the
consent of the Optionee shall not be required for any amendment
made pursuant to Subsection 8(e)(i)(E) or Section 9 of the Plan,
as applicable.
9. Change of Control. In the event of a Change of
Control, all Options then outstanding under the Plan shall become
immediately exercisable in full. Any amendment to this Section 9
which diminishes the rights of Optionees shall not be effective
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with respect to Options outstanding at the time of adoption of
such amendment, whether or not such outstanding Options are then
exercisable.
A "Change of Control" shall be deemed to have occurred upon
the earliest to occur of the following events: (i) the date the
stockholders of the Company (or the Board of Directors, if
stockholder action is not required) approve a plan or other
arrangement pursuant to which the Company will be dissolved or
liquidated, or (ii) the date the stockholders of the Company (or
the Board of Directors, if stockholder action is not required)
approve a definitive agreement to sell or otherwise dispose of
substantially all of the assets of the Company, or (iii) the date
the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) and the stockholders of the
other constituent corporation (or its board of directors if
stockholder action is not required) have approved a definitive
agreement to merge or consolidate the Company with or into such
other corporation, other than, in either case, a merger or
consolidation of the Company in which holders of shares of the
Company's Common Stock immediately prior to the merger or
consolidation will have at least a majority of the voting power
of the surviving corporation's voting securities immediately
after the merger or consolidation, which voting securities are to
be held in the same proportion as such holders' ownership of
Common Stock of the Company immediately before the merger or
consolidation, or (iv) the date any entity, person or group,
within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act (other than (A) the Company or any of its
subsidiaries or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its
subsidiaries, or (B) any other person who, on the date the Plan
is effective, shall have been the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than thirty percent (30%) of outstanding shares of the Company's
Common Stock), shall have become the beneficial owner of, or
shall have obtained voting control over, more than thirty percent
(30%) of the outstanding shares of the Company's Common Stock, or
(v) the first day after the date this Plan is effective when
directors are elected such that a majority of the Board of
Directors shall have been members of the Board of Directors for
less than two (2) years, unless the nomination for election of
each new director who was not a director at the beginning of such
two (2) year period was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the
beginning of such period.
10. Adjustments on Changes in Capitalization. The
aggregate number of Shares and class of shares as to which
Options may be granted hereunder, the number and class or classes
of shares covered by each outstanding Option and the Option Price
thereof shall be appropriately adjusted in the event of a stock
dividend, stock split, recapitalization or other change in the
number or class of issued and outstanding equity securities of
the Company resulting from a subdivision or consolidation of the
Common Stock and/or, if appropriate, other outstanding equity
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securities or a recapitalization or other capital adjustment (not
including the issuance of Common Stock on the conversion of other
securities of the Company which are convertible into Common
Stock) affecting the Common Stock which is effected without
receipt of consideration by the Company. The Committee shall
have authority to determine the adjustments to be made under this
Section, and any such determination by the Committee shall be
final, binding and conclusive.
11. Amendment and Termination of the Plan. The Board of
Directors of the Company may amend or terminate the Plan from
time to time in such manner as it may deem advisable without
further action by the Company's stockholders except to the extent
required by applicable law. No amendment to the Plan shall
adversely affect any outstanding Option, however, without the
consent of the Optionee.
12. No Commitment to Retain. The grant of an Option
pursuant to the Plan shall not be construed to imply or to
constitute evidence of any agreement, express or implied, on the
part of the Company or any date to retain the Optionee in the
employ of the Company or an date and/or as a member of the
Company's Board of Directors or in any other capacity.
13. Withholding of Taxes. Whenever the Company proposes or
is required to deliver or transfer Shares in connection with the
exercise of an Option, the Company shall have the right to
(a) require the recipient to remit or otherwise make available to
the Company an amount sufficient to satisfy any federal, state
and/or local withholding tax requirements prior to the delivery
or transfer of any certificate or certificates for such Shares or
(b) take whatever other action it deems necessary to protect its
interests with respect to tax liabilities. The Company's
obligation to make any delivery or transfer of Shares shall be
conditioned on the Optionee's compliance, to the Company's
satisfaction, with any withholding requirement.
14. Interpretation.
(a) It is the intent of the Company that transactions
under the Plan with respect to directors and officers (within the
meaning of Section 16(a) under the Exchange Act) satisfy the
conditions of Rule 16b-3. To the extent that any provision of
the Plan would result in a conflict with such conditions, such
provision shall be deemed null and void. This Section shall not
be applicable if no class of the Company's equity securities is
then registered pursuant to Section 12 of the Exchange Act.
(b) It is the intent that all provisions in the Plan
pertaining to ISOs satisfy the conditions of Section 422 of the
Code and the Regulations promulgated thereunder. To the extent
that any provision of the Plan would result in a conflict with
such conditions, such provision shall be deemed null and void.
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