SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
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/ / 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 Section240.14a-11(c) or
Section240.14a-12
CTC COMMUNICATIONS GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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CTC COMMUNICATIONS GROUP, INC.
220 BEAR HILL ROAD
WALTHAM, MASSACHUSETTS 02451
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NOTICE AND PROXY STATEMENT FOR
2002 ANNUAL MEETING OF SHAREHOLDERS
OF CTC COMMUNICATIONS GROUP, INC.
TO BE HELD ON
THURSDAY, MAY 23, 2002
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To our Shareholders:
You are invited to attend our 2002 Annual Meeting of Shareholders,
which will be held on Thursday, May 23, 2002, at 9:30 a.m., at our executive
offices located at 220 Bear Hill Rd., Waltham, Massachusetts. At the Annual
Meeting, holdings of our outstanding shares of common stock and preferred
stock will act on the following matters:
(1) Election of three Class II directors, each for a term of
three years;
(2) Proposal to approve an amendment to the Company's 2000 Flexible
Stock Plan
(3) Proposal to approve an amendment to the Company's 1999 Equity
Incentive Plan for Non-Employee Directors;
(4) Ratification of the appointment of the Company's
independent auditors for 2002; and
(5) any other matters that properly come before the meeting.
All holders of record of shares of CTC Communications Group, Inc.
Common Stock and Series B Redeemable Convertible Preferred Stock at the
close of business on April 2, 2002 are entitled to vote at the meeting and
any postponements or adjournments of the meeting.
Please vote promptly whether or not you plan to attend the meeting.
Please sign and date the enclosed proxy card and return it promptly in the
enclosed postage prepaid envelope or you may also vote your shares either
via telephone or the Internet. Please read the instructions printed on the
proxy card. The Company's transfer agent, which is tabulating the votes,
will count the last vote received from a stockholder, whether by telephone,
proxy, ballot or electronically through the Internet. Please note that all
votes cast via telephone or Internet must be cast prior to 5:00 p.m.,
Eastern Daylight Saving Time, on Tuesday, May 21, 2002.
By order of the Board of Directors,
[SIG]
Robert J. Fabbricatore,
Chairman and Chief Executive Officer
April 19, 2002
CTC COMMUNICATIONS GROUP, INC.
220 BEAR HILL ROAD
WALTHAM, MASSACHUSETTS 02451
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PROXY STATEMENT
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This proxy statement contains information related to the Annual
Meeting of shareholders of CTC Communications Group, Inc., or the "Company,"
to be held on Thursday, May 23, 2002, at 9:30 a.m., at the offices of the
Company located at 220 Bear Hill Rd., Waltham, Massachusetts 02451, and at
any postponements or adjournments of the meeting.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, shareholders will act on matters that are
properly presented at the meeting, including the election of three Class II
directors of the Company's Board of Directors, the amendments to the
Company's 2000 Flexible Stock Plan and 1999 Equity Incentive Plan for Non-
Employee Directors, and the ratification of the appointment of Ernst & Young
LLP as the Company's independent auditors for the fiscal year ending
December 31, 2002. In addition, the Company's management will report on the
performance of the Company for the year ended December 31, 2001 and respond
to questions from shareholders.
WHO MAY ATTEND AND VOTE AT THE MEETING?
Any holder of record of Common Stock or Series B Convertible Preferred Stock
at the close of business on April 2, 2002, the record date, is entitled to
attend and vote at the meeting. On the record date we had 27,169,760 shares
of Common Stock entitled to one vote per share and 200,000 shares of Series
B Preferred Stock outstanding entitled to 4,600,000 votes, for a total of
31,769,760 votes. Please note that if you hold your shares in "street name"
(that is, through a broker or other nominee), you will need to bring a copy
of a brokerage statement reflecting your stock ownership as of the record
date and check in at the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
Holders of a majority interest of all of the Common Stock and Series B
Convertible Preferred Stock issued, outstanding and entitled to vote on the
record date must be present at the meeting, either in person or by proxy, to
establish a quorum. Proxies that we receive that are marked "withhold" or
"abstain" will be considered present at the meeting for purposes of
establishing a quorum.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and
return it to the Company, it will be voted as you direct. If you attend the
meeting, you may deliver your completed proxy card in person or fill out and
return a ballot that will be supplied to you. You may also vote by
telephone by calling 1-877-PRX-VOTE or via the Internet at
http://www.eproxyvote.com/cptl. To vote either by telephone or via the
Internet, you will need the Control Number set forth on your proxy card in
order to cast your vote. Please refer to the instructions on your proxy
card. IF YOU VOTE BY TELEPHONE OR VIA THE INTERNET, PLEASE DO NOT RETURN
YOUR PROXY CARD.
CAN I CHANGE MY VOTE AFTER I HAVE VOTED?
Yes. Even after you have submitted your proxy either by mail,
telephone or via the Internet, you may change your vote at any time before
the proxy is exercised by delivering to the Secretary of the Company either
a notice of revocation or a duly executed proxy bearing a later date. You
may also change your vote by attending the meeting and using the ballot that
will be supplied to you there, although attendance at the meeting will not
by itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board's recommendation is
included with the description of each item in this proxy statement. In
summary, the Board recommends a vote:
- FOR the election of the nominated slate of Class II directors;
- FOR the amendments to the Company's 2000 Flexible Stock Plan
and 1999 Equity Incentive Plan for Non-Employee Directors.
- FOR the ratification of the appointment of Ernst & Young LLP as the
independent auditors for the fiscal year ending December 31, 2002.
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors or, if
no recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
- ELECTION OF DIRECTORS. The nominees who receive the most votes
represented in person or by proxy and entitled to vote at the meeting will
be elected no matter how many votes are cast. A properly executed proxy
marked "WITHHOLD" or "FOR ALL EXCEPT" with respect to the election of one or
more directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether
there is a quorum.
- OTHER ITEMS. All other proposals to be considered at the meeting will
require the affirmative vote of the holders of a majority of the shares
represented in person or by proxy and entitled to vote on the item at the
meeting. A properly executed proxy marked "ABSTAIN" with respect to any
matter will not be voted, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, an abstention will have
the effect of a negative vote.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if
you do not give your broker or nominee specific instructions, your shares
may not be voted on those matters and will not be counted in determining the
number of shares necessary for approval. Shares represented by such "broker
non-votes" will, however, be counted in determining whether there is a
quorum.
Proposal Number One:
Election of Directors
Our bylaws provide that our Board of Directors must consist of not less
than three nor more than twelve members. Our bylaws also provide that the
Board of Directors is classified into three classes, as nearly as equal in
number as possible, so that each director serves for three years and until
their successors are duly elected and qualified, and one class of directors
will be elected each year. We currently have eleven members on our Board of
Directors: four Class I Directors (Messrs. Hermann, Maroni, Sillari and
Redfield), three Class II Directors (Messrs. Murphy, Nunnelly and Santagati)
and four Class III Directors (Messrs. Fabbricatore, Sperling, Troupe and Ms.
Courage). The terms of the Class III and Class I Directors expire upon the
election and qualification of their successors at the Annual Meetings of
Stockholders to be held in 2003 and 2004, respectively.
Messrs. Murphy, Nunnelly and Santagati have been nominated to stand for
re-election as Class II Directors at this meeting to hold office until the
Annual Meeting of Stockholders in 2005 and until their respective successors
are elected and qualified. The persons named in the enclosed proxy intend to
vote all shares represented by a proxy which has been properly executed,
returned and not revoked for the election of each of J. Richard Murphy, Mark
E. Nunnelly and Richard J. Santagati as Class II Directors for a three-year
term unless you specify otherwise in the proxy. We expect that each nominee
will be able to serve, but if any of the nominees is unable to serve, all
proxies may be voted for a substitute nominee designated by the Board of
Directors. The experience and qualifications of these nominees are
summarized below:
J. Richard Murphy became a director of the Company in August 1995. Mr.
Murphy is a managing director of Atlantic Management Company Incorporated
(AMC), a Portsmouth, a New Hampshire valuation, investment banking and
financial advisory firm that has been serving New England's business, legal
and financial communities since 1968. Prior to joining AMC in January 2002,
Mr. Murphy was a managing director of Baldwin & Clarke Corporate Finance,
Inc., a Bedford, New Hampshire investment banking firm which he joined
August 1999. Mr. Murphy was the director of the Corporate Advisory Group of
Moody, Cavanaugh and Company, LLP, a North Andover, Massachusetts public
accounting firm, from April 1996 to August 1999.
Mark E. Nunnelly became director of the Company in June 2000 as a
designee of Bain Capital, Inc. He joined Bain Capital as a General Partner
in 1990 and has served as Managing Director since April 1993. Mr. Nunnelly
also serves on the Board of Directors of Domino's, DoubleClick, Modus Media
International, and Eschelon Telecom. Mr. Nunnelly received an M.B.A. from
Harvard Business School and a B.A. from Centre College.
Richard J. Santagati became a director of the Company in September 1991.
He has been the President of Merrimack College in North Andover,
Massachusetts since 1994. From March 1992 to February 1994, Mr. Santagati
was 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 software company.
Recommendation:
Our Board of Directors recommends that you vote "FOR" the election of
each nominee named above.
PROPOSAL 2
AMENDMENT TO THE COMPANY'S 2000 FLEXIBLE STOCK PLAN
INTRODUCTION
On March 21, 2002, our Board of Directors has adopted an amendment to
our 2000 Flexible Stock Plan ("Incentive Plan") to increase by 750,000 the
number of shares of Common Stock issuable under the Incentive Plan from
4,500,000 shares to 5,250,000 shares. 3,200,000 shares have been issued and
there are currently 1,300,000 shares available for issuance under the
Incentive Plan. The proposed amendment is subject to shareholder approval.
We believe that the Incentive Plan is serving its purpose in helping
to attract, retain and reward persons who can make significant contributions
to our success, and in strengthening the commonality of interest between
these persons and our shareholders. To continue to meet these objectives,
we believe that we need to have additional shares available for awards under
the Incentive Plan.
Set forth below is a description of the essential features of the
Plan.
SUMMARY OF THE PLAN:
Number of Shares.
The number of shares of Common Stock which may currently be issued in
connection with Benefits shall be 1,500,000 shares plus an annual increase,
effective on the first day of each fiscal year, equal to 5% of the number of
outstanding shares of Common Stock as of the first day of such fiscal year,
but in no event more than 4,500,000 shares in the aggregate. Such shares may
be authorized but unissued shares, shares held in the Company's treasury, or
both. If an option or SAR expires or is terminated, surrendered or canceled,
without having been fully exercised, if Performance Shares are forfeited, or
if any other grant results in shares of Common Stock not being issued, the
shares covered by such option or SAR, grant Performance Shares or other
grant, as the case may be, shall again be available for use under the Plan.
If there is any change in the Common Stock of the Company by reason of
any stock dividend, spin-off, split-up, spin-out, recapitalization, merger,
consolidation, reorganization, combination or exchange of shares, the number
of SARs and number and class of shares available for options and grants of
Performance Shares and Other Stock Based Awards and the number of shares
subject to any outstanding options, SARs, grants of Performance Shares which
are not yet vested, and Other Stock Based Awards, and the price thereof, as
applicable, will be appropriately adjusted.
Administration
The Plan is administered by a committee ("Committee"). The Committee
shall consist of the Board, unless the Board appoints a Committee of two or
more but less than all of the Board. If the Committee does not include the
entire Board, it shall serve at the pleasure of the Board, which may from
time to time appoint members in substitution for members previously
appointed and fill vacancies, however caused, in the Committee.
Subject to the express provisions of the Plan, the Committee has
complete authority to: (i) determine when and to whom Benefits are granted
and the type and amounts of Benefits; (ii) determine the terms, conditions
and provisions of, and restrictions relating to, each Benefit granted; (iii)
interpret and construe the Plan and any agreement ("Agreement") evidencing
and describing a Benefit; (iv) prescribe, amend and rescind rules and
regulations relating to the Plan; (v) determine the form and contents of all
Agreements; (vi) determine all questions relating to Benefits under the
Plan; and (vii) take any other action which it considers necessary or
appropriate for the administration of the Plan and to carry out the purposes
of the Plan. Except as required by Rule 16b-3 with respect to Benefits
granted to persons who are subject to Section 16 of the Exchange Act
(consisting of directors and executive officers), the Committee may delegate
its authority to any employee, employees or committee.
Amendment, Termination and Change in Control
The Board may amend the Plan at any time. However, the Board may not
amend the Plan without shareholder approval if such amendment (i) would
cause options which are intended to qualify as Incentive Stock Options to
fail to qualify as such, (ii) would cause the Plan to fail to meet the
requirements of Rule 16b-3, or (iii) would violate applicable law. The Plan
has no fixed termination date and shall continue in effect until terminated
by the Board.
The amendment or termination of the Plan will not adversely affect any
Benefit granted prior to such amendment or termination. However, any Benefit
may be modified or canceled by the Committee if and to the extent permitted
by the Plan or Agreement or with the consent of the participant to whom such
Benefit was granted.
In the event of a Change in Control, as defined below, the Committee
may provide such protection as it deems necessary to maintain a
participant's rights, including, without limitation: (i) providing for the
acceleration of any time periods relating to the exercise or realization of
any Benefit; (ii) providing for purchase of a Benefit upon the participant's
request for an amount in cash equal to the amount which could have been
attained upon the exercise or realization of the Benefit had it been
currently exercisable or payable; (iii) making such adjustment to the
outstanding Benefits as the Committee deems appropriate; and/or (iv) causing
the outstanding Benefits to be assumed, or new Benefits substituted
therefor, by the surviving corporation. "Change in Control" means: the
acquisition, without the approval of the Board, by any person or group,
other than the Company and certain related entities, of more than 20% of the
outstanding shares of Common Stock; the liquidation or dissolution of the
Company following a sale or other disposition of all or substantially all of
its assets; a merger or consolidation involving the Company in which the
shareholders of the Company prior to the effective date of the transaction
do not have more than 50% of the voting power of the surviving entity
immediately following the transaction; or a change in the majority of the
members of the Board during any two year period which is not approved by at
least two-thirds of the members of the Board who were members at the
beginning of the two year period.
Eligibility for Benefits
Benefits may be awarded to individuals selected by the Committee.
Benefits may be awarded only to employees, members of the Board, employees
and owners of entities which are not affiliates but which have a direct or
indirect ownership interest in an employer, individuals who, and employees
and owners of entities which, are customers or suppliers of an employer,
individuals who, and employees and owners of entities which, render services
to an employer, and individuals who, and employees and owners of entities
which, have ownership or business affiliations with any individual or entity
previously described.
Types of Benefits
Under the Plan, the Committee may grant a number of different types of
Benefits. A summary of the principal characteristics of various types of
Benefits which may be granted is set forth below.
Stock Options. Two types of stock options may be granted under the
Plan. Stock options intended to qualify for special tax treatment under
Section 422 of the Code are referred to as "Incentive Stock Options," and
options not intended to so qualify are referred to as "Non-Qualified Stock
Options." In the case of Non-Qualified Stock Options, the option price shall
be determined by the Committee but shall be no less than 85% of the fair
market value of the shares of Common Stock on the date the option is
granted, and, in the case of Incentive Stock Options, the price shall be
determined by the Committee but shall be no less than the fair market value
of the shares of Common Stock on the date the option is granted.
The other terms of options shall be determined by the Committee.
However, in the case of options intended to qualify as Incentive Stock
Options, such terms must meet all requirements of Section 422 of the Code.
Currently, such requirements are (i) the option must be granted within 10
years from the adoption of the Plan, (ii) the option may not have a term
longer than 10 years, (iii) the option must be not transferable other than
by will or the laws of descent and distribution and may be exercised only by
the optionee during his/her lifetime, (iv) the maximum aggregate fair market
value of Common Stock with respect to which such options are first
exercisable by an optionee in any calendar year may not exceed $100,000; and
(v) the option must be granted to an employee. In addition, if the optionee
owns more than 10% of the Company's Common Stock or more than 10% of the
total combined voting power of all classes of stock of any subsidiary, the
option price must be at least 110% of fair market value of the shares of
Common Stock on the date the option is granted, and the option may not have
a term longer than five years.
SARs. An SAR is the right to receive an amount equal to the
appreciation in value of one share of Common Stock from the time the SAR is
granted until the time the grantee elects to receive payment. Participants
who elect to receive payment of SARs shall receive payment in cash, in
Common Stock or in any combination of cash and common stock, as determined
by the Committee. When SARs are granted in tandem with an Incentive Stock
Option, the SARs must contain such terms and conditions as are necessary for
the related option to qualify as an Incentive Stock Option. In addition, if
SARs are granted in tandem with a stock option: the exercise of the option
shall cause a correlative reduction in the SARs; and the payment of SARs
shall cause a correlative reduction in the shares under the option.
Performance Shares. Performance Shares are the right to receive Common
Stock or cash equal to the fair market value of the Common Stock at a future
date in accordance with the terms of the grant. Generally, such right shall
be based upon the attainment of targeted profit and/or other performance
objectives.
Cash Awards. A Cash Award is a Benefit payable in cash. The maximum
cash award that an individual who is subject to Section 16 of the Exchange
Act may receive in any calendar year in the aggregate is the greater of
$100,000 or 100% of his/her compensation (excluding any Cash Award) for such
year.
Other Stock Based Awards. An Other Stock Based Award is an award that
is valued in whole or in part by reference to, or is otherwise based on,
Common Stock.
General Provisions Applicable to Benefits
Under the Plan, the following provisions are applicable to one or more
types of Benefits.
Agreement and Terms of Benefits. The grant of any Benefit may be
evidenced by an Agreement which describes the specific Benefit granted and
the terms, conditions and provisions of, and restrictions relating to, such
Benefit. Any Agreement shall contain such provisions as the Committee shall
determine to be necessary, desirable and appropriate.
Transferability. Unless otherwise specified in an agreement or
permitted by the Committee, each Benefit shall be non-transferable other
than by will or the laws of descent and distribution and shall be
exercisable during a participant's lifetime only by him/her.
Tandem Awards. Awards may be granted by the Committee in tandem.
However, no Benefit may be granted in tandem with an Incentive Stock Option
except SARs.
Payment. Upon the exercise of an option or in the case of any other
Benefit that requires a payment to the Company, payment may be made either
(i) in cash, including a so-called "cashless exercise," or (ii) with the
consent of the Committee, (a) by the tender of shares of Common Stock having
an aggregate fair market value equal to the amount due the Company and which
have been owned at least six months, (b) in other property, (c) by the
surrender of all or part of a Benefit (including the Benefit being exercised
or acquired), or (d) by any combination of the foregoing.
Dividend Equivalents. Grants of Benefits in Common Stock or Common
Stock equivalents may include dividend equivalent payments or dividend
credit rights. Deferral. The right to receive a Benefit may, upon the
request of the request of the recipient, be deferred for such period and
upon such conditions as the Committee may determine.
Withholding. At the time any Benefit is distributed under the Plan,
the Company may withhold, in cash or in shares of Common Stock, from such
distribution any amount necessary to satisfy minimum income withholding
requirements applicable to such distribution.
Limitation on Benefits. The number of shares covered by options where
the purchase price is no less than fair market value on the date of grant
plus SARs which may be granted to any one individual in any calendar year
shall not exceed 500,000.
Restrictions on Shares
The Committee may require each person purchasing Common Stock pursuant
to an option or receiving Common Stock pursuant to any other form of Benefit
under the Plan to represent to and agree with the Company in writing that
such person is acquiring the shares for investment and without a view to
distribution or resale. In addition, shares issued under the Plan may be
subject to restrictive agreements between the Company or a subsidiary and
the participant. The Committee may require that a legend reflecting any
restriction described above be placed on any certificate for shares.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following is a summary of the U.S. federal income tax consequences
of the Plan, based on current income tax laws, regulations and rulings.
Incentive Stock Options
Subject to the effect of the Alternative Minimum Tax, discussed below,
an optionee does not recognize income on the grant of an Incentive Stock
Option. If an optionee exercises an Incentive Stock Option in accordance
with the terms of the option and does not dispose of the shares acquired
within two years from the date of the grant of the option nor within one
year from the date of exercise, the optionee will not realize any income by
reason of the exercise, and the Company will be allowed no deduction by
reason of the grant or exercise. The optionee's basis in the shares acquired
upon exercise will be the amount paid upon exercise. (See the discussion
below for the tax consequences of the exercise of an option with stock
already owned by the optionee.) Provided the optionee holds the shares as a
capital asset at the time of sale or other disposition of the shares,
his/her gain or loss, if any, recognized on the sale or other disposition
will be capital gain or loss. The amount of his/her gain or loss will be the
difference between the amount realized on the disposition of the shares and
his/her basis in the shares.
If an optionee disposes of the shares within two years from the date
of grant of the option or within one year from the date of exercise ("Early
Disposition"), the optionee will realize ordinary income at the time of such
Early Disposition which will equal the excess, if any, of the lesser of (i)
the amount realized on the Early Disposition, or (ii) the fair market value
of the shares on the date of exercise, over the optionee's basis in the
shares. The Company will be entitled to a deduction in an amount equal to
such income. The excess, if any, of the amount realized on the Early
Disposition of such shares over the fair market value of the shares on the
date of exercise will be long-term or short-term capital gain, depending
upon the holding period of the shares, provided the optionee holds the
shares as a capital asset at the time of Early Disposition. If an optionee
disposes of such shares for less than his/her basis in the shares, the
difference between the amount realized and his/her basis will be a long-term
or short-term capital loss, depending upon the holding period of the shares,
provided the optionee holds the shares as a capital asset at the time of
disposition.
The excess of the fair market value of the shares at the time the
Incentive Stock Option is exercised over the exercise price for the shares
is an item of tax preference ("Stock Option Preference").
Non-Qualified Stock Options
Non-Qualified Stock Options do not qualify for the special tax
treatment accorded to Incentive Stock Options under the Code. Although an
optionee does not recognize income at the time of the grant of the option,
he recognizes ordinary income upon the exercise of a Non-Qualified Option in
an amount equal to the difference between the fair market value of the stock
on the date of exercise of the option and the amount of cash paid for the
stock.
As a result of the optionee's exercise of a Non-Qualified Stock
Option, the Company will be entitled to deduct as compensation an amount
equal to the amount included in the optionee's gross income. The Company's
deduction will be taken in the Company's taxable year in which the option is
exercised.
The excess of the fair market value of the stock on the date of
exercise of a Non-Qualified Stock Option over the exercise price is not a
Stock Option Preference.
SARs
Recipients of SARs do not recognize income upon the grant of such
rights. When a participant elects to receive payment of an SAR, he
recognizes ordinary income in an amount equal to the cash and fair market
value of shares of Common Stock received, and the Company is entitled to a
deduction equal to such amount.
Performance Shares
Grantees of Performance Shares do not recognize income at the time of
the grant of such stock. However, when Performance Shares are paid, grantees
recognize ordinary income in an amount equal to the fair market value of the
stock on the date all restrictions are satisfied. The Company will be
entitled to deduct as compensation the amount includible in the grantee's
income in its taxable year in which the grantee recognizes the income.
Cash Awards
Cash Awards are taxable as ordinary income when received or
constructively received by a participant. The Company is entitled to deduct
the amount of a Cash Award when the award is taxable to the recipient.
Taxation of Preference Items
Section 55 of the Code imposes an Alternative Minimum Tax equal to the
excess, if any, of (i) 26% of the optionee's "alternative minimum taxable
income" up to $175,000 plus 28% of such income over $175,000 over (ii)
his/her "regular" U.S. federal income tax. Alternative minimum taxable
income is determined by adding the optionee's Stock Option Preference and
any other items of tax preference to the optionee's adjusted gross income
and then subtracting certain allowable deductions and an exemption amount.
The exemption amount is $33,750 for single taxpayers, $45,000 for married
taxpayers filing jointly and $22,500 for married taxpayers filing
separately. However, these exemption amounts are phased out beginning at
certain levels of alternative minimum taxable income.
Change of Control
If there is an acceleration of the vesting or payment of Benefits
and/or an acceleration of the exercisability of stock options upon a Change
of Control, all or a portion of the accelerated benefits may constitute
"Excess Parachute Payments" under Section 280G of the Code. The employee
receiving an Excess Parachute Payment incurs an excise tax of 20% of the
amount of the payment in excess of the employee's average annual
compensation over the five calendar years preceding the year of the Change
of Control, and the Company is not entitled to a deduction for such payment.
Limitation on Deduction
Section 162(m) of the Code provides that no deduction will be allowed
for certain remuneration with respect to a covered employee to the extent
such remuneration exceeds $1,000,000. Under the regulations interpreting
Code Section 162(m), an employee is a covered employee if his/her
compensation is required to be reported under the SEC's disclosure rules and
he is employed as of the last day of the taxable year. Code Section 162(m)
does not apply to: (a) compensation payable solely on account of the
attainment of one or more performance goals if (i) the goals are determined
by a committee of two or more outside directors, (ii) the material terms
under which the remuneration will be paid, including the goals, is disclosed
to shareholders and approved by a majority of the shareholders, and (iii)
except in the case of SARs and certain stock options (as described below),
the committee certifies that the goals have been met; and (b) compensation
payable under a binding contract in effect on February 17, 1993 which is not
thereafter modified in any material respect. Compensation arising from SARs
and stock options where the price from which appreciation is calculated or
exercise price, as the case may be, is no less than fair market value on the
date of grant constitute compensation on amount of attainment of a
performance goal as long as the shareholders approve the maximum number of
shares per participant over a specific time period. The $1,000,000
limitation is reduced by any remuneration subject to such limitation for
which a deduction is disallowed under the Change of Control provisions set
forth above.
Summary Only
The foregoing section is only a summary of the U.S. federal income tax
consequences of the Plan and is based on the Company's understanding of
present U.S. federal tax laws and regulations.
Recommendation:
Our Board of Directors recommends that you vote "FOR" approval of the
proposed amendment to the 2000 Flexible Stock Plan.
PROPOSAL 3
AMENDMENT TO THE COMPANY'S
1999 EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
Proposal
The Company presently maintains the CTC Communications Group 1999
Equity Incentive Plan for Non-Employee Directors (the "1999 Directors Plan")
which was originally adopted by the Company's stockholders on September 16,
1999. On March 21, 2002, the Board of Directors approved an amendment to
increase the by 250,000 number of shares of Common Stock issuable under the
1999 Directors Plan from 300,000 to 550,000. 235,000 shares have been
issued and there are currently 65,000 shares issuable under the 1999
Directors Plan, subject to adjustments for stock splits and similar events.
The proposed amendment is subject to shareholder approval.
The 1999 Plan has been advancing our interest by enhancing our ability
to attract and retain non-employee directors who are in a position to make
significant contributions to our success and to align the interest of those
directors more closely with our stockholders. The board of directors adopted
the plan to align the equity compensation of the board with that of
comparable companies, to permit each eligible director to elect to receive
his or her directors fees in stock instead of cash and to take advantage of
additional flexibility provided by revised federal regulation. The proposed
amendment is subject to shareholder approval.
Summary Description of the 1999 Directors Plan
At each annual meeting at which an eligible director is reelected or is
continuing as a director, including this annual meeting, he or she will be
granted an option to purchase 10,000 shares of common stock. The options
described in this paragraph are referred to as formula options. These
formula options will have an exercise price of 100% of the fair market value
of the common stock on the day before the date of the grant. The formula
options are exercisable five years after the date of grant. Eligible
directors are those directors who are not our employees and currently
include all directors except Robert J. Fabbricatore.
In addition to formula options, the administrator also has the authority
to award options to eligible directors in amounts and on terms as it
determines. These options are referred to as discretionary options. The
exercise price of discretionary options will be set by the administrator and
will become exercisable and expire as the administrator determines, but no
options will expire later than 10 years from the date of grant.
The exercise price of any option granted under the plan may be paid in
cash or check, bank draft or money order, by tendering shares of common
stock having a fair market value equal to the exercise price and which have
been owned at least six months, by delivering an undertaking by a broker to
deliver promptly sufficient funds to pay the exercise price or by any
combination of the foregoing. At the request of an option holder, and if the
market price of the shares of common stock subject to an option exceeds the
exercise price of the option at the time of exercise, the administrator may,
in its sole discretion, cancel the option and cause CTC to pay to the person
exercising the option in cash or common stock an amount equal to the
difference between the fair market value of the stock which would have been
purchased pursuant to the option and the aggregate exercise price which
would have been paid. Each option will be non-transferable except by will or
the laws of descent and distribution.
If a director dies, or otherwise ceases to be a director, all options not
then exercisable will immediately terminate, unless the board of directors
otherwise determines. Any exercisable options will remain exercisable for a
period of one year following death or three months following other
termination of the individual's status as a director, but in no event
beyond the fifth anniversary of the date of grant in the case of formula
options and beyond the tenth anniversary of the date of the grant in the
case of discretionary options. Upon a merger or consolidation, which results
in a 50% change in ownership, a transfer of all or substantially all of our
assets, or a dissolution or liquidation of the Company, all options not then
exercisable will become exercisable and all unexercised options will
terminate upon the consummation of the transaction. However, in lieu of
termination, the board of directors may cause the acquiring or surviving
corporation to assume all options outstanding under the plan or provide
replacement options for on substantially the same terms, with any necessary
adjustments.
In addition to the option grants, the plan allows each eligible director
to elect annually in advance to receive his or her fees in the form of
deferred grants of common stock, rather than cash, payable on the earlier of
(i) the first business day of the third January following the date of grant,
(ii) a change of control of CTC or (iii) the date the eligible director
ceases to be a director. Each eligible director will receive a deferred
stock award in lieu of any annual retainer fee to which such eligible
director may be entitled and a deferred stock award in lieu of any fees to
which such eligible director may be entitled with respect to any meeting of
the board of directors or any committee thereof. The number of shares of
common stock subject to a deferred stock award will be that number of shares
of common stock the fair market value of which is equal, in the case of
annual fees, to the amount of the annual fee on the first business day of
the calendar year for which the annual fee is payable, and in the case of
meeting fees, to the amount of the meeting fee on the day before the date of
meeting for which the meeting fee is payable.
Certain Federal Income Tax Consequences
For federal income tax purposes, options under this plan are treated as
non-qualified stock options. In general, on the exercise of a non-qualified
stock option an optionee realizes ordinary income equal to the option
spread, and we receive a corresponding deduction. Upon a subsequent sale of
the shares, an optionee recognizes a capital gain or loss for which we
receive no deduction.
Recommendation:
Our Board of Directors recommends that you vote "FOR" approval of the
proposed amendment to the 1999 Equity Incentive Plan for Non-Employee
Directors.
PROPOSAL 4
RATIFICATION OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
has appointed the firm of Ernst & Young LLP ("E&Y") as independent auditors
to audit the consolidated financial statements of CTC Communications Group
for the fiscal year ending December 31, 2002.
E&Y fees for services rendered during the year ended December 31, 2001
were as follows: $340,000 for the annual audit, $43,000 for audit related
services and $50,000 for tax-related services.
The Audit Committee has considered whether the provision of tax-related
services is compatible with maintaining E&Y's independence.
Representatives of E&Y are expected to be present at the Annual Meeting.
They will have the opportunity to make a statement if they desire, and will
be available to respond to questions.
Recommendation:
Our Board of Directors recommends that you vote "FOR" ratification of this
appointment.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as of March 31, 2002 except as
otherwise noted) regarding ownership of Common Stock and Series B Convertible
Preferred Stock ("Preferred Stock") by the only persons known to own
beneficially more than 5 percent thereof, by the directors individually, by the
named executive officers named in the Summary Compensation Table individually,
and by all current directors and executive officers of the Company as a group.
Where any footnote indicates that shares included in the table are owned by, or
jointly with, family members or by an affiliate of such person, the director or
executive officer may be deemed to exercise shared voting and investment power
with respect to those shares, unless otherwise indicated.
Beneficial
Ownership
-----------------
Name Number Percent
- ------------------------------------------------------------------------------
Preferred Stock
- ---------------
Thomas H. Lee Equity Fund IV, L.P. (1)................ 75,000(1) 37.5%
Bain Capital Fund VI, L.P. (2)........................ 75,000(2) 37.5%
Credit Suisse First Boston Equity Partners, L.P.(3)... 35,143(3) 17.6%
Common Stock
- -------------
Robert J. Fabbricatore................................ 3,714,623 (4) 13.4%
John Hancock Advisers, Inc............................ 2,698,410 (4.1) 10.0%
Spectrum Equity Investors II, L.P..................... 2,624,782 (5) 9.6%
Kevin J. Maroni....................................... 2,689,782 (5)(6) 9.8%
Viking Global Performance LLC......................... 1,983,700 (5.1) 7.3%
Thomas H. Lee Equity Fund IV, L.P..................... 1,725,000 (1)(7) 6.0%
Bain Capital Fund VI, L.P............................. 1,725,000 (2)(7) 6.0%
Scott M. Sperling..................................... 1,654,449 (8) 5.8%
INVESCO Funds Group, Inc.............................. 1,490,300 (8.1) 5.5%
Henry Hermann......................................... 391,726 (9) 1.4%
Richard J. Santagati.................................. 209,000 (10) *
Carl Redfield......................................... 95,000 (11) *
J. Richard Murphy..................................... 57,800 (12) *
Mark E. Nunnelly...................................... 87,896 (13) *
Ralph C. Sillari...................................... 50,750 (14) *
Katherine D. Courage.................................. 80,000 (15) *
Ralph S. Troupe....................................... 63,125 (16) *
Steven P. Milton...................................... 842,683 (17) 3.1%
John D. Pittenger..................................... 507,398 (18) 1.9%
Frederic Kunzi........................................ 178,500 (19) *
David E. Mahan........................................ 162,676 (20) *
All directors and executive officers as a group
(19 persons)......................................... 11,538,538 (21) 37.0%
- ----------
*Less than 1%.
<FN>
(1) Thomas H. Lee Equity Fund IV, L.P., together with certain affiliates and
other
entities and individuals (including Mr. Sperling) jointly filed a Schedule 13D
on May
26, 2000 relating to the purchase of an aggregate of 75,000 shares of Preferred
Stock,
each share of which is currently convertible into 23 shares of Common Stock, and
votes
on an as converted basis. The address of Thomas H. Lee Equity Fund IV, L.P. and
its
affiliates is 75 State St., Boston MA 02109.
(2) Bain Capital Fund VI, L.P., together with certain affiliates and other
entities
and individuals jointly filed a Schedule 13D on May 26, 2000 relating to the
purchase
of an aggregate of 75,000 shares of Preferred Stock, each share of which is
currently
convertible into 23 shares of Common Stock and votes on an as converted basis.
The
address of Bain Capital Fund VI, L.P. and its affiliates is Two Copley Place,
Boston MA
02116.
(3) Represents 35,143 shares of Preferred Stock held by Credit Suisse First
Boston
Equity Partners, L.P.. Its address is 11 Madison Ave., New York NY 10010.
(4) Includes 93,747 shares owned by Mr. Fabbricatore as trustee of a trust for
his
children and 2,701,270 shares as a general partner of a family partnership; also
includes 587,499 shares issuable upon exercise of options exercisable within 60
days of
March 31, 2002. Mr. Fabbricatore's address is c/o CTC Communications Group,
Inc., 220
Bear Hill Road, Waltham, Massachusetts 02451.
(4.1) A Schedule 13G/A was filed with the SEC on February 1, 2002 on behalf of
John
Hancock Financial Services, Inc. ("JHF"), JHF's direct, wholly-owned subsidiary,
John
Hancock Life Insurance Company ("JHLICO"), JHLICO's direct, wholly-owned
subsidiary,
John Hancock Subsidiaries, Inc. ("JHSI"), JHSI's direct, wholly-owned
subsidiary, The
Berkeley Financial Group, Inc. ("TBFG") and TBFG's wholly-owned subsidiary, John
Hancock Advisers, Inc. ("JHA"), reporting that JHA has direct beneficial
ownership of
2,698,410 shares of Common Stock, and that through their parent-subsidiary
relationship
to JHA, JHF, JHLICO, JHSI and TBFG have indirect, beneficial ownership of these
same
shares. The principal business offices of JHF, JHLICO and JHSI are located at
John
Hancock Place, P.O. Box 111, Boston, MA 02117. The principal business offices of
TBFG
and JHA are located at 101 Huntington Avenue, Boston MA 02199.
(5) Includes 280,599 shares issuable upon the exercise of warrants exercisable
within
60 days of March 31, 2002. As partners of Spectrum Equity Investors II, L.P.,
Kevin J.
Maroni, William P Collatos, Brion B. Applegate and Spectrum Equity Associates II
may be
deemed to be beneficial owners of the shares owned by Spectrum. The address of
Spectrum
and its affiliates is One International Place, 29th Floor, Boston, Massachusetts
02110.
(5.1) Viking Global Performance LLC together with certain affiliates and other
entities and individuals jointly filed a Schedule 13G on January 31, 2001 Viking
Global
Performance LLC, Viking Global Investors LP, O. Andreas Halvorsen, Brian T.
Olson and
David C. Ott do not directly own any shares of Common Stock, but all may be
deemed
beneficial owners of 1,983,700 shares of Common Stock, which include 1,440,100
shares
directly owned by Viking Global Equities LP. The business address of these
entities
and individuals is 280 Park Ave., 35th floor, New York NY 10017.
(6) Includes 65,000 shares issuable to Mr. Maroni upon the exercise of options
exercisable within 60 days of March 31, 2002. Mr. Maroni's address is c/o
Spectrum
Equity Investors II, L.P., One International Place, 29th Floor, Boston,
Massachusetts
02110.
(7) Represents shares of Common Stock which may be acquired upon conversion of
the
Preferred Stock and the corresponding number of votes attributable to the
Preferred
Stock, as of the record date, April 2, 2002.
(8) Represents shares of Common Stock that may be acquired upon conversion of
Preferred Stock, which votes on an "as converted" basis. Of those shares of
Common
Stock, Mr. Sperling has direct beneficial ownership of 4,232 shares. In
addition, Mr.
Sperling may be deemed to beneficially own 1,440,950 shares beneficially owned
by the
Thomas H. Lee Equity Fund IV, L.P., 49,312 shares beneficially owned by Thomas
H. Lee
Foreign Fund IV, L.P. and 139,955 shares beneficially owned by Thomas H. Lee
Foreign
Fund IV-B, L.P. Mr. Sperling, who is managing director of Thomas H. Lee Equity
Fund
IV, Thomas H. Lee Foreign Fund IV and Thomas H. Lee Foreign Fund IV-B, expressly
disclaims beneficial ownership of the shares beneficially owned by such entities
except
to the extent of his indirect pecuniary interest in such entities. Also
includes
20,000 shares issuable to Mr. Sperling upon the exercise of options exercisable
within
60 days of March 31, 2002. The address for Mr. Sperling is c/o Thomas H. Lee
Company,
75 State St., Boston MA 02109.
(8.1) Schedule 13G was filed with the SEC on February 8 2002 on behalf of
INVESCO
Funds Group, Inc., 4350 So. Monaco St., Denver CO 80237, reporting that it is
the
beneficial owner of 1,490,000 shares of Common Stock.
(9) Includes 14,625 shares held by Mr. Hermann's spouse, 22,000 shares as co-
trustee
and 50,000 shares issuable upon the exercise of options exercisable within 60
days of
March 31, 2002.
(10) Includes 65,000 shares issuable to Mr. Santagati upon the exercise of
options
exercisable within 60 days of March 31, 2002.
(11) Includes 80,000 shares issuable to Mr. Redfield upon the exercise of
options
exercisable within 60 days of March 31, 2002.
(12) Includes 50,000 shares issuable to Mr. Murphy upon the exercise of options
exercisable within 60 days of March 31, 2002.
(13) Represents shares of Common Stock that may be acquired upon conversion of
Preferred Stock, which votes on an "as converted" basis. Of those shares of
Common
Stock, Mr. Nunnelly may be deemed to beneficially own 42,297 shares beneficially
owned
by BCIP Associates II, 4,485 shares beneficially owned by BCIP Trust Associates
II,
7,774 shares beneficially owned by BCIP Associates II-B, 5,911 shares
beneficially
owned by BCIP Trust Associates II-B, and 7,429 shares beneficially owned by BCIP
Associates II-C. Mr. Nunnelly, who is general partner of BCIP Associates II,
BCIP
Trust Associates II, BCIP Associates II-B, BCIP Trust Associates II-B and BCIP
Associates II-C, expressly disclaims beneficial ownership of the shares
beneficially
owned by such entities except to the extent of his indirect pecuniary interest
in such
entities. Also includes 20,000 shares issuable to Mr. Nunnelly upon the
exercise of
options exercisable within 60 days of March 31, 2002.
(14) Includes 50,000 shares issuable to Mr. Sillari upon the exercise of options
exercisable within 60 days of March 31, 2002.
(15) Includes 80,000 shares issuable to Ms. Courage upon the exercise of options
exercisable within 60 days of March 31, 2002.
(16) Includes 63,125 shares issuable to Mr. Troupe upon the exercise of options
exercisable within 60 days of March 31, 2002.
(17) Includes 6,750 shares owned by Mr. Milton as trustee of a trust for his
children
and 322,500 shares issuable upon the exercise of options exercisable within 60
days of
March 31, 2002.
(18) Includes 158,999 shares issuable to Mr. Pittenger upon the exercise of
options
exercisable within 60 days of March 31, 2002.
(19) Includes 142,415 shares issuable to Mr. Kunzi upon the exercise of options
exercisable within 60 days of March 31, 2002.
(20) Mr. Mahan terminated his employment effective March 1, 2002.
(21) Includes the shares issuable upon the exercise of options of warrants
exercisable
within 60 days of March 31, 2002 and which may be acquired upon conversion of
the
preferred stock.
</FN>
Management
Executive Officers and Directors
Our executive officers and directors, and their ages as of March 31, 2002
are as follows:
Name Age Current Office Held
---- --- -------------------
Robert J. Fabbricatore.. 59 Chairman and Chief Executive Officer
Steven P. Milton........ 48 President and Chief Operating Officer
John D. Pittenger....... 48 Executive Vice President-Finance and
Administration, Chief Financial Officer,
Treasurer and Secretary
Thomas Fabbricatore..... 43 Vice President--Business Systems
Anthony D. Vermette..... 41 Vice President--Sales
Frederick Kunzi......... 50 Vice President and Chief Technology Officer
Jeffrey C. Lavin........ 46 Vice President--Corporate Development
Russell Oliver.......... 40 Vice President--Network Operations
Katherine D. Courage.... 44 Director
Henry Hermann........... 60 Director
Kevin J. Maroni......... 38 Director
J. Richard Murphy....... 57 Director
Mark E. Nunnelly........ 43 Director
Carl Redfield........... 53 Director
Richard J. Santagati.... 58 Director
Ralph C. Sillari........ 48 Director
Scott M. Sperling....... 44 Director
Ralph S. Troupe......... 40 Director
Robert J. 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 J.
Fabbricatore is the brother of Thomas Fabbricatore, who is an executive
officer of the Company.
Steven P. 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 Vice President--Sales and
Marketing.
John D. Pittenger has served as Chief Financial Officer since April 14,
1999, as Executive Vice President--Finance and Administration since April
1998 and as Treasurer and Secretary 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.
Thomas Fabbricatore has been employed by the Company since 1982 in a
number of positions. He was named Vice President--Business Systems in 1999.
Thomas Fabbricatore is the brother of Robert J. Fabbricatore.
Anthony D. Vermette has been employed by the Company in a variety of
positions since 1987. Mr. Vermette was named Vice President--Sales in 1996.
Frederick Kunzi joined the Company as a Vice President and Chief
Technology Officer in August 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.
Jeffrey C. Lavin joined the Company in June 1998 as Vice President--
Corporate Development. Mr. Lavin has 20 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. From 1979 to
1996, Mr. Lavin was employed by Comlink Incorporated, a communications
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.
Russell Oliver joined the Company in October 1999 as Vice President--
Network Operations. From 1985 to 1996, Mr. Oliver was employed by Comlink
Incorporated, a communications network integrator, most recently as Vice
President of Operations, Following the acquisition of Comlink in 1996 by
Williams Communications, Mr. Oliver served as Vice President of Network
Systems Integration. From September 1998 to October 1999, Mr. Oliver was
employed by LaVigne as Vice President of Operations, where he was
responsible for network systems integration throughout North America. Mr.
Oliver serves on the Board of Directors of BICSI, a non-profit association
that promotes standards and education throughout the telecommunications
industry.
Katherine D. Courage became a director of the Company in April 1999. Ms.
Courage is a managing director in the Global Telecommunications and Media
Group in the Investment Banking Department of Credit Suisse First Boston,
one of the underwriters of our earlier common stock offerings. Prior to
joining Credit Suisse First Boston in September 1996, Ms. Courage worked at
Salomon Brothers Inc. for ten years where she was a managing director in the
Global Telecommunications Group. Ms. Courage currently serves as a director
of NorthEast Optic Network, Inc. Credit Suisse First Boston Equity
Partners, L.P., as a Series B preferred stockholder, has appointed Ms.
Courage as its designee to the Company's Board of Directors.
Henry Hermann, CFA, became a director of the Company in September 1996.
Since November 1997, he has operated Hermann Companies, a financial services
company. 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 SWS Financial. Mr. Hermann has been a NASD
Board of Arbitrators Member since 1991.
Kevin J. Maroni joined the board in April 1998. Mr. Maroni is a Managing
General Partner of Spectrum Equity Investors, a leading private equity firm
focused on communications companies with $2.9 billion under management.
Prior to Spectrum, Mr. Maroni worked at Time Warner, Inc. and Harvard
Management Company. Mr. Maroni currently sits on several private company
boards. He holds an MBA from Harvard University and a AB from the
University of Michigan.
J. Richard Murphy became a director of the Company in August 1995. Mr.
Murphy is a managing director of Atlantic Management Company Incorporated
(AMC), a Portsmouth, a New Hampshire valuation, investment banking and
financial advisory firm that has been serving New England's business, legal
and financial communities since 1968. Prior to joining AMC in January 2002,
Mr. Murphy was a managing director of Baldwin & Clarke Corporate Finance,
Inc., a Bedford, New Hampshire investment banking firm which he joined
August 1999. Mr. Murphy was the director of the Corporate Advisory Group of
Moody, Cavanaugh and Company, LLP, a North Andover, Massachusetts public
accounting firm, from April 1996 to August 1999.
Mark E. Nunnelly became director of the Company in June 2000 as a designee
of Bain Capital, Inc. He joined Bain Capital as a General Partner in 1990
and has served as Managing Director since April 1993. Mr. Nunnelly also
serves on the Board of Directors of Domino's, DoubleClick, Modus Media
International, and Eschelon Telecom. Mr. Nunnelly received an M.B.A. from
Harvard Business School and a B.A. from Centre College.
Carl Redfield became a director of the Company in January 1999. He has been
Senior Vice President, Manufacturing and Logistics of Cisco since February
1997. From September 1993 to February 1997 he was Vice President of
Manufacturing. Mr. Redfield also is a director of VA Linus Systems, Inc.,
iBasis Inc. and Broadwing, Inc.
Richard J. Santagati became a director of the Company in September 1991. He
has been the President of Merrimack College in North Andover, Massachusetts
since 1994. From March 1992 to February 1994, Mr. Santagati was 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 Celerity
Solutions, Inc., a software company.
Ralph C. 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, Manager of Regional Banking.
Scott M. Sperling became a director of the Company in May 2000 as a designee
of Thomas H. Lee Company. He has been a Managing Director of Thomas H. Lee
Company since July 1994 and is also President of TH Lee, Putnam Capital,
Trustee of THL Equity Trust III and Managing Director of THL Equity
Advisors IV, LLC. Mr. Sperling is currently a Director of Fisher Scientific
International, Inc., GenTek, Inc., Safelite Glass Corp., LiveWire Systems
LLC, Wyndham International, GoodHome.com and several private companies. He
holds an MBA degree from Harvard University and a B.S. from Purdue
University.
Ralph S. Troupe became a director of the Company in May 1999. In October
1999, Mr. Troupe co-founded Callisma (formerly known as Rt.1 Solutions), a
network services company focusing on all key aspects of complex network
planning, design and implementation, and serves as its President and Chief
Executive Officer. From January 1993 to October 1999, Mr. Troupe was
employed by International Network Services, most recently as Vice President
of North American Field Operations, East. Mr. Troupe holds a B.S. degree
from Northeastern University and is a 1998 graduate of the Harvard Business
School Advanced Management Program for International Senior Managers.
Director Compensation
Non-employee directors receive an annual retainer of $16,000. At each
annual meeting, each non-employee director is granted an option to purchase
10,000 shares of our common stock, at an exercise price equal to the fair
market value of the common stock. On June 11, 2001, all of our directors
(except Robert J. Fabbricatore) were granted options to purchase 10,000
shares of Common Stock at an exercise price of $4.91 per share.
Committees of the Board of Directors
Our Board of Directors has established an audit committee, a
compensation committee, a finance committee, a governance committee and a
nominating committee.
The audit committee consists of Messrs. Murphy, Hermann, Nunnelly and
Sillari, all of whom are independent directors. The audit committee's
purpose is to oversee the Company's accounting and financial reporting
policies and practices and to assist the Board in fulfilling its fiduciary
and corporate accountability responsibilities. Members of the Company's
finance and accounting departments periodically meet with the audit
committee and always have unrestricted direct access to the audit committee
members. During the year ended December 31, 2001, the audit committee held
9 meetings.
The compensation committee consists of Messrs. Santagati, Murphy,
Nunnelly, Redfield and Ms. Courage. The compensation committee establishes
compensation and benefits for our senior executives. The committee also
determines the number and terms of stock options granted to employees,
directors and consultants under our stock option plans. During the year
ended December 31, 2001, the compensation committee held one meeting.
The finance committee consists of Messrs. Maroni, Sillari, Hermann and
Ms. Courage. The finance committee evaluates and reports to the Board of
Directors with respect to plans for corporate expansion, capital structure
and long-range capital requirements. The finance committee also considers
and reports to the Board with respect to such other matters relating to the
financial affairs of the Company as may be requested by the Board of
Directors or the appropriate officers of the Company. During the year
ended December 31, 2001, the finance committee held 7 meetings.
The governance committee consists of Ms. Courage and Messrs. Maroni,
Nunnelly, Redfield and Santagati. The governance committee reviews and
makes recommendations with respect to the nature, requirements and
procedures covering the operations of the Company, the Board of Directors
and its committees. During the year ended December 31, 2001, the
governance committee held two meetings.
The nominating committee consists of Messrs. Redfield, Santagati,
Sperling and Troupe. 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. The nominating committee did not meet during the year ended
December 31, 2001.
During the year ended December 31, 2001, all directors and committee
members attended more than 85% of their respective meetings.
Report of the Audit Committee
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically
incorporates this Report by reference therein.
The Charter for the Audit Committee was reproduced as an appendix to last
year's proxy statement.
As set forth in more detail in the charter, the Audit Committee's primary
responsibilities fall into three broad categories:
. first, the Audit Committee is charged with monitoring the preparation of
quarterly and annual financial reports by the Company's management,
including discussions with management and the Company's outside auditors
about draft annual financial statements and key accounting and reporting
matters;
. second, the Audit Committee is responsible for matters concerning the
relationship between the Company and its outside auditors, including
recommending their appointment or removal; reviewing the scope of their
audit services and related fees, as well as any other services being
provided to the Company; and determining whether the outside auditors
are independent (based in part on the annual letter provided to the
Company pursuant to Independence Standards Board Standard No. 1); and
third, the Audit Committee oversees management's implementation of
effective systems of internal controls, including review of policies
relating to legal and regulatory compliance, ethics and conflicts of
interests; and review of the activities and recommendations of the
Company's internal control program.
The Audit Committee has implemented procedures to ensure that during the
course of each fiscal year it devotes the attention that it deems necessary
or appropriate to each of the matters assigned to it under the Audit
Committee's charter. To carry out its responsibilities, the Audit Committee
met a total of 9 times during 2001.
In overseeing the preparation of the Company's financial statements, the
Audit Committee met with both management and the Company's outside auditors
to review and discuss all financial statements prior to their issuance and to
discuss significant accounting issues. Management advised the Audit Committee
that all financial statements were prepared in accordance with accounting
principles generally accepted in the United States, and the Audit Committee
discussed the statements with both management and the outside auditors. The
Audit Committee's review included discussion with the outside auditors of
matters required to be discussed pursuant to Statement on Auditing Standards
No. 61 (Communication With Audit Committees).
With respect to the Company's outside auditors, the Audit Committee, among
other things, discussed with Ernst & Young LLP matters relating to its
independence, including the written disclosures made to the Audit Committee
as required by the Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees).
Finally, the Audit Committee continued to monitor the scope and adequacy
of the Company's internal control program, including proposals for adequate
staffing and to strengthen internal procedures and controls where
appropriate.
On the basis of these reviews and discussions, the Audit Committee
recommended to the Board of Directors that the Board approve the inclusion
of the Company's audited consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 2001, for filing
with the Securities and Exchange Commission.
Members of the Audit Committee
J. Richard Murphy, Chairman
Henry Hermann
Mark E. Nunnelly
Ralph C. Sillari
Executive Compensation
The following table provides summary information concerning compensation of
the Company's Chief Executive Officer and each of the four other most
highly paid executive officers (the "Named Executive Officers") during the
year ended December 31, 2001, the nine month transition period ended December
31, 2000, and the fiscal year ended March 31, 2000.
Summary Compensation Table
Long Term Compensation
---------------------------
- ---
Securities All
Other
Period Salary Bonus Underlying
Compensation
Ending(1) ($) ($) Options (#)(2) ($)(3)
---------- -------- ------- -------------- ------------
- ---
Robert J. Fabbricatore 12/31/01 300,000 136,875 1,050,000
34,303(4)
Chairman and 12/31/00 180,000 45,000 0
41,100(4)
Chief Executive Officer 03/31/00 240,000 75,000 0
22,000(4)
Steven P. Milton, 12/31/01 240,000 86,250 160,000 5,250
President and 12/31/00 150,000 37,300 0 3,000
Chief Operating Officer 03/31/00 200,000 62,500 0 4,625
John D. Pittenger, 12/31/01 190,000 93,000 145,000 3,600
Executive Vice President 12/31/00 82,500 30,000 0 3,375
-Finance & Administration 03/31/00 110,000 50,000 0 4,200
Chief Financial Officer
Treasurer, & Secretary
Frederic Kunzi, Executive 12/31/01 185,000 43,875 165,000 5,100
Vice President & Chief 12/31/00 138,750 30,000 0 3,375
Technology Officer 03/31/00 167,500 75,787 75,000 5,888
David E. Mahan, 12/31/01 190,000 88,000 320,000 4,538
Executive Vice President 12/31/00 90,000 30,000 0 3,375
-Marketing and Strategic 03/31/00 120,000 50,000 0 4,025
Planning (5)
- - --------
(1) The periods presented are the year ended December 31, 2001, the nine
months ended December 31, 2000 and the fiscal year ended March 31, 2000.
(2) All "Securities Underlying Options" gives effect to the March 17, 2000
three-for-two stock split.
(3) Includes 50% matching contributions up to 6% to the Company's 401(k)
Savings Plan.
(4) Includes 50% matching contributions of the first 6% in the amounts of
$5,250, $3,900 and $4,500 for the year ended December 31, 2001, the nine
month transition period ended December 31, 2000 and the fiscal year ended
March 31, 2000 to the Company's 401(k) Savings Plan. Also included is the
actuarial benefit on the "split-dollar" life insurance policy for the
benefit of Mr. Fabbricatore in the amounts of $29,053, $37,200 and $17,500
for the same periods.
(5) Mr. Mahan terminated his employment with the Company in March 2002.
Option Grants in Last Fiscal Year
The following table sets forth the aggregate number of stock options
granted to each of the Named Executive Officers during the year ended
December 31, 2001. Options are exercisable for our common stock.
Potential Realizable
Value
at Assumed
Annual Rate of
Number of Percent of
Stock Price
Securities Total Options
Appreciation for
Underlying Granted to Exercise
Option Term ($)
Options Employees in Price Expiration -------
- ---------------
Granted (#) Fiscal Year ($/Share) Date 5%
10%
----------- ------------- --------- ---------- -------
- --- ----------
Robert J. Fabbricatore.. 783,334 29.2 6.60 5/8/2011
828,524 2,399,399
16,666 0.6 6.60 5/8/2007
17,627 51,049
83,334 3.1 3.37 7/1/2006
44,952 130,181
83,334 3.1 4.04 7/1/2006
(10,965) 74,263
83,333 3.1 4.71 7/1/2006
(66,881) 18,347
Steven P. Milton........ 83,334 3.1 6.00 5/8/2011
138,142 305,257
16,666 0.6 6.00 5/8/2007
27,627 61,049
20,000 0.7 3.06 7/1/2006
16,908 37,363
20,000 0.7 3.67 7/1/2006
4,708 25,163
20,000 0.7 4.28 7/1/2006
(7,492) 12,963
John D. Pittenger....... 83,334 3.1 6.00 5/8/2011
138,142 305,257
16,666 0.6 6.00 5/8/2007
27,627 61,049
15,000 0.6 3.06 7/1/2006
12,681 28,022
15,000 0.6 3.67 7/1/2006
3,531 18,872
15,000 0.6 4.28 7/1/2006
(5,619) 9,722
Frederic Kunzi.......... 133,334 5.0 6.00 5/8/2011
221,026 488,410
16,666 0.6 6.00 5/8/2007
27,627 61,049
5,000 0.2 3.06 7/1/2006
4,227 28,022
5,000 0.2 3.67 7/1/2006
1,177 18,872
5,000 0.2 4.28 7/1/2006
(1,873) 9,722
David E. Mahan.(1)....... 258,334 9.6 6.00 5/8/2011
428,237 946,292
16,666 0.6 6.00 5/8/2007
27,627 61,049
15,000 0.6 3.06 7/1/2006
12,681 28,022
15,000 0.6 3.67 7/1/2006
3,531 18,872
15,000 0.6 4.28 7/1/2006
(5,619) 9,722
<fn>
(1) Mr. Mahan terminated his employment in March 2002, at which time all of his
unexercised options terminated.
</fn>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information concerning the exercise of
options by the Named Executive Officers during year ended December 31, 2001
and the December 31, 2001 aggregate value of unexercised options held by
each of the Named Executive Officers.
Number of Securities
Value of Unexercised
Underlying Unexercised in-
the-Money Options
Options at Fiscal at
Fiscal Year End ($)
Year-End (#)(1)
(1)(2)
Shares ----------------------- ----
- -------------------
acquired on Value Exercisable/
Exercisable/
exercise(1)(#) Realized ($) Unexercisable
Unexercisable
------------- ------------ ----------------------- ----
- -------------------
Robert J. Fabbricatore 0 0 531,249 856,250
370,001 0
Steven P. Milton 0 0 285,000 137,500
129,075 0
John D. Pittenger 0 0 145,499 113,500
80,205 0
Frederic Kunzi 31,498 131,242 142,415 180,001
219,704 0
David E. Mahan (3) 30,000 36,240 52,500 282,500
65,342 0
- --------
(1) All shares and amounts, as necessary, have been adjusted to reflect the
three-for-two stock split effected in March 2000.
(2) Assumes a fair market value of the Common Stock at December 31, 2001 of
$5.15 per share.
(3) Mr. Mahan terminated his employment in March 2002, at which time all of
his unexercised options terminated.
Board Compensation Committee Report on Executive Compensation
During the year ended December 31, 2001, the compensation committee,
comprised of three independent non-employee directors, made decisions
regarding executive compensation. 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 our
employees, directors and consultants under our stock option plans.
Compensation Policies. Our executive compensation philosophy is to
provide compensation opportunities for our officers which are competitive
within our industry and community so that we can attract and retain high
quality executives and to align the interests of our executives and
stockholders by providing for payment of a significant portion of executive
compensation in the form of bonuses based on the our sales performance.
Thus, the value generated for our stockholders is a key factor in
determining the value ultimately received by the executive officers.
Base Salary. We establish base salaries for executive officers at levels
we consider appropriate in light of the scope of the duties and
responsibilities for each officer's position. We provide annual increases in
base salary to further protect our 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 fiscal year ended March 31, 2000, the nine month transition period ended
December 31, 2000 and the year ended December 31, 2001, CTC has exceeded the
performance goals. We believe that the establishment of performance goals is
the most objective measurement of executive performance during the relevant
period, where CTC's overriding objective is to build its business by
increasing sales.
Stock Options. Incentive stock options are granted to executive officers
at the discretion of the compensation committee. In general, stock options
are granted with an exercise price equal to the fair market value of our
common stock on the date of the grant. If an option recipient owns more than
ten percent of our common stock, the options are granted with an exercise
price equal to 110% of the fair market value of our stock on such date. 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.
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 our 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 year ended December 31, 2001, the nine month
transition period ended December 31, 2000, and the fiscal year ended March
31, 2000, the Company's most highly compensated officer was Robert J.
Fabbricatore, Chairman of the Board and Chief Executive Officer, who received
an annualized base salary of $300,000, $240,000 and $240,000 during each
period, respectively, and bonuses aggregating $136,875 during the year ended
December 31, 2001, $45,000 during the nine months ended December 31, 2000,
and $75,000 during the fiscal year ended March 31, 2000.
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 with respect to Section
162(m).
The Compensation Committee
Richard J. Santagati, Kevin J. Maroni and J. Richard Murphy
Performance Graph
The following table shows a comparison of cumulative total return to
stockholders for our common stock, the Nasdaq Composite Index and the Nasdaq
Telecommunications Index for the period December 31, 1996 through December 31,
2001.
The table assumes $100 invested on December 31, 1996 in CTC Communications
Group, Inc. Common Stock, the Nasdaq Telecommunications Index (Nasdaq
Telecom), and the Nasdaq Composite Index (Nasdaq US).
[LINE GRAPH APPEARS HERE]
Dec-96 Dec-97 Dec-98 Dec-99 Dec-00
Dec-01
CTC Communications Group Inc. $100 $165 $105 $488 $87
$97
Nasdaq Telecom $100 $146 $242 $431 $184
$123
Nasdaq US $100 $122 $173 $321 $193
$153
Certain Relationships and Related Transactions
We lease office space from a trust, of which Robert J. Fabbricatore, our
Chairman and Chief Executive Officer, is a beneficiary. Rental payments
under the lease totaled approximately $51,584 for the twelve months ended
December 31, 2001. We sublease part of our Waltham and New York facilities
at our cost to Comm-Tract Corp., a company in which Mr. Fabbricatore is a
principal stockholder. Sublease income totaled $131,073 for the twelve
months ended December 31, 2001. We also contract with Comm-Tract Corp. for
outsourced purchasing personnel, the installation of telephone lines and for
the service and maintenance of equipment marketed by the Company. During
the twelve months ended December 31, 2001, Comm-Tract Corp. provided us with
services, inventory and equipment totaling $11,374,050. We believe that the
payments to the trust, and Comm-Tract Corp. are comparable to the costs for
such services, and inventory and equipment that we would be required to pay
to unaffiliated individuals in arms-length transactions.
During the twelve months ended December 31, 2001, we made an advance to
Thomas Fabbricatore, an executive officer, in the amount of $150,000
evidenced by a fully secured promissory note bearing interest at an annual
rate of 10.75%. During the nine months ended December 31, 2000, we made
advances aggregating $6,375,135 to several executive officers evidenced by
fully secured promissory notes bearing interest at an annual rate of 10.75%
as follows: Robert J. Fabbricatore, $4,650,515; Michael Donnellan, $650,509;
Frederic Kunzi, $309,950; Thomas Fabbricatore, $420,766; and Anthony
Vermette, $343,395. During March 2001, the principal and accrued interest
of $5,414,676 on these advances were repaid in full with the exception of
the advances aggregating $1,217,281, exclusive of interest, made to Messrs.
Donnellan, Kunzi, and Thomas Fabbricatore. During February 2002, we made
advances to Thomas Fabbricatore and Steven Milton in the amounts of $245,243
and $300,000, respectively, evidenced by fully secured promissory notes
bearing interest at an annual rate of 10.75%. During March and April 2002,
Mr. Milton repaid $204,000 of this advance and has advised that he will
repay the remaining balance by May 15, 2002.
In May 2000, we entered into a 15 year lease for approximately 71,250
feet from Telecom Realty, LLC. Payments under the lease for the twelve
months ended December 31, 2001 totaled $1,933,058. The escrow account
guarantee of $2.5 million that we funded with the lessor in 2000 was
returned in 2001 plus interest of $135,899. For the twelve months ended
December 31, 2001, we earned interest of $47,524 on our $889,050 security
deposit. Robert J. Fabbricatore and Thomas Fabbricatore, own a majority of
the membership interests in the lessor. Steven P. Milton, Michael Donnellan
and John D. Pittenger, executive officers of the Company, own minority
membership interests in the lessor. We believe that the rent required to be
paid under this lease is comparable to the rent we would be required to pay
to unaffiliated individuals in arms-length transactions for similar
facilities.
Carl Redfield, one of our directors, is an executive officer of Cisco
Systems, Inc. ("Cisco"). We have purchased most of our network equipment
from Cisco. During the twelve months ended December 31, 2001, we purchased
or leased equipment and services of approximately $38 million and, intend to
continue to purchase equipment and services from Cisco in the same amount
during 2002, pursuant to a restructured leasing arrangement with Cisco
Capital, an affiliate of Cisco. We also maintain a credit facility from
Cisco Capital, of which approximately $33 million was outstanding as of
December 31, 2001. Cisco is also a $25 million participant in our Toronto
Dominion Bank $225 million senior secured credit facility.
Ralph Sillari, one of our directors, is an Executive Vice President of
Fleet National Bank. During the twelve months ended December 31, 2001, we
paid approximately $139,000 in bank service fees to Fleet.
Katherine D. Courage, one of our directors, is a Managing Director of
Credit Suisse First Boston, one of the underwriters of our July 1999 public
offering and the Documentation Agent for the Toronto Dominion Bank $225
million senior secured credit facility which closed in June 2000. For the
twelve months ended December 31, 2001, we paid interest and other fees
totaling $14,338,662 to Toronto Dominion Bank under the facility. Credit
Suisse First Boston Equity Partners, L.P., as a Series B preferred
stockholder, has appointed Ms. Courage as its designee to the Company's
Board of Directors and as of December 31, 2001 dividends in the amount of
$7,098,269 have accrued on the Series B preferred shares owned by Credit
Suisse and its affiliates.
Ms. Courage is also a director of Neon Optica, Inc. (formerly known as
NorthEast Optic Network), from which we agreed to lease transmission
facilities and dark fiber. During the twelve months ended December 31,
2001, payments to Neon Optica, Inc. under these leases aggregated
$4,658,610.
Mark E. Nunnelly, who became a director in June 2000, is a general
partner of BCIP Associates II, BCIP Trust Associates II, BCIP Associates II-
B, BCIP Trust Associates II-B and BCIP Associates II-C, which purchased an
aggregate of 2,952 shares of Series B Convertible Preferred Stock for
$2,952,000. The shares have accrued dividends in the amount of $419,082 as
of December 31, 2001. The Series B Convertible Preferred Stockholders
received customary registration rights as part of the transaction.
Scott M. Sperling, who became a director in June 2000, is a Managing
Director of Thomas H. Lee Equity Fund IV, Thomas H. Lee Foreign Fund IV and
Thomas H. Lee Foreign Fund IV-B (collectively, the "Funds"). In June 2000,
Mr. Sperling purchased 184 shares of Series B Convertible Preferred Stock
for $184,000 and the Funds purchased an aggregate of 70,879 shares for
$70,879,000. The shares have accrued dividends in the amount of $10,088,415
as of December 31, 2001. The Series B Convertible Preferred Stockholders
received customary registration rights as part of the transaction.
Ralph S. Troupe, who became a director of the Company in May 1999, is
President and Chief Executive Officer of Callisma (formerly known as Rt.1
Solutions). Callisma has provided us with consulting services relating to e-
commerce. During the twelve months ended December 31, 2001, we paid
Callisma approximately $457,000 under the agreement.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers, and persons who own more than ten
percent of a registered class of our equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and our other equity securities.
Officers, directors and greater than ten percent shareholders are required by
Commission regulations to furnish us with copies of all Section 16(a) forms
they file.
Based solely on our review of copies of the filings under Section 16(a) of
the Securities Exchange Act of 1934 received by us, we believe that during
the year ended December 31, 2001 our directors, executive officers and
beneficial owners of greater than ten percent of our common stock filed all
required reports under Section 16 of the Exchange Act.
Expense of Solicitation
The Company will bear all costs connected with the solicitation of
proxies. We will reimburse brokers and other persons holding stock for the
benefit of others for their expenses in forwarding proxies and accompanying
material to the beneficial owners of such stock and obtaining their proxies.
We will solicit proxies 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. We do not expect to incur
more than $10,000 of solicitation expenses. We have not incurred any
solicitation expenses to date.
Stockholders' Proposals
If you wish to present a proposal to be voted on at the 2003 annual meeting
of stockholders, you 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;
. have held such securities for at least one (1) year; and
. continue to own such securities through the date on which the 2003 annual
meeting is held.
To be included in the management proxy statement, your proposal must be
received at our executive offices no later than March 1, 2003. Under our by-
laws, stockholders who wish to make a proposal at the 2003 annual meeting--
other than one that will be included in the management proxy statement--must
notify us no earlier than February 23, 2003 and no later than March 23, 2003.
If you fail to notify us of such a proposal by March 23, 2003, then the
proxies that management solicits for the 2003 annual meeting will include
discretionary authority to vote on any such proposal in the event it is
properly brought before the meeting. We suggest that you submit any proposal
by certified mail, return receipt requested, to remove any question as to the
date on which a proposal is received by the Board of Directors.
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, the board intends that the persons named in the Proxy will vote
according to their best judgment.
We request you to date, sign and return the proxy in the enclosed postage-
paid envelope. 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 and Chief Executive Officer
April 19, 2002
PROXY
CTC COMMUNICATIONS GROUP, INC.
2002 ANNUAL MEETING OF STOCKHOLDERS
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Leonard R. Glass and Kim Graziano 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
Annual Meeting of Stockholders of CTC Communications Group, Inc. to be held on
Thursday, May 23, 2002 at 9:30 a.m., local time, at the executive offices of
the Company, 220 Bear Hill Road, 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 year ended December 31, 2001, Proxy Statement
and Notice of Annual Meeting dated April 19, 2002.
**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 ALL NOMINEES TO SERVE AS CLASS II 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?
- - ------------------------------ -------------------------------
- - ------------------------------ -------------------------------
- - ------------------------------ -------------------------------
Vote by Telephone
It's fast, convenient, and immediate!. Call Toll-Free on a Touch-Tone Phone.
Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number 1-877-PRX-VOTE (1-877-779-8683)
There is NO CHARGE for this call.
3. Enter your Control Number located on your Proxy Card.
4. Follow the recorded instructions.
Your vote is important! Call 1-877-PRX-VOTE anytime!
Vote by Internet
It's fast, convenient and your vote is immediately confirmed and posted.
Follow these four easy steps.
1. Read the accompanying Proxy Statement and Proxy Card.
2. Go to the Website http://www.eproxyvote.com/cptl
3. Enter your Control Number located on your Proxy Card.
4. Follow the instructions provided.
Your vote is important! Go to http://www.eproxyvote.com/cptl anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
[X] PLEASE MARK VOTES CTC COMMUNICATIONS GROUP, INC.
AS IN THIS EXAMPLE
(1) In favor of the following nominees as Class II Directors to serve until
the Annual Meeting of Stockholders in 2005, and until each successor is duly
elected and qualified;
FOR ALL [ ] WITHHOLD [ ] FOR ALL EXCEPT [ ]
J. RICHARD MURPHY MARK E. NUNNELLY RICHARD J. SANTAGATI
Instruction: To withhold authority to vote for a nominee, check the
"FOR ALL EXCEPT" box and strike a line through the nominee's name in the list
above. Unless authority to vote for all nominees is withheld, this proxy will
be deemed to confer authority to vote for each nominee whose name is not
struck.
(2) To approve the amendment to the 2000 Flexible Stock Plan.
(3) To approve the amendment to the 1999 Equity Incentive Plan for
Non-Employee Directors.
(4) Ratify the appointment of Ernst & Young LLP as the independent
accountants of the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(5) 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________________________________