EXHIBIT 4.1
CTC COMMUNICATIONS CORP.
1998 INCENTIVE PLAN
1. DEFINED TERMS
Exhibit A, which is incorporated by reference, defines the terms used in
the Plan and sets forth certain operational rules related to those terms.
2. GENERAL
The Plan has been established to advance the interests of the Company by
giving selected Employees, directors and other persons (including both
individuals and entities) who provide services to the Company or its
Affiliates Stock-based incentives or incentives based on Performance Criteria.
3. ADMINISTRATION
The Administrator has discretionary authority, subject only to the
express provisions of the Plan, to interpret the Plan; determine eligibility
for and grant Awards; determine, modify or waive the terms and conditions of
any Award; prescribe forms, rules and procedures (which it may modify or
waive); and otherwise do all things necessary to carry out the purposes of the
Plan. Once an Award has been communicated in writing to a Participant, the
Administrator may not, without the Participant's consent, alter the terms of
the Award so as to affect adversely the Participant's rights under the Award,
unless the Administrator expressly reserved the right to do so in writing at
the time of such communication. In the case of any Award intended to be
eligible for the performance-based compensation exception under Section
162(m), the Administrator shall exercise its discretion consistent with
qualifying the Award for such exception.
4. LIMITS ON AWARD UNDER THE PLAN
a. Number of Shares. A maximum of 1,500,000 shares of Stock may be
delivered in satisfaction of Awards under the Plan. For purposes of the
preceding sentence, the following shares shall not be considered to have been
delivered under the Plan: (i) shares remaining under an Award that
terminates without having been exercised in full; (ii) shares subject to an
Award, where cash is delivered to a Participant in lieu of such shares; (iii)
shares of Restricted Stock that have been forfeited in accordance with the
terms of the applicable Award; and (iv) shares held back, in satisfaction of
the exercise price or tax withholding requirements, from shares that would
otherwise have been delivered pursuant to an Award. The number of shares of
Stock delivered under an Award shall be determined net of any previously
acquired Shares tendered by the Participant in payment of the exercise price
or of withholding taxes.
b. Type of Shares. Stock delivered by the Company under the Plan may
be authorized but unissued Stock or previously issued Stock acquired by the
Company and held in treasury. No fractional shares of Stock will be delivered
under the Plan.
c. Option & SAR Limits. The maximum number of shares of Stock for
which Stock Options may be granted to any person in any calendar year, the
maximum number of shares of Stock subject to SARs granted to any person in any
calendar year and the aggregate maximum number of shares of Stock subject to
other Awards that may be delivered to any person in any calendar year shall
each be 1,000,000. For purposes of the preceding sentence, the repricing of a
Stock Option or SAR shall be treated as a new grant to the extent required
under Section 162(m). Subject to these limitations, each person eligible to
participate in the Plan shall be eligible in any year to receive Awards
covering up to the full number of shares of Stock then available for Awards
under the Plan.
d. Other Award Limits. No more than $1,000,000 may be paid to any
individual with respect to any Cash Performance Award. In applying the
limitation of the preceding sentence: (A) multiple Cash Performance Awards to
the same individual that are determined by reference to performance periods of
one year or less ending with or within the same fiscal year of the Company
shall be subject in the aggregate to one limit of such amount, and
(B) multiple Cash Performance Awards to the same individual that are
determined by reference to one or more multi-year performance periods ending
in the same fiscal year of the Company shall be subject in the aggregate to a
separate limit of such amount. With respect to any Performance Award other
than a Cash Performance Award or a Stock Option or SAR, the maximum Award
opportunity shall be 1,000,000 shares of Stock or their equivalent value in
cash, subject to the limitations of Section 4.c.
5. ELIGIBILITY AND PARTICIPATION
The Administrator will select Participants from among those key
Employees, directors and other individuals or entities providing services to
the Company or its Affiliates who, in the opinion of the Administrator, are in
a position to make a significant contribution to the success of the Company
and its Affiliates. Eligibility for ISOs is further limited to those
individuals whose employment status would qualify them for the tax treatment
described in Sections 421 and 422 of the Code.
6. RULES APPLICABLE TO AWARDS
a. ALL AWARDS
(1) Terms of Awards. The Administrator shall determine the
terms of all Awards subject to the limitations provided herein.
(2) Performance Criteria. Where rights under an Award depend in
whole or in part on satisfaction of Performance Criteria, actions by the
Company that have an effect, however material, on such Performance Criteria or
on the likelihood that they will be satisfied will not be deemed an amendment
or alteration of the Award.
(3) Alternative Settlement. The Company may at any time
extinguish rights under an Award in exchange for payment in cash, Stock
(subject to the limitations of Section 4) or other property on such terms as
the Administrator determines, provided the holder of the Award consents to
such exchange.
(4) Transferability Of Awards. Except as the Administrator
otherwise expressly provides, Awards may not be transferred other than by will
or by the laws of descent and distribution, and during a Participant's
lifetime an Award requiring exercise may be exercised only by the Participant
(or in the event of the Participant's incapacity, the person or persons
legally appointed to act on the Participant's behalf).
(5) Vesting, Etc. Without limiting the generality of Section
3, the Administrator may determine the time or times at which an Award will
vest (i.e., become free of forfeiture restrictions) or become exercisable and
the terms on which an Award requiring exercise will remain exercisable.
Unless the Administrator expressly provides otherwise, immediately upon the
cessation of the Participant's employment or other service relationship with
the Company and its Affiliates, an Award requiring exercise will cease to be
exercisable, and all Awards to the extent not already fully vested will be
forfeited, except that:
(A) all Stock Options and SARs held by a Participant immediately prior
to his or her death, to the extent then exercisable, will remain exercisable
by such Participant's executor or administrator or the person or persons to
whom the Stock Option or SAR is transferred by will or the applicable laws of
descent and distribution, for the lesser of (i) a one year period ending with
the first anniversary of the Participant's death or (ii) the period ending on
the latest date on which such Stock Option or SAR could have been exercised
without regard to this Section 6.a.(5) and shall thereupon terminate;
(B) All Stock Options and SARs held by the Participant immediately
prior to the cessation of the Participant's employment or other service
relationship for reasons other than death and except as provided in (C) below,
to the extent then exercisable, will remain exercisable for the lesser of (i)
a period of three months or (ii) the period ending on the latest date on which
such Stock Option or SAR could have been exercised without regard to this
Section 6.a.(5), and shall thereupon terminate; and
(C) all Stock Options and SARs held by the Participant whose cessation
of employment or other service relationship is determined by the Administrator
in its sole discretion to result for reasons which cast such discredit on the
Participant as to justify immediate termination of the Award shall immediately
terminate upon such cessation.
Unless the Administrator expressly provides otherwise, a Participant's
"employment or other service relationship with the Company and its Affiliates"
will be deemed to have ceased, in the case of an employee Participant, upon
termination of the Participant's employment with the Company and its
Affiliates (whether or not the Participant continues in the service of the
Company or its Affiliates in some capacity other than that of an employee of
the Company or its Affiliates), and in the case of any other Participant, when
the service relationship in respect of which the Award was granted terminates
(whether or not the Participant continues in the service of the Company or its
Affiliates in some other capacity).
(6) Taxes. The Administrator will make such provision for the
withholding of taxes as it deems necessary. The Administrator may, but need
not, hold back shares of Stock from an Award or permit a Participant to tender
previously owned shares of Stock in satisfaction of tax withholding
requirements.
(7) Dividend Equivalents, Etc. The Administrator may provide
for the payment of amounts in lieu of cash dividends or other cash
distributions with respect to Stock subject to an Award.
(8) Rights Limited. Nothing in the Plan shall be construed as
giving any person the right to continued employment or service with the
Company or its Affiliates, or any rights as a shareholder except as to shares
of Stock actually issued under the Plan. The loss of existing or potential
profit in Awards will not constitute an element of damages in the event of
termination of employment or service for any reason, even if the termination
is in violation of an obligation of the Company or Affiliate to the
Participant.
(9) Section 162(m). In the case of an Award intended to be
eligible for the performance-based compensation exception under Section
162(m), the Plan and such Award shall be construed to the maximum extent
permitted by law in a manner consistent with qualifying the Award for such
exception. In the case of a Performance Award intended to qualify as
performance-based for the purposes of Section 162(m) (other than a Stock
Option or SAR with an exercise price at least equal to the fair market value
of the underlying Stock on the date of grant), the Committee shall in writing
preestablish one or more specific Performance Criteria no later than 90 days
after the commencement of the period of service to which the performance
relates (or at such earlier time as is required to qualify the Award as
performance-based under Section 162(m)). Prior to payment of any Performance
Award (other than a Stock Option or SAR with an exercise price at least equal
to the fair market value of the underlying Stock on the date of grant)
intended to qualify as performance-based under Section 162(m), the Committee
shall certify whether the Performance Criteria have been attained and such
determination shall be final and conclusive. If the Performance Criteria with
respect to any such Award are not attained, no other Award shall be provided
in substitution of the Performance Award.
b. AWARDS REQUIRING EXERCISE
(1) Time And Manner Of Exercise. Unless the Administrator
expressly provides otherwise, (a) an Award requiring exercise by the holder
will not be deemed to have been exercised until the Administrator receives a
written notice of exercise (in form acceptable to the Administrator) signed by
the appropriate person and accompanied by any payment required under the
Award; and (b) if the Award is exercised by any person other than the
Participant, the Administrator may require satisfactory evidence that the
person exercising the Award has the right to do so.
(2) Exercise Price. The Administrator shall determine the
exercise price of each Stock Option provided that each Stock Option intended
to qualify for the performance-based exception under Section 162(m) of the
Code and each ISO must have an exercise price that is not less than the fair
market value of the Stock subject to the Stock Option, determined as of the
date of grant. An ISO granted to an Employee described in Section 422(b)(6)
of the Code must have an exercise price that is not less than 110% of such
fair market value.
(3) Payment Of Exercise Price, If Any. Where the exercise of an
Award is to be accompanied by payment, the Administrator may determine the
required or permitted forms of payment, subject to the following: (a) all
payments will be by cash or check acceptable to the Administrator, or, if so
permitted by the Administrator (with the consent of the optionee of an ISO if
permitted after the grant), (i) through the delivery of shares of Stock which
have been outstanding for at least six months (unless the Administrator
approves a shorter period) and which have a fair market value equal to the
exercise price, (ii) by delivery of a promissory note of the person exercising
the Award to the Company, payable on such terms as are specified by the
Administrator, (iii) by delivery of an unconditional and irrevocable
undertaking by a broker to deliver promptly to the Company sufficient funds to
pay the exercise price, or (iv) by any combination of the foregoing
permissible forms of payment; and (b) where shares of Stock issued under an
Award are part of an original issue of shares, the Award shall require an
exercise price equal to at least the par value of such shares.
(4) Reload Awards. The Administrator may provide that upon the
exercise of an Award, either by payment of cash or (if permitted under Section
6.b.(3) above) through the tender of previously owned shares of Stock, the
Participant or other person exercising the Award will automatically receive a
new Award of like kind covering a number of shares of Stock equal to the
number of shares of Stock for which the first Award was exercised.
(5) ISOs. No ISO may be granted under the Plan after November
16, 2008, but ISOs previously granted may extend beyond that date.
c. AWARDS NOT REQUIRING EXERCISE
Awards of Restricted Stock and Unrestricted Stock may be made in return
for either (i) services determined by the Administrator to have a value not
less than the par value of the Awarded shares of Stock, or (ii) cash or other
property having a value not less than the par value of the Awarded shares of
Stock plus such additional amounts (if any) as the Administrator may determine
payable in such combination and type of cash, other property (of any kind) or
services as the Administrator may determine.
7. EFFECT OF CERTAIN TRANSACTIONS
a. MERGERS, ETC.
In the event of a Covered Transaction, all outstanding Awards shall vest
and if relevant become exercisable and all deferrals, other than deferrals of
amounts that are neither measured by reference to nor payable in shares of
Stock, shall be accelerated, immediately prior to the Covered Transaction and
upon consummation of such Covered Transaction all Awards then outstanding and
requiring exercise shall be forfeited unless assumed by an acquiring or
surviving entity or its affiliate as provided in the following sentence. In
connection with any Covered Transaction in which there is an acquiring or
surviving entity, the Administrator may provide for substitute or replacement
Awards from, or the assumption of Awards by, the acquiring or surviving entity
or its affiliates, any such substitution, replacement or assumption to be on
such terms as the Administrator determines.
b. CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK
(1) Basic Adjustment Provisions. In the event of a stock
dividend, stock split or combination of shares, recapitalization or other
change in the Company's capital structure, the Administrator will make
appropriate adjustments to the maximum number of shares that may be delivered
under the Plan under Section 4.a. and to the maximum share limits described in
Section 4.b., and will also make appropriate adjustments to the number and
kind of shares of stock or securities subject to Awards then outstanding or
subsequently granted, any exercise prices relating to Awards and any other
provision of Awards affected by such change.
(2) Certain Other Adjustments. The Administrator may also make
adjustments of the type described in paragraph (1) above to take into account
distributions to common stockholders other than those provided for in Section
7.a. and 7.b.(1), or any other event, if the Administrator determines that
adjustments are appropriate to avoid distortion in the operation of the Plan
and to preserve the value of Awards made hereunder; provided, that no such
adjustment shall be made to the maximum share limits described in Section 4.c.
or 4.d., or otherwise to an Award intended to be eligible for the performance-
based exception under Section 162(m), except to the extent consistent with
that exception, nor shall any change be made to ISOs except to the extent
consistent with their continued qualification under Section 422 of the Code.
(3) Continuing Application of Plan Terms. References in the Plan
to shares of Stock shall be construed to include any stock or securities
resulting from an adjustment pursuant to Section 7.b.(1) or 7.b.(2) above.
8. LEGAL CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock
pursuant to the Plan or to remove any restriction from shares of Stock
previously delivered under the Plan until the Company's counsel has approved
all legal matters in connection with the issuance and delivery of such shares;
if the outstanding Stock is at the time of delivery listed on any stock
exchange or national market system, the shares to be delivered have been
listed or authorized to be listed on such exchange or system upon official
notice of issuance; and all conditions of the Award have been satisfied or
waived. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of
the Award, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act. The Company may require
that certificates evidencing Stock issued under the Plan bear an appropriate
legend reflecting any restriction on transfer applicable to such Stock.
9. AMENDMENT AND TERMINATION
Subject to the last sentence of Section 3, the Administrator may at any
time or times amend the Plan or any outstanding Award for any purpose which
may at the time be permitted by law, or may at any time terminate the Plan as
to any further grants of Awards; provided, that (except to the extent
expressly required or permitted by the Plan) no such amendment will, without
the approval of the stockholders of the Company, effectuate a change for which
stockholder approval is required in order for the Plan to continue to qualify
under Section 422 of the Code and for Awards to be eligible for the
performance-based exception under Section 162(m).
10. NON-LIMITATION OF THE COMPANY'S RIGHTS
The existence of the Plan or the grant of any Award shall not in any way
affect the Company's right to Award a person bonuses or other compensation in
addition to Awards under the Plan.
11. GOVERNING LAW
The Plan shall be construed in accordance with the laws of the State of
Massachusetts.
EXHIBIT A
Definition of Terms
The following terms, when used in the Plan, shall have the meanings and be
subject to the provisions set forth below:
"Administrator": The Board or, if one or more has been appointed, the
Committee.
"Affiliate": Any corporation or other entity owning, directly or indirectly,
50% or more of the outstanding Stock of the Company, or in which the Company
or any such corporation or other entity owns, directly or indirectly, 50% of
the outstanding capital stock (determined by aggregate voting rights) or other
voting interests.
"Award": Any or a combination of the following:
(i) Stock Options.
(ii) SARs.
(iii) Restricted Stock.
(iv) Unrestricted Stock.
(v) Deferred Stock.
(vi) Securities (other than Stock Options) that are convertible
into or exchangeable for Stock on such terms and conditions
as the Administrator determines.
(vii) Cash Performance Awards.
(viii) Performance Awards.
(ix) Grants of cash, or loans, made in connection with other
Awards in order to help defray in whole or in part the
economic cost (including tax cost) of the Award to the
Participant.
"Board": The Board of Directors of the Company.
"Cash Performance Award": A Performance Award payable in cash. The right of
the Company under Section 6.a.(3) to extinguish an Award in exchange for cash
or the exercise by the Company of such right shall not make an Award otherwise
not payable in cash a Cash Performance Award.
"Code": The U.S. Internal Revenue Code of 1986 as from time to time amended
and in effect, or any successor statute as from time to time in effect.
"Committee": One or more committees of the Board which in the case of Awards
granted to officers of the Company shall be comprised solely of two or more
outside directors within the meaning of Section 162(m). Any Committee may
delegate ministerial tasks to such persons (including Employees) as it deems
appropriate.
"Company": CTC Communications Corp.
"Covered Transaction": Any of (i) a consolidation or merger in which the
Company is not the surviving corporation or which results in the acquisition
of all or substantially all of the Company's then outstanding common stock by
a single person or entity or by a group of persons and/or entities acting in
concert, (ii) a sale or transfer of all or substantially all the Company's
assets, or (iii) a dissolution or liquidation of the Company.
"Deferred Stock": A promise to deliver Stock or other securities in the
future on specified terms.
"Employee": Any person who is employed by the Company or an Affiliate.
"ISO": A Stock Option intended to be an "incentive stock option" within the
meaning of Section 422 of the Code. No Stock Option Awarded under the Plan
will be an ISO unless the Administrator expressly provides for ISO treatment.
"Participant": An Employee, director or other person providing services to
the Company or its Affiliates who is granted an Award under the Plan.
"Performance Award": An Award subject to Performance Criteria. The Committee
in its discretion may grant Performance Awards that are intended to qualify
for the performance-based compensation exception under Section 162(m) and
Performance Awards that are not intended so to qualify.
"Performance Criteria": Specified criteria the satisfaction of which is a
condition for the exercisability, vesting or full enjoyment of an Award. For
purposes of Performance Awards that are intended to qualify for the
performance-based compensation exception under Section 162(m), a Performance
Criterion shall mean an objectively determinable measure of performance
relating to any of the following (determined either on a consolidated basis
or, as the context permits, on a divisional, subsidiary, line of business,
project or geographical basis or in combinations thereof): (i) sales;
revenues; assets; expenses; earnings before or after deduction for all or any
portion of interest, taxes, depreciation, amortization or other items, whether
or not on a continuing operations or an aggregate or per share basis; return
on equity, investment, capital or assets; one or more operating ratios;
borrowing levels, leverage ratios or credit rating; market share; capital
expenditures; cash flow; stock price; stockholder return; network deployment;
sales of particular products or services; customer acquisition, expansion and
retention; or any combination of the foregoing; or (ii) acquisitions and
divestitures (in whole or in part); joint ventures and strategic alliances;
spin-offs, split-ups and the like; reorganizations; recapitalizations,
restructurings, financings (issuance of debt or equity) and refinancings;
transactions that would constitute a change of control; or any combination of
the foregoing. A Performance Criterion measure and targets with respect
thereto determined by the Administrator need not be based upon an increase, a
positive or improved result or avoidance of loss.
"Plan": The CTC Communications Corp. 1998 Incentive Plan as from time to time
amended and in effect.
"Restricted Stock": An Award of Stock subject to restrictions requiring that
such Stock be redelivered to the Company if specified conditions are not
satisfied.
"Section 162(m)": Section 162(m) of the Code.
"SARs": Rights entitling the holder upon exercise to receive cash or Stock,
as the Administrator determines, equal to a function (determined by the
Administrator using such factors as it deems appropriate) of the amount by
which the Stock has appreciated in value since the date of the Award.
"Stock": Common Stock of the Company, par value $ .01 per share.
"Stock Options": Options entitling the recipient to acquire shares of Stock
upon payment of the exercise price.
"Unrestricted Stock": An Award of Stock not subject to any restrictions under
the Plan.