EXHIBIT 4.2
AMENDMENT NO. 1 TO CTC COMMUNICATIONS 1998 INCENTIVE PLAN
Pursuant to a vote of a majority of the Company's stockholders at the
Annual Meeting of Stockholders duly held on September 16, 1999,
paragraph a
of Section 4 of the CTC Communications 1998 Incentive Plan is hereby
amended to read as follows:
"4. LIMITS ON AWARD UNDER THE PLAN
a. Number of Shares. A maximum of 2,250,000 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."
CTC COMMUNICATIONS GROUP, INC.
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:
Stock Options.
SARs.
Restricted Stock.
Unrestricted Stock.
Deferred Stock.
Securities (other than Stock Options) that are convertible into or
exchangeable for Stock on such terms and conditions as the
Administrator determines.
Cash Performance Awards.
Performance Awards.
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 Group, Inc.
"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 Group 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.