As filed with the Securities and Exchange Commission on June 20, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-8
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933
---------------
AMERICAN PORTABLE TELECOM, INC.
(Exact name of registrant as specified in its charter)
Delaware 39-1706857
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
8410 West Bryn Mawr Avenue, Suite 1100
Chicago, Illinois 60631
(Address of Principal Executive Offices) (Zip Code)
American Portable Telecom, Inc.
1996 Long-Term Incentive Plan
(Full title of the plan)
LeRoy T. Carlson, Jr.
Chairman
American Portable Telecom, Inc.
c/o Telephone and Data Systems, Inc.
30 North LaSalle Street, Suite 4000
Chicago, Illinois 60602
(Name and address of agent for service)
(312) 630-1900
(Telephone number, including
area code, of agent for service)
---------------
CALCULATION OF REGISTRATION FEE
Proposed
Maximum Proposed
Title of Securities Amount to be Maximum Aggregate Amount of
to be Registered Registered Offering Price Offering Registration
Per Share Price Fee
- ------------------- ---------------- -------------- ----------- ------------
Common Shares,
$1.00 par value 318,055 Shares $17.00(1) $ 5,406,935 $1,865
- ------------------- ---------------- -------------- ----------- ------------
Common Shares,
$1.00 par value 1,181,945 Shares $12.25(2) $14,478,826 $4,993
- ------------------- ---------------- -------------- ----------- ------------
TOTAL 1,500,000 Shares NA $19,885,761 $6,858
=================== ================ ============== =========== ============
(1) Represents the price at which such options may be exercised, pursuant
to Rule 457(h) under the Securities Act of 1933.
(2) Estimated for the Common Shares solely for the purpose of calculating
the registration fee on the basis of the average of the high and low
prices of the Common Shares of the Company on the Nasdaq National
Market on June 19, 1996, pursuant to Rule 457(h)(1) under the
Securities Act of 1933.
(3) In addition, this Registration Statement also covers an indeterminate
amount of additional securities which may be issued under the
above-referenced Plan pursuant to the anti-dilution provisions of such
Plan.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information.*
Item 2. Registration Information and Employee Plan Annual Information.*
* Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from the Registration Statement in accordance
with Rule 428 under the Securities Act of 1933, as amended (the "1933
Act") and the Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents which have heretofore been filed by American
Portable Telecom, Inc. (the "Company" or the "Registrant"), with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Act of
1933, as amended (the "1933 Act"), and the Securities Exchange Act of 1934, as
amended (the "1934 Act"), are incorporated by reference herein and shall be
deemed to be a part hereof:
1. The Company's Prospectus dated April 25, 1996, as filed with
the Commission on April 26, 1996, pursuant to Rule 424(b)(4)
under the 1933 Act, which is part of the Company's
Registration Statement on Form S-1, as amended (Registration
No. 333-1514).
2. The description of the Common Shares, par value $1.00 per
share ("Common Shares"), of the Company contained in the
Company's Registration Statement on Form 8-A, as filed with
the Commission on April 19, 1996.
3. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996.
4. The Company's Current Report on Form 8-K, as filed with the
Commission on June 7, 1996.
5. All other reports filed by the Company pursuant to Section 13
(a) and 15(d) of the 1934 Act since December 31, 1995.
All documents, subsequently filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act, prior to the
filing of a post-effective amendment to this Registration Statement which
indicates that all securities offered have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and made a part hereof from their
respective dates of filing (such documents, and the documents enumerated above,
being hereinafter referred to as "Incorporated Documents").
Any statement contained in an Incorporated Document shall be deemed to
be modified or superseded for purposes of this Registration Statement to the
extent that a statement contained herein or in any other subsequently filed
Incorporated Document modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Registration Statement.
<PAGE>
Item 4. Description of Securities.
See Item 3.
Item 5. Interests of Named Experts and Counsel.
Certain legal matters relating to the securities registered hereby will
be addressed by Sidley & Austin, One First National Plaza, Chicago, Illinois
60603. The Company is controlled by Telephone and Data Systems, Inc. ("TDS")
which is controlled by a voting trust. Walter C.D. Carlson, a trustee and
beneficiary of such voting trust and a director of TDS, the Company and certain
other subsidiaries of TDS, Michael G. Hron, the Secretary of TDS, the Company
and certain other subsidiaries of TDS, William S. DeCarlo, the Assistant
Secretary of TDS, the Company and certain other subsidiaries of TDS, Stephen P.
Fitzell, the Secretary of certain subsidiaries of TDS, and Sherry S. Treston,
the Assistant Secretary of certain subsidiaries of TDS, are partners of Sidley &
Austin.
Item 6. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law ("DGCL") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person was an officer or director of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that such officer or director acted in good faith in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe his
conduct was illegal. A Delaware corporation may indemnify officers and directors
in an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation in the
performance of his duty. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred. Article XI of the Company's Restated
Certificate of Incorporation provides for the indemnification of directors,
officers and employees of the Company within the limitations of Section 145.
In accordance with Section 102(b)(7) of the DGCL, the Company's
Restated Certificate of Incorporation provides that directors shall not be
personally liable for monetary damages for breaches of their fiduciary duty as
directors except for (i) breaches of their duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, (iii) certain transactions
under Section 174 of the DGCL (unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv) transactions from which a director derives an
improper personal benefit. The effect of the provision is to eliminate the
personal liability of directors for monetary damages for actions involving a
breach of their fiduciary duty of care, including any actions involving gross
negligence.
The Company has directors' and officers' liability insurance which
provides, subject to certain policy limits, deductible amounts and exclusions,
coverage for all persons who have been, are or may in the future be, directors
or officers of the Company, against amounts which such persons must pay
resulting from claims against them by reason of their being such directors or
officers during the policy period for certain breaches of duty, omissions or
other acts done or wrongfully attempted or alleged. Such policies provide
coverage to certain situations where the Company cannot directly provide
indemnification under DGCL.
Item 7. Exemption from Registration Claimed.
Not Applicable.
<PAGE>
Item 8. Exhibits.
The exhibits accompanying this Registration Statement are listed on the
accompanying Exhibit Index. The Plan is not intended to be qualified under
Section 401(a) of the Internal Revenue Code.
Item 9. Undertakings.
The Company hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(a) To include any prospectus required by Section
10(a)(3) of the 1933;
(b) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would
not exceed that which was registered) and any
deviation from the low or high and of them offering
range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and
price represent no more than a 20 percent change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
(c) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
provided, however, that paragraphs 1.(a) and 1.(b) do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Company pursuant to Section 13
or Section 15(d) of the 1934 Act that are incorporated by
reference in the Registration Statement.
2. That, for the purpose of determining any liability under the
1933 Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective
amendment any of the Common Shares being registered hereby
which remain unsold at the termination of the offering.
4. That, for the purposes of determining any liability under the
1933 Act, each filing of the Company's Annual Report pursuant
to Section 13(a) or Section 15(d) of the 1934 Act (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the 1934 Act) that is
incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering hereof.
5. That, insofar as indemnification for liabilities arising under
the 1933 Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in
the opinion of the Commission such indemnification is against
public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Company of expenses
<PAGE>
incurred or paid by a director, officer or controlling person
of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy
as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on the 20th day of
June, 1996.
AMERICAN PORTABLE TELECOM, INC.
By: /s/ Donald W. Warkentin
-------------------------
Donald W. Warkentin
President
POWER OF ATTORNEY AND SIGNATURES
The undersigned officers and directors of American Portable
Telecom, Inc. hereby severally constitute and appoint LeRoy T. Carlson, Jr. and
Donald W. Warkentin, and each of them, our true and lawful attorneys-in-fact and
agents, with full power of substitution, to sign for us in our names in the
capacities indicated below, all amendments to this registration statement, and
generally to do all things in our names and on our behalf in such capacities to
enable American Portable Telecom, Inc. to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission in connection with this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated and on the 20th day of June, 1996.
/s/ Donald W. Warkentin President and Chief Executive Officer (Principal
- ------------------------- Executive Officer) and Director
Donald W. Warkentin
/s/ J. Clarke Smith Vice President-Finance and Administration and
- ------------------------- Chief Financial Officer (Principal Financial and
J. Clarke Smith Accounting Officer), Treasurer and Director
/s/ LeRoy T. Carlson, Jr. Chairman and Director
- -------------------------
LeRoy T. Carlson, Jr.
/s/ LeRoy T. Carlson Director
- -------------------------
LeRoy T. Carlson
/s/ Murray L. Swanson Director
- -------------------------
Murray L. Swanson
/s/ Rudolph E. Hornacek Director
- -------------------------
Rudolph E. Hornacek
/s/ James Barr III Director
- -------------------------
James Barr III
/s/ Walter C.D. Carlson Director
- -------------------------
Walter C.D. Carlson
<PAGE>
EXHIBIT INDEX
The following documents are filed herewith or incorporated
herein by reference.
Exhibit
No. Description
- ------- -----------
4.1 Restated Certificate of Incorporation of the Company, as
amended, is hereby incorporated herein by reference to Exhibit
3(i) to the Company's Registration Statement on Form S-1
(Registration No. 333-1514)
4.2 Bylaws of the Company is hereby incorporated herein by
reference to Exhibit 3(ii) to the Company's Registration
Statement on Form S-1 (Registration No. 333-1514)
5 Opinion of Counsel
23.1 Consent of Independent Public Accountants
23.2 Consent of Counsel (contained in Exhibit 5)
24 Powers of Attorney (included on signature page)
99.1 American Portable Telecom, Inc. 1996 Long-Term Incentive Plan
<PAGE>
EXHIBIT 5
SIDLEY & AUSTIN
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60603
(312) 853-7000
June 20, 1996
American Portable Telecom, Inc.
Suite 1100
8410 West Bryn Mawr Avenue
Chicago, Illinois 60631
Re: American Portable Telecom, Inc.
Registration Statement on Form S-8
Ladies and Gentlemen:
We are counsel to American Portable Telecom, Inc., a Delaware
corporation (the "Company"), and have represented the Company in connection with
the Registration Statement on Form S-8 (the "Registration Statement") being
filed by the Company with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
issuance and delivery of 1,500,000 common shares, par value $1.00 per share (the
"Shares"), of the Company pursuant to the American Portable Telecom, Inc. 1996
Long- Term Incentive Plan (the "Plan").
In rendering this opinion, we have examined and relied upon a
copy of the Plan and the Registration Statement, including the related
Prospectus dated the date hereof. We have also examined and relied upon
originals, or copies of originals certified to our satisfaction, of such
agreements, documents, certificates and other statements of governmental
officials and other instruments, and have examined such questions of law and
have satisfied ourselves as to such matters of fact, as we have considered
relevant and necessary as a basis for this opinion. We have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures, the legal capacity of all natural persons and the conformity
with the original documents of any copies thereof submitted to us for our
examination.
Based on the foregoing, we are of the opinion that:
1. The Company is duly incorporated and validly existing
under the laws of the State of Delaware; and
2. Each Share will be legally issued, fully paid and
nonassessable when (i) the Registration Statement shall have become effective
under the Securities Act; (ii) such Share shall have been duly issued and
delivered in the manner contemplated by the Plan; and (iii) a certificate
representing such Share shall have been duly executed, countersigned and
registered and duly delivered to the person entitled thereto against receipt of
the agreed consideration therefor (not less than the par value thereof) in
accordance with the Plan.
We do not find it necessary for the purposes of this opinion
to cover, and accordingly we express no opinion as to, the application of the
securities or "Blue Sky" laws of the various states to the issuance and delivery
of the Shares.
The Company is controlled by Telephone and Data Systems, Inc.
("TDS"), which is controlled by a voting trust. Walter C.D. Carlson, a trustee
and beneficiary of such voting trust and a director of TDS, the
<PAGE>
Company and certain other subsidiaries of TDS, Michael G. Hron, the Secretary of
TDS, the Company and certain other subsidiaries of TDS, William S. DeCarlo, the
Assistant Secretary of TDS, the Company and certain other subsidiaries of TDS,
Stephen P. Fitzell, the Secretary of certain subsidiaries of TDS, and Sherry S.
Treston, the Assistant Secretary of certain subsidiaries of TDS, are partners of
this Firm.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to all references to our Firm in or made a
part of the Registration Statement.
Very truly yours,
SIDLEY & AUSTIN
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Form S-8 Registration Statement of American
Portable Telecom, Inc. of our report dated February 20, 1996 (except
with respect to Note 2.(i), as to which the date is June 4, 1996), on the
consolidated financial statements of American Portable Telecom, Inc. and
Subsidiaries for the year ended December 31, 1995, included in the American
Portable Telecom, Inc. Current Report on Form 8-K and to all references to our
Firm included in this Form S-8 Registration Statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 19, 1996
<PAGE>
EXHIBIT 99.1
AMERICAN PORTABLE TELECOM, INC.
1996 LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE
The purposes of the American Portable Telecom, Inc. 1996
Long-Term Incentive Plan (the "Plan") are (i) to align the interests of the
stockholders of American Portable Telecom, Inc. (the "Company"), and the key
executive and management employees of the Company and certain independent
contractors hired by the Company ("employees") who receive options under the
Plan by increasing the proprietary interest of such employees in the Company's
growth and success, (ii) to advance the interests of the Company by attracting
and retaining key executive personnel and (iii) to motivate such individuals to
act in the long-term best interests of the Company.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following capitalized terms
shall have the meanings set forth in this Article.
2.1 "Affiliate" shall mean a corporation which owns directly or
indirectly at least 50% of the outstanding stock of the Company or the combined
voting power of such outstanding stock, or a corporation at least 50% of whose
outstanding stock or the combined voting power of such outstanding stock is
owned directly or indirectly by the Company.
2.2 "Award" shall mean a written agreement between the Company and
an optionee evidencing an option granted hereunder.
<PAGE>
2.3 "Board" shall mean the Board of Directors of the Company.
2.4 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
2.5 "Committee" shall mean a committee designated by the
Board, consisting of two or more members of the Board, each of whom may be
required by the Board to be an "outside director" within the meaning of
section 162(m) of the Code. No member of the Committee during the one year
prior to serving as a Committee member, or while serving as a Committee member,
shall have been, or shall be, granted or awarded shares of Common Stock, or
options to purchase shares of Common Stock or other Stock of the Company,
or stock appreciation rights pursuant to any plan of the Company or any of its
Affiliates, except for a grant or award which would not result in such
member ceasing to be a "disinterested person" within the meaning of Rule 16b-3
under the Exchange Act.
2.6 "Common Stock" shall mean the class of shares of the
Company designated as "Common Shares" in its Certificate of Incorporation, as
such may be amended or restated from time to time.
2.7 "Disability" shall mean a total physical disability which,
in the Committee's judgment, prevents an optionee from performing
substantially such optionee's employment duties and responsibilities for a
continuous period of at least six months.
2.8 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
2.9 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
<PAGE>
2.10 "Fair Market Value" of a share of Stock shall mean its
closing sale price on the principal national stock exchange on which the Stock
is traded on the date as of which such value is being determined, or, if there
shall be no reported sale for such date, on the next preceding date for
which a sale was reported; provided that if Fair Market Value for any
date cannot be so determined, Fair Market Value shall be determined by the
Committee by whatever means or method as the Committee, in the good faith
exercise of its discretion, shall at such time deem appropriate.
2.11 "Incentive Stock Option" shall mean an option to purchase shares
of Stock which meets the requirements of section 422 of the Code (or any
successor provision) and which is intended by the Committee to constitute an
Incentive Stock Option.
2.12 "Legal Representative" shall mean a guardian, legal
representative or other person acting in a similar capacity with respect to an
optionee.
2.13 "Mature Shares" shall mean shares of Stock (i) for which the
holder thereof has good title, free and clear of all liens and encumbrances, and
(ii) which such holder has held for at least six months or has purchased on the
open market.
2.14 "Non-Qualified Stock Option" shall mean an option to purchase
shares of Stock which is not an Incentive Stock Option.
2.15 "Performance Measures" shall mean criteria and objectives
established by the Committee which must be satisfied during a Performance Period
in order for an employee eligible to participate in the Plan to be granted a
Performance Stock Option. Such criteria and objectives may include, but are not
limited to, the attainment by a share of Stock of a specified Fair Market Value
for a specified period of
<PAGE>
time, certain earnings per share or return on equity, increased cash flows,
revenues, or market share, or attainment of cost reduction goals, attainment of
individual performance objectives, or any other criteria and objectives
established by the Committee or any combination thereof.
2.16 "Performance Period" shall mean a period designated by the
Committee during which Performance Measures shall be measured.
2.17 "Permanent and Total Disability" shall have the meaning set
forth in section 22(e)(3) of the Code (or any successor thereto).
2.18 "Permitted Transferee" shall mean (i) an optionee's spouse,
(ii) any of an optionee's lineal descendants or (iii) a trust or similar
arrangement of which such spouse, a lineal descendant of such optionee, or
one or more of such persons are the only current beneficiaries, provided that
such spouse or descendant (or the Legal Representative of such spouse or
descendant) or such trust or similar arrangement, as the case may be, has
entered into a written agreement with the Company authorizing the Company to
withhold shares of Stock which would otherwise be delivered to such person
upon an exercise of a Non-Qualified Stock Option to pay any federal, state,
local or other taxes which may be required to be withheld or paid in connection
with such exercise in the event that the optionee does not provide for an
arrangement satisfactory to the Company to assure that such taxes will be paid.
2.19 "Stock" shall mean Common Stock and any other equity security
which (i) is designated by the Board to be available for stock option grants
under the Plan or (ii) becomes available for grants under the Plan by reason of
a stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, spin-off or other similar change
in capitalization or event or any distribution to holders of shares of Common
Stock.
<PAGE>
ARTICLE III
ELIGIBILITY AND ADMINISTRATION
3.1 Eligibility. Participants in the Plan shall consist of such key
executive and management employees of the Company as the Committee in its sole
discretion may select from time to time. The Committee's selection of an
employee to participate in the Plan at any time shall not require the Committee
to select such employee to participate in the Plan at any other time.
3.2 Committee Administration. (a) In General. The Plan shall be
administered by the Committee or its designee in accordance with the terms of
the Plan. The Committee, in its sole discretion, shall determine the form and
timing of each grant of an option, the number of shares of Stock subject to each
option and the purchase price per share of Stock purchasable upon exercise of
the option, the time and conditions of exercise of the option and all other
terms and conditions of the option, including, without limitation, the form of
the Award evidencing the option. The Committee shall interpret the Plan and
establish any rules and procedures it deems necessary or desirable for the
administration of the Plan and may impose, incidental to the grant of an option,
conditions with respect to the option, such as restricting or limiting
competitive employment or other activities. All such interpretations, rules,
procedures and conditions shall be conclusive and binding on the parties. A
majority of the members of the Committee shall constitute a quorum. The acts of
the Committee shall be either (i) acts of a majority of the members of the
Committee present at any meeting at which a quorum is present or (ii) acts
approved in writing by a majority of the Committee without a meeting.
(b) Delegation. The Committee may delegate some or all of its power
and authority hereunder to the Chairman of the Board or to an executive officer
of the Company, as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority to select an
<PAGE>
officer or other person subject to section 16 of the Exchange Act to participate
in the Plan and, if the Committee is composed solely of outside directors within
the meaning of section 162(m) of the Code, the Committee may not delegate its
power and authority with regard to decisions concerning the timing, pricing or
number of shares subject to an option granted to any "covered employee" within
the meaning of section 162(m) of the Code or any other person who, in the
Committee's judgment, is likely to be such a "covered employee" at any time
during the exercise period of the option to be granted to such employee.
(c) Indemnification. No member of the Board or Committee nor any
executive officer of the Company to whom the Committee shall delegate any of its
power and authority hereunder, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with the Plan and each member of the Board and the Committee and each such
executive officer who is designated by the Committee to exercise any power or
authority hereunder shall be entitled to indemnification and reimbursement by
the Company in respect of any claim, loss, damage or expense (including
attorneys' fees) arising therefrom to the full extent permitted by law, except
as otherwise may be provided in the Company's articles of incorporation or
by-laws, and under any directors' and officers' liability insurance which may be
in effect from time to time.
3.3 Shares Available. Subject to adjustment as provided in Section 5.7,
1,500,000 shares of Common Stock shall initially be available under the Plan.
Such shares of Common Stock and shares of each other class of Stock which become
available under the Plan shall be reduced by the sum of the aggregate number of
shares of such Stock then subject to outstanding options under the Plan. To the
extent that an outstanding option expires or terminates unexercised or is
cancelled or forfeited, then the shares of Stock subject to such expired,
unexercised, cancelled or forfeited portion of such option shall again be
available under the Plan. Shares of Stock to be delivered under the Plan shall
be made available from authorized and unissued shares of Stock, or authorized
and issued shares of Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
<PAGE>
ARTICLE IV
STOCK OPTIONS
4.1 In General. The Committee may, in its discretion, grant options to
purchase shares of Stock to such eligible employees as may be selected by the
Committee. Any option to be granted to a key employee upon his or her initial
employment with the Company shall be subject to the approval of the Chairman of
the Board. Each option, or portion thereof, that is not an Incentive Stock
Option, shall be a Non-Qualified Stock Option. Each Incentive Stock Option shall
be granted within ten years of the effective date of the Plan. To the extent
that the aggregate Fair Market Value (determined as of the date of grant) of
shares of Stock with respect to which options designated as Incentive Stock
Options are exercisable for the first time by an option holder during any
calendar year (under the Plan or any other plan of the Company or any Affiliate)
exceeds $100,000, such options shall constitute Non-Qualified Stock Options.
Options shall be subject to the terms and conditions set forth in this Section
4.1 and shall contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as the Committee shall deem advisable, except that
the Committee shall not grant an option or options in any calendar year to any
eligible employee which, in the aggregate, give such an employee an option to
purchase more than 150,000 shares of Stock (as may be adjusted pursuant to
Section 5.7).
4.2 Number of Shares and Purchase Price. The number of shares of Stock
subject to an option and the purchase price per share of Stock purchasable upon
exercise of the option shall be determined by the Committee; provided, however,
that the purchase price per share of Stock purchasable upon exercise of either
an Incentive Stock Option or a Non-Qualified Stock Option shall generally be the
average Fair Market Value of a share of Stock during the 20 trading days
immediately preceding the date the option is
<PAGE>
granted, but in the case of an Incentive Stock Option, shall not be less than
100% of the Fair Market Value of a share of Stock on the date such option is
granted; provided further, that if an Incentive Stock Option shall be granted to
an employee who owns capital stock possessing more than ten percent of the total
combined voting power of all classes of capital stock of the Company or any of
its subsidiaries ("Ten Percent Holder"), the purchase price per share of Stock
shall be at least 110% of its Fair Market Value. In the case of options which
are granted on the date of the closing of the Company's initial public offering
of Common Stock (the "IPO"), the purchase price will be the initial public
offering price of a share of Common Stock.
4.3 Option Period and Exercisability. The period during which an option
may be exercised shall be determined by the Committee; provided, however, that
no Incentive Stock Option shall be exercised later than ten years after its date
of grant; provided further, that if an Incentive Stock Option shall be granted
to a Ten Percent Holder, such option shall be exercised within five years of its
date of grant. The Committee may, in its discretion, establish Performance
Measures which must be satisfied during a Performance Period as a condition
either to a grant of an option or to the exercisability of all or a portion of
an option. The Committee shall determine whether an option shall become
exercisable in cumulative or non-cumulative installments or in part or in full
at any time. An option may be exercised only with respect to whole shares of
Stock.
4.4 Method of Exercise. An option may be exercised (i) by giving
written notice to the most senior executive in the Company's Human Resources
Department specifying the number of whole shares of Stock to be purchased and by
accompanying such notice with payment therefor in full (unless another
arrangement for such payment which is satisfactory to the Company has been made)
either (A) in cash, (B) in Mature Shares having a Fair Market Value, determined
as of the date of exercise, equal to the aggregate purchase price payable by
reason of such exercise, (C) by authorizing the Company to withhold whole
<PAGE>
shares of Stock which would otherwise be delivered upon exercise of the option
having a Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (D) in cash by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (E) a combination of (A), (B) and (C), in each
case to the extent determined by the Committee at the time the option is
granted, and (ii) by executing such documents as the Company may reasonably
request. The Committee shall have sole discretion to disapprove of an election
pursuant to any of clauses (B)-(E) in the preceding sentence and, in the case of
an optionee who is subject to section 16 of the Exchange Act, the Company may
require that the method of making such payment be in compliance with section 16
of the Exchange Act and the rules and regulations thereunder. If payment of the
purchase price is to be made pursuant to clause (B) or (C) (or a combination
thereof) of the first sentence of this Section 4.4, any fraction of a share of
Stock which would be required to pay such purchase price shall be disregarded
and the remaining amount due shall be paid in cash by the optionee. No share of
Stock shall be delivered until the full purchase price therefor has been paid.
4.5 Termination of Employment. (a) Disability. Unless otherwise
specified in an Award evidencing the grant of an option and, in the case of an
Incentive Stock Option, subject to Section 4.5(f), if an optionee's employment
with the Company terminates by reason of Disability, the option held by such
optionee shall be exercisable only to the extent that such option is exercisable
on the effective date of such optionee's termination of employment and after
such date may be exercised by such optionee (or such optionee's Legal
Representative) for a period of 12 months after the effective date of such
optionee's termination of employment or until the expiration of the term of such
option, whichever period is shorter. If the optionee shall die within such
period (or other period specified in the Award), the option shall be exercisable
by the beneficiary or beneficiaries duly designated by the optionee or, if none,
the executor or administrator of the optionee's estate or, if none, the person
to whom the optionee's rights under such option shall pass by will or by
applicable laws of descent and distribution, to the same extent such option
<PAGE>
was exercisable by the optionee on the date of the optionee's death, for a
period ending on the later of (i) the last day of such period and (ii) 90 days
after the date of the optionee's death.
(b) Retirement or Resignation with Prior Written Consent of the
Chairman of the Board. Unless otherwise specified in an Award evidencing the
grant of an option and, in the case of an Incentive Stock Option, subject to
Section 4.5(f), if an optionee's employment with the Company terminates by
reason of the optionee's retirement after attainment of age 65 or by reason of
the optionee's resignation of employment at any age with the prior written
consent of the Chairman of the Board, the option held by such optionee shall be
exercisable only to the extent that such option is exercisable on the effective
date of such optionee's retirement or resignation, as the case may be, and after
such date may be exercised by such optionee (or such optionee's Legal
Representative) for a period of 90 days after such effective date or until the
expiration of the term of such option, whichever period is shorter. If the
optionee who has so retired or resigned shall die within such period (or other
period specified in the Award), the option shall be exercisable by the
beneficiary or beneficiaries duly designated by the optionee or, if none, the
executor or administrator of the optionee's estate or, if none, the person to
whom the optionee's rights under such option shall pass by will or by the
applicable laws of descent and distribution, to the same extent such option was
exercisable by the optionee on the date of the optionee's death, for a period
ending 180 days after the effective date of such optionee's retirement or
resignation.
(c) Transfer to Affiliate. Unless otherwise specified in an Award
evidencing the grant of an option, and in the case of an Incentive Stock Option,
subject to Section 4.5(f), if an optionee's employment with the Company
terminates by reason of the optionee's transfer of employment to an Affiliate
then the optionee's employment with such Affiliate shall be deemed to be
employment with the Company solely for the purpose of determining the
exercisability of any outstanding option awarded to such optionee, except that
such option shall be exercisable only to the extent it is exercisable at the
time of such transfer.
<PAGE>
(d) Death. Unless otherwise specified in an Award evidencing the grant
of an option and, in the case of an Incentive Stock Option, subject to Section
4.5(f), if an optionee's employment with the Company terminates by reason of
death, the option held by such optionee shall be exercisable only to the extent
that such option is exercisable on the date of such optionee's death, and after
such date may be exercised by the beneficiary or beneficiaries duly designated
by the optionee or, if none, the executor or administrator of the optionee's
estate or, if none, the person to whom the optionee's rights under such option
shall pass by will or by the applicable laws of descent or distribution for a
period of 180 days after the date of death or until the expiration of the term
of such option, whichever period is shorter.
(e) Other Termination of Employment. Unless otherwise specified in an
Award evidencing the grant of an option and, in the case of an Incentive Stock
Option, subject to Section 4.5(f), if an optionee's employment with the Company
terminates for any reason other than Disability, retirement after attainment of
age 65, resignation of employment with the prior written consent of the Chairman
of the Board, a transfer to an Affiliate or death, the option held by such
optionee shall be exercisable only to the extent that such option is exercisable
on the effective date of such optionee's termination of employment and after
such date may be exercised by such optionee (or such optionee's Legal
Representative) for a period of 30 days after such effective date or until the
expiration of the term of such option, whichever period is shorter. If the
optionee shall die within such period (or other period specified in the Award),
the option held by such optionee shall be exercisable only to the extent that
such option is exercisable on the date of such optionee's death, and after such
date may be exercised by the beneficiary or beneficiaries duly designated by the
optionee or, if none, the executor or administrator of the optionee's estate or,
if none, the person to whom the optionee's rights under such option shall pass
by will or by the applicable laws of descent or distribution for a period of 120
days after the date of death or until the expiration of the term of such option,
whichever period is shorter. Notwithstanding the first sentence of this
subsection (e), if an optionee ceases to be employed by the Company on account
of such optionee's negligence, willful
<PAGE>
misconduct, competition with the Company or an Affiliate or misappropriation of
confidential information of the Company or an Affiliate, the option shall
terminate on the date the optionee's employment with the Company terminates,
unless such option terminates earlier pursuant to Section 4.6.
(f) Termination of Employment - Incentive Stock Options. If the
employment with the Company of an optionee of an Incentive Stock Option
terminates by reason of death or Permanent and Total Disability, each Incentive
Stock Option held by such optionee shall be exercisable only to the extent that
such option is exercisable on the date of such optionee's death or on the
effective date of such optionee's termination of employment by reason of
Permanent and Total Disability, as the case may be. In the case of the
optionee's Permanent and Total Disability, the option may thereafter be
exercised by such optionee (or such optionee's Legal Representative) for a
period of one year (or such shorter period as the Committee may specify in the
Award) after the effective date of such optionee's termination of employment by
reason of Permanent and Total Disability or until the expiration of the term of
such Incentive Stock Option, whichever period is shorter. In the case of the
optionee's death, the option may thereafter be exercised by the beneficiary or
beneficiaries duly designated by the optionee or, if none, the executor or
administrator of the optionee's estate or, if none, the person to whom the
optionee's rights under such option shall pass by will or by the applicable laws
of descent and distribution for a period of one year (or such other period as
the Committee may specify in the Award) after the date of such optionee's death
or until the expiration of the term of such Incentive Stock Option, whichever
period is shorter.
If an optionee's employment with the Company terminates for
any reason other than death or Permanent and Total Disability, each Incentive
Stock Option held by such optionee shall be exercisable only to the extent such
option is exercisable on the effective date of such optionee's termination of
employment, and may thereafter be exercised by such optionee (or such optionee's
Legal Representative)
<PAGE>
for a period of three months after the effective date of such optionee's
termination of employment or until the expiration of the term of the Incentive
Stock Option, whichever period is shorter.
If an optionee dies during the exercise period specified in
the Award evidencing the grant of such option following termination of
employment by reason of Permanent and Total Disability, or if the optionee dies
during the three-month period following termination of employment for any reason
other than death or Permanent and Total Disability, each Incentive Stock Option
held by such optionee shall be exercisable only to the extent such option is
exercisable on the date of the optionee's death and may thereafter be exercised
by the beneficiary or beneficiaries duly designated by the optionee or, if none,
the executor or administrator of the optionee's estate or, if none, the person
to whom the optionee's rights under such option shall pass by will or by the
applicable laws of descent and distribution for a period of one year (or such
shorter period as the Committee may specify in the Award) after the date of
death or until the expiration of the term of such Incentive Stock Option,
whichever period is shorter.
4.6 Forfeiture of Option Upon Competition with the Company or Any
Affiliate or Misappropriation of Confidential Information. Notwithstanding any
other provision herein, an option granted pursuant to an Award under the Plan
shall not be exercisable on or after any date on which such optionee (a) enters
into competition with the Company or an Affiliate, or (b) misappropriates
confidential information of the Company or an Affiliate, as determined by the
Committee or the Company in its sole discretion, and, accordingly, shall be
terminated and thereby forfeited to the extent it has not been exercised as of
such date.
For purposes of the preceding sentence, an optionee shall be
treated as entering into competition with the Company or an Affiliate if such
optionee (i) directly or indirectly, individually or in conjunction with any
person, firm or corporation, has contact with any customer of the Company or an
<PAGE>
Affiliate or any prospective customer which has been contacted or solicited by
or on behalf of the Company or an Affiliate for the purpose of soliciting or
selling to such customer or prospective customer any product or service, except
to the extent such contact is made on behalf of the Company or an Affiliate, or
(ii) otherwise competes with the Company or an Affiliate in any manner or
otherwise engages in the business of the Company or an Affiliate.
An optionee shall be treated as misappropriating confidential
information of the Company or an Affiliate if such optionee (i) uses
confidential information (as described below) for the benefit of anyone other
than the Company or such Affiliate, as the case may be, or discloses the
confidential information to anyone not authorized by the Company or such
Affiliate, as the case may be, to receive such information, (ii) upon
termination of employment, makes any summaries of, takes any notes with respect
to, or memorizes any information or takes any confidential information or
reproductions thereof from the facilities of the Company or an Affiliate, or
(iii) upon termination of employment or upon the request of the Company or an
Affiliate, fails to return all confidential information then in the optionee's
possession. "Confidential information" shall mean any confidential and
proprietary drawings, reports, sales and training manuals, customer lists,
computer programs, and other material embodying trade secrets or confidential
technical, business, or financial information of the Company or an Affiliate.
ARTICLE V
GENERAL
5.1 Effective Date and Term of Plan. The Plan shall become effective as
of the date of the IPO and shall terminate ten years thereafter unless
terminated earlier by the Board. Termination of the Plan shall not affect the
terms or conditions of any option granted prior to termination. Grants of
options hereunder may be made at any time on or after the effective date and
prior to the termination of the Plan.
<PAGE>
The Plan shall be submitted to the stockholder of the Company for approval and,
in the event that the Plan is not approved by such stockholder, no options shall
be granted hereunder.
5.2 Amendments. The Board may amend the Plan as it shall deem
advisable, subject to any requirement of stockholder approval under applicable
law, including Rule 16b-3 under the Exchange Act and section 162(m) of the Code;
provided, however, that, except as provided in Section 5.7, no amendment shall
be made without stockholder approval if such amendment (a) would increase the
maximum number of shares of Stock available for issuance under the Plan or (b)
would reduce the minimum purchase price in the case of an option; provided
further that no amendment shall extend the term of the Plan or shall effect any
change inconsistent with section 422 of the Code with respect to any Incentive
Stock Option which shall have been, or may be, granted under the Plan. No
amendment may impair the rights of a holder of an outstanding option without the
consent of such holder.
5.3 Award. Each option granted under the Plan shall be evidenced by an
Award setting forth the terms and conditions applicable to such option. No
option shall be valid until an Award is executed by the Company's President and
Chief Executive Officer or the Chairman of the Board and the optionee and, upon
execution by each party and delivery of the Award to the most senior executive
in the Company's Human Resources Department such option shall be effective as of
the effective date set forth in the Award.
5.4 Transferability of Stock Options. No Incentive Stock Option shall
be transferable other than by will or the laws of descent and distribution or
pursuant to a beneficiary designation effective on the optionee's death. No
Non-Qualified Stock Option shall be transferable other than (a) by will or the
laws of descent and distribution, (b) pursuant to a beneficiary designation
effective on the optionee's death, or (c) to the extent permitted under (i)
securities laws relating to the registration of securities subject to
<PAGE>
employee benefit plans, (ii) Rule 16b-3 under the Exchange Act and (iii) the
Award evidencing the grant of such option, by gift to a Permitted Transferee.
Each option may be exercised during the optionee's lifetime only by the optionee
(or the optionee's Legal Representative) or, if applicable, by a Permitted
Transferee. Except as permitted by the preceding sentences, no option may be
sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise
disposed of (whether by operation of law or otherwise) or be subject to
execution, attachment or similar process. Upon any attempt to so sell, transfer,
assign, pledge, hypothecate, encumber or otherwise dispose of any option such
award and all rights thereunder shall immediately become null and void.
5.5 Tax Withholding. The Company shall have the right to require, prior
to the delivery of any shares of Stock, payment by the holder of the option
being exercised of any federal, state, local or other taxes which may be
required to be withheld or paid in connection with the exercise of such option.
As determined by the Committee at the time of the grant of an option, an Award
may provide that (i) the Company shall withhold whole shares of Stock which
would otherwise be delivered to a holder, having an aggregate Fair Market Value
determined as of the date the obligation to withhold or pay taxes arises in
connection with an option (the "Tax Date") in the amount necessary to satisfy
any such obligation or (ii) the holder may satisfy any such obligation by any of
the following means: (A) a cash payment to the Company, (B) delivery to the
Company of Mature Shares the aggregate Fair Market Value of which shall be
determined as of the Tax Date, (C) authorizing the Company to withhold whole
shares of Stock which would otherwise be delivered the aggregate Fair Market
Value of which shall be determined as of the Tax Date, (D) a cash payment by a
broker-dealer acceptable to the Company to whom the holder has submitted an
irrevocable notice of exercise or (E) any combination of (A), (B) and (C);
provided, however, that the Committee shall have sole discretion to disapprove
of an election pursuant to any of clauses (B)-(E), and that in the case of an
optionee who is subject to section 16 of the Exchange Act, the Company may
require that the method of satisfying such an obligation be in compliance with
section 16 of the Exchange Act and
<PAGE>
the rules and regulations thereunder. An Award may provide for shares of Stock
to be delivered or withheld having an aggregate Fair Market Value in excess of
the minimum amount required to be withheld. Any fraction of a share of Stock
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by the holder.
5.6 Restrictions on Shares. Each option granted hereunder shall be
subject to the requirement that if at any time the Company determines that the
listing, registration or qualification of the shares of Stock subject to such
option upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Stock delivered
pursuant to any option made hereunder bear a legend indicating that the sale,
transfer or other disposition thereof by the holder is prohibited except in
compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
5.7 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reclassification, reorganization, merger, consolidation,
spin-off, combination of shares in a reverse stock split or other similar event,
each holder of an option shall be entitled to receive upon the exercise of an
option, at a price determined by the Committee in its sole discretion, such
shares of Stock and other securities to which the holder would be entitled had
the holder exercised such option prior to the occurrence of such event. If any
other event shall occur which in the judgment of the Board would warrant an
adjustment to (i) the number or designation of the class or classes of
securities available under the Plan or (ii) the number or designation of the
class or classes of securities subject to each outstanding option or the
purchase price of a share of Stock subject to the option, or any combination of
adjustments provided
<PAGE>
for in clauses (i) and (ii), such adjustments shall be authorized by the Board
and made by the Committee upon such terms and conditions as it may deem
equitable and appropriate. To the extent that any such event or any action taken
under this Section 5.7 shall entitle a holder of an option to purchase
additional shares of Stock or other security, the shares of Stock available
under the Plan shall be deemed to include such additional shares of Stock or
other security. If any such adjustment would result in a fractional security
being generally available under the Plan, such fractional security shall be
disregarded. If any such adjustment would result in a fractional security being
subject to an outstanding option under the Plan, the Company shall pay the
holder of such an option, in connection with the first exercise of such option
occurring after such adjustment, an amount in cash determined by multiplying (i)
the fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (A) the Fair Market Value on the exercise date over (B) the
purchase price of such security. Any determination made by the Committee under
this Section 5.7 shall be final, binding and conclusive on all holders of
outstanding options granted under the Plan.
5.8 Change in Control. (a) Notwithstanding any other provision of the
Plan or any provision of any Award, in the event of (i) a Change in Control (as
defined in Section 5.8(b)) or (ii) a "change in control" within the meaning of
the Telephone and Data Systems, Inc. 1994 Long-Term Incentive Plan, at a time
when TDS owns directly or indirectly at least 50% of either the outstanding
stock of the Company or the combined voting power of such stock, all outstanding
options shall become immediately exercisable in full. In the event of a Change
in Control pursuant to Section 5.8(b)(3) below, there may be substituted for
each share of Stock available under the Plan, whether or not then subject to an
outstanding option, the number and class of shares into which each outstanding
share of such Stock shall be converted pursuant to such Change in Control. In
the event of such a substitution, the purchase price per share of stock then
subject to an outstanding option under the Plan shall be appropriately adjusted
by the Committee, but in
<PAGE>
no event shall the aggregate purchase price for such shares be greater than the
aggregate purchase price for the shares of Stock subject to such option prior to
the Change in Control.
(b) For purposes of the Plan, "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of section
13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act of
25% or more of the combined voting power of the then outstanding
securities of the Company entitled to vote generally on matters
(without regard to the election of directors) (the "Outstanding Voting
Securities"), excluding, however, the following: (i) any acquisition
directly from the Company, or an Affiliate (excluding any acquisition
resulting from the exercise of an exercise, conversion or exchange
privilege, unless the security being so exercised, converted or
exchanged was acquired directly from the Company or an Affiliate), (ii)
any acquisition by the Company or an Affiliate, (iii) any acquisition
by an employee benefit plan (or related trust) sponsored or maintained
by the Company or an Affiliate, (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (3) of this Section 5.8(b), or (v) any acquisition
by the following persons: (A) LeRoy T. Carlson or his spouse, (B) any
child of LeRoy T. Carlson or the spouse of any such child, (C) any
grandchild of LeRoy T. Carlson, including any child adopted by any
child of LeRoy T. Carlson, or the spouse of any such grandchild, (D)
the estate of any of the persons described in clauses (A)-(C), (E) any
trust or similar arrangement (including any acquisition on behalf of
such trust or similar arrangement by the trustees or similar persons)
provided that all of the current beneficiaries of such trust or similar
arrangement are persons described in clauses (A)-(C) or their lineal
descendants, or (F) the voting trust which expires on
<PAGE>
June 30, 2009, or any successor to such voting trust, including the
trustees of such voting trust on behalf of such voting trust (all such
persons, collectively, the "Exempted Persons");
(2) individuals who, as of the date of the IPO, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of such Board; provided that any individual who
becomes a director of the Company subsequent to the date of the IPO
whose election, or nomination for election by the Company's
stockholders, was approved by the vote of at least a majority of the
directors then comprising the Incumbent Board shall be deemed a member
of the Incumbent Board; and provided further, that any individual who
was initially elected as a director of the Company as a result of an
actual or threatened election contest, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board shall not be deemed a member
of the Incumbent Board;
(3) approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company (a "Corporate
Transaction"), excluding, however, a Corporate Transaction pursuant to
which (i) all or substantially all of the individuals or entities who
are the beneficial owners of the Outstanding Voting Securities
immediately prior to such Corporate Transaction will beneficially own,
directly or indirectly, more than 51% of the combined voting power of
the outstanding securities of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation
which as a result of such transaction owns, either directly or
indirectly, the Company or all or substantially all of the Company's
assets) which are entitled to vote generally on matters (without regard
to the election of directors), in substantially the same proportions
relative to each other as the shares of Outstanding Voting Securities
are owned immediately prior to such Corporate
<PAGE>
Transaction, (ii) no Person (other than the following Persons: (v) the
Company or an Affiliate, (w) any employee benefit plan (or related
trust) sponsored or maintained by the Company or an Affiliate, (x) the
corporation resulting from such Corporate Transaction, (y) the Exempted
Persons, (z) and any Person which beneficially owned, immediately prior
to such Corporate Transaction, directly or indirectly, 25% or more of
the Outstanding Voting Securities) will beneficially own, directly or
indirectly, 25% or more of the combined voting power of the outstanding
securities of such corporation entitled to vote generally on matters
(without regard to the election of directors) and (iii) individuals who
were members of the Incumbent Board will constitute at least a majority
of the members of the board of directors of the corporation resulting
from such Corporate Transaction; or
(4) approval by the Company's stockholders of a plan of
complete liquidation or dissolution of the Company.
5.9 No Right of Participation or Employment. No person shall have any
right to participate in the Plan. Neither the Plan nor any option granted
hereunder shall confer upon any person any right to continued employment by the
Company or any of its subsidiaries or affiliates, or shall affect in any manner
the right of the Company or any of its subsidiaries or affiliates to terminate
the employment of any person at any time without liability hereunder.
5.10 Rights as Stockholder. No person shall have any right as a
stockholder of the Company with respect to any shares of Stock of the Company
which are subject to an option granted hereunder unless and until such person
becomes a stockholder of record with respect to such shares of Stock.
<PAGE>
5.11 Governing Law. The Plan, each option granted hereunder and the
related Award, and all determinations made and actions taken pursuant thereto,
to the extent not otherwise governed by the Code or the laws of the United
States, shall be governed by the laws of the State of Illinois and construed in
accordance therewith without giving effect to principles of conflicts of laws.
5.12 Severability. If a provision of the Plan shall be held illegal or
invalid, the illegality or invalidity shall not affect the remaining parts of
the Plan and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included in the Plan.
<PAGE>
