As filed with the Securities and Exchange Commission on December 2, 1996.
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------
Form S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-------------------
TELS Corporation
(Exact name of registrant as specified in charter)
UTAH 87-0373840
(State of incorporation) (I.R.S. Employer Identification Number)
406 West South Jordan Parkway
Suite 250
South Jordan, Utah 84095
(801) 571-1182
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------------------
1993 Tel Electronics Inc. Stock Option and Incentive Plan
(Full title of plan)
-----------------------------------------
WILLIAM C. GIBBS, ESQ.
Snell & Wilmer, L.L.P.
111 East Broadway, Suite 900
Salt Lake City, Utah 84111
(801) 237-1900
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Approximate date of proposed commencement of sales: As soon as practicable
after this Registration Statement becomes effective, at the direction of
employees who participate in the Plan (as defined herein).
CALCULATION OF REGISTRATION FEE
Proposed
Proposed maximum
Title of each maximum aggregate Amount of
class of securities Amount to be offering price offering registration
to be registered(2) registered(3) per unit(1) price(1) fee
Common Stock, $.02
par value 1,867,151 $.5782 1,079,586.71 $327.15
=================== ============== =============== ============ ========
<PAGE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rules 457(c) and 457(h) under the Securities Act of 1933,
as amended (the "Securities Act") based on the average of the high and
low prices for shares of Common Stock, as reported on the National
Association of Securities Dealers, Inc. Automated Quotation System
("Nasdaq") on November 25, 1996.
(2) This Registration Statement also shall cover any additional shares of
Common Stock which become issuable under the Plans by reason of any
stock split, stock dividend, recapitalization or any other similar
transaction without receipt of consideration which results in an
increase in the number of outstanding shares of Common Stock of the
registrant.
(3) Of this total, 1,867,151 shares represent shares authorized for
issuance upon exercise of options under the 1993 TEL Electronics Inc.
Stock Option and Incentive Plan (the "Plan"). There are a total of
2,000,000 shares of Common Stock authorized for issuance under the
Plan, the remaining 132,849 of which are being registered pursuant to a
registration statement on Form S-8 filed by the Company with the
Commission on December 2, 1996.
2
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Pursuant to Rule 428 of the Securities Act of 1933, as amended (the
"Securities Act"), the documents containing the information specified in Part I,
Items 1 and 2, will be delivered to employees in accordance with Form S-8.
I-1
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed with the Securities and Exchange
Commission (the "Commission") are hereby incorporated by reference in this
Registration Statement:
1. The Company's Form 10-K Report for the fiscal year ended December
31, 1995;
2. The Company's Form 10-Q Report for the fiscal quarter ended March
31, 1996;
3. The Company's Form 10-Q Report for the fiscal quarter ended June
30, 1996;
4. The Company's Form 10-Q Report for the fiscal quarter ended
September 30, 1996;
5. The Company's Notice of Annual Meeting of Stockholders and Proxy
Statement for its Annual Meeting of Stockholders held on June 3, 1996, pursuant
to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); and
6. The description of the Company's Common Stock contained in Item 1 of
the Company's Registration Statement on Form 8-A filed with the Commission on
November 15, 1984, pursuant to Section 12 of the Exchange Act, including any
amendments or reports filed for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, prior to the
filing of a post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference in this Registration Statement
and to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein 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
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Registration Statement.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
II-1
<PAGE>
Item 6. Indemnification of Officers and Directors
The law of Utah permits extensive indemnification of present and former
directors, officers, employees or agents of a Utah company, whether or not
authority for such indemnification is contained in the indemnifying Company's
articles of incorporation or bylaws. Specific authority for indemnification of
present and former directors and officers, under certain circumstances, is
contained in Article VI of the Company's Bylaws. Under Utah law, in order for a
Company to provide indemnification, a disinterested majority of the Company's
board of directors, independent legal counsel, a court or the shareholders must
find that the director, officer, employee or agent acted, or failed to act, in
good faith and in a manner he reasonably believed, in the case of conduct in his
official capacity with the Company, was in the best interests of the Company or,
in all other cases, was at least not opposed to the Company's best interests,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. Statutory indemnification is permissive,
except in the event of a successful defense, in which case, unless limited by
the Articles of Incorporation, when a director, officer, employee or agent must
be indemnified against reasonable expenses incurred by him in connection
therewith. Indemnification is permitted with respect to expenses, judgments,
fines, and amounts paid in settlement by such persons.
The Company's Bylaws provide that the Company may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of the
Company), by reason of the fact that he is or was a director, officer, employee,
fiduciary or agent of the Company or is or was serving at the request of the
Company as a director, officer, employee, fiduciary or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Company and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
The Company's Bylaws also provide that a corporation may indemnify a
person who was or is a party or is threatened to be made a party to any
proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee, or agent
of the Company, or is or was serving at the request of the Company as a
director, officer, employee, fiduciary or agent of another corporation or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action if
he acted in good faith and in a manner he reasonably believed to be in the best
interests of the Company. No indemnification shall be made in respect of any
claim or matter as to which such person has been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Company unless
and only to the extent that the court in which the action is brought determines
that in view of all circumstances such person is fairly and reasonably entitled
to indemnification for expenses which the court deems proper.
The Company's Bylaws also provide that a director may, to the extent that
he is successful on the merits and defense of any action, be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred in
II-2
<PAGE>
connection therewith. A determination of whether indemnification is proper shall
be made by the board of directors by a majority vote of a quorum consisting of
disinterested directors or, if such a quorum is not obtainable or even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or by the shareholders. The Company may advance
expenses (including attorneys' fees) upon receipt of an undertaking by or on
behalf of the director to repay such amount unless it is determined that he is
entitled to be indemnified.
Item 7. Exemption from Registration
Not applicable
Item 8. Exhibits
Exhibit No. Description
4.1 1993 TEL Electronics Inc. Stock Option and Incentive Plan.
5.1 Opinion of Snell & Wilmer, L.L.P.
23.1 Consent of Coopers & Lybrand, L.L.P.
23.2 Consent of KPMG Peat Marwick, L.L.P.
23.3 Consent of Snell & Wilmer (included in the opinion filed
as Exhibit 5.1).
Item 9. Undertakings
The undersigned registrant 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 Securities Act;
(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 this registration statement;
(c) To include any material information with respect to
the plan of distribution not previously disclosed in
this registration statement or any material change to
such information in this registration statement.
II-3
<PAGE>
Provided, however, that paragraphs (1)(a) and (1)(b) above do not apply
if the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in this
registration statement.
2. That, for the purpose of determining any liability under the
Securities 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 securities being registered which remain unsold at the termination of
the offering.
4. If the registrant is a foreign private issuer, to file a
post-effective amendment to this registration statement to include any financial
statements required by Rule 3-19 of Regulation S-X at the start of any delayed
offering or throughout a continuous offering.
5. For purposes of determining any liability under the 1933 Act, each
filing of the registrant's annual report pursuant to Section 13(a) or 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 Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities at that time and shall be
deemed to be the initial bona fide offering thereof.
6. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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 registrant 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 Securities
Act and will be governed by the final adjudication of such issue.
II-4
<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 South Jordan, State of Utah, on the 27th day of
November, 1996.
TELS Corporation
By: /s/ Stephen M. Nelson
Stephen M. Nelson
Director and President
By: /s/ Deborah Walford
Deborah Walford
Controller
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ John L. Gunter Chairman of the Board of
John L. Gunter Directors and Chief November 29, 1996
Executive Officer
/s/ Willard H. Gardner Director and Secretary November 29, 1996
Willard H. Gardner
/s/ Stephen M. Nelson Director and President November 27, 1996
Stephen M. Nelson
/s/ David K. Doyle Director November 27, 1996
David K. Doyle
/s/ Ming T. Chen Director November 27, 1996
Ming T. Chen
II-5
1993 TEL Electronics Inc. Stock Option and Incentive Plan
TEL ELECTRONICS INC.
STOCK OPTION AND INCENTIVE PLAN
DATED: June 7, 1993
<PAGE>
TABLE OF CONTENTS
PURPOSE .................................................................. 1
DEFINITIONS................................................................ 1
EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL.......................... 4
ADMINISTRATION............................................................. 4
SHARES SUBJECT TO THE PLAN.................................................. 5
ELIGIBILITY................................................................. 5
STOCK OPTIONS............................................................... 5
STOCK APPRECIATION RIGHTS................................................... 7
PERFORMANCE SHARES.......................................................... 8
RESTRICTED STOCK AWARDS.....................................................10
DIVIDEND EQUIVALENTS........................................................12
GENERAL ...................................................................12
CHANGES IN CAPITAL STRUCTURE................................................15
AMENDMENTS AND TERMINATION..................................................15
i
<PAGE>
TEL ELECTRONICS INC.
STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE
The purpose of the Tel electronics inc. Stock Option and Incentive Plan
(the "Plan") is to provide a means through which Tel electronics inc., a Utah
corporation, (the "Company") and its Subsidiaries may attract able persons to
enter the employ of the Company and its Subsidiaries and to provide a means
whereby those key employees upon whom the responsibilities for the successful
administration and management of the Company and its Subsidiaries rest, and
whose present and potential contributions to the welfare of the Company and its
Subsidiaries are of importance, can acquire and maintain stock ownership,
thereby strengthening their commitment to the welfare of the Company and its
Subsidiaries and the desire to remain in the employ of the Company and its
Subsidiaries.
A further purpose of the Plan is to provide such key employees with
additional incentive and reward opportunities designed to enhance the profitable
growth of the Company and its Subsidiaries. So that the appropriate incentive
can be provided, the Plan provides for granting non-qualified Options, Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Performance
Shares and Dividend Equivalents, or any combination of the foregoing.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
(a) "Award" means, individually or collectively, any Option, Stock
Appreciation Right, Restricted Stock Award, Performance Share Award, or Dividend
Equivalent Award.
(b) "Award Period" means a period of not less than three years.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986 and any regulations
issued thereunder, as the same may be amended from time to time.
(e) "Committee" means the committee of the Board described in paragraph 4.
(f) "Company" means Tel electronics inc.
(g) "Date of Grant" means the date on which the granting of an Award is
authorized by the Committee or such later date as may be specified by the
Committee in such authorization.
(h) "Dividend Equivalent" means the Award granted under paragraph 11.
<PAGE>
(i) "Eligible Employee" means any person regularly employed by the Company
or a Subsidiary on a full-time salaried basis who satisfies all of the
requirements of paragraph 6.
(j) "Fair Market Value" means as follows:
(i) For periods during which the Stock is not regularly
traded on an established securities market, it shall be
the value of a share of Stock as determined by the Board
based on an appraisal of the Company by an independent
third party as of the Valuation Date coinciding with or
immediately preceding the particular date on which Fair
Market Value is to be determined.
(ii) For periods during which the Stock is regularly
traded on an established securities market,
(1) For Options, SARs and Dividend Equivalents,
it shall be the average of the highest price and
the lowest price at which the Stock shall have
been reported as sold on a generally recognized
stock exchange (the "Exchange") or quoted pursuant
to an inter-dealer quotation system of a national
securities association registered with the United
States Securities and Exchange Commission (the
"Quotation System") on a specified date;
(2) For Performance Share Awards, it shall be the
average of the reported closing prices of the
Stock on the Exchange or Quotation System for 30
consecutive trading days prior to the Valuation
Date.
(k) "Holder" means an Eligible Employee who has been granted an Award.
(l) "Incentive Stock Option" means an Option within the meaning of
paragraph 422 of the Code.
(m) "Normal Termination" means Termination:
(i) At retirement pursuant to the Company or Subsidiary
retirement plan covering the Holder,
(ii) For permanent and total disability, or
(iii) For any other reason, other than a Termination for
cause, provided that the Committee has approved, in writing,
the continuation of any Option outstanding on the date of the
Holder's Termination.
(n) "Option" means an Award granted under paragraph 7 of the Plan.
<PAGE>
(o) "Performance Share" means an Award granted under paragraph 9 of the
Plan.
(p) "Plan" means the Tel electronics inc. Stock Option and Incentive Plan,
as set forth herein and as the same may be amended from time to time.
(q) "Restricted Stock Award" means an Award granted under paragraph 10 of
the Plan.
(r) "ROE" means return on average shareholders' equity which is defined as
the Company's consolidated net earnings, divided by the average of the
shareholders' equity at the beginning and end of the year, as shown in the
consolidated statements of earnings and balance sheet as set forth in the
Company's annual report to shareholders for such year. The Committee may, in its
sole discretion, include or exclude any items in calculating ROE. "Average ROE"
means, with respect to any one Award Period, the sum of the ROEs achieved in
each of the years of the Award Period divided by the number of years in the
Award Period.
(s) "Stock" means Common Stock of the Company as defined in Article 5 of
the Company's Articles of Incorporation, unless, at any time prior to the grant
of the first Award under the Plan, the Committee, in its sole and absolute
discretion, designates an alternative class of stock of the Company as "Stock"
for purposes of this Plan, and such designation is consistent with applicable
law; and such other stock as shall be substituted therefor as provided in
paragraph 13.
(t) "Stock Appreciation Right" or "SAR" means an Award granted pursuant to
paragraph 8 of the Plan.
(u) "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.
(v) "Termination" means separation from employment with the Company or any
of its Subsidiaries for any reason other than death.
(w) "Valuation Date" means as follows:
(i) For purposes of determining the Fair Market Value
under paragraph 2(j)(i), the last day of the fiscal year of
the Company and such other dates as the Committee shall
determine in its discretion; and
(ii) For purposes of determining Fair Market Value of
Performance Shares Awards under paragraph 2(j)(ii)(2), the
first day of the year in which the Award is made for purposes
of granting Performance Share Awards and the first business
day following the end of the Award Period for the purpose of
making Performance Share payments.
<PAGE>
3. EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL
The Plan will become effective on the date it is approved by the
shareholders of the Company holding a majority of the Company's voting stock.
Awards may be made as provided herein for a period of 10 years after such date.
The Plan shall continue in effect until all matters relating to the payment
of Awards and administration of the Plan have been settled.
4. ADMINISTRATION
The Committee shall administer the Plan. The Committee shall consist of at
least two individuals who are members of the Board provided that, when and if
Awards are to be made to officers or directors of the Company or its
Subsidiaries who are subject to the provisions of Section 16 of the Securities
Exchange Act of 1934 (the "1934 Act"), the Committee shall consist of at least
two individuals who are members of the Board and who are "disinterested
persons," as such term is defined in Rule 16b-3 promulgated under the 1934 Act,
or any successor provision, except as may be otherwise permitted under Section
16 of the 1934 Act and the regulations and rules promulgated thereunder. A
majority of the Committee shall constitute a quorum. The acts of a majority of
the members present at any meeting at which a quorum is present and acts
approved in writing by a majority of the Committee in lieu of a meeting shall be
deemed the acts of the Committee.
No member of the Committee, while serving as such, shall be eligible to
receive an Award under the Plan. Except as otherwise provided in the Plan, the
Committee shall have exclusive power, authority and discretion to:
(a) Select Eligible Employees to participate in the Plan.
(b) Determine the Awards to be made to each Eligible Employee selected.
(c) Determine the time or times when Awards will be made.
(d) Determine the conditions (including the performance requirements) to
which the payment of Awards may be subject.
(e) Prescribe the form or forms evidencing Awards.
(f) Establish, adopt or revise such rules and regulations as it may deem
necessary or advisable for the administration of the Plan.
(g) Make all determinations relating to the Plan.
<PAGE>
The Committee's interpretation of the Plan or any Awards granted pursuant
thereto and all decisions and determinations by the Committee with respect to
the Plan shall be final, binding, and conclusive on all parties.
5. SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards to one or more Eligible
Employees; provided, however, that:
(a) Subject to paragraph 13, the aggregate number of shares of Stock made
subject to Awards under this Plan may not exceed 1,000,000.
(b) Shares shall be deemed to have been used in payment of SARs and
Performance Shares only if such shares are actually delivered to the Holder.
(c) To the extent that an Award lapses or the rights of its Holder
terminate, any shares of Stock subject to such Award shall again be available
for the grant of an Award, but only if the Holder has not received any benefits
of ownership from such shares prior to the time of such lapse or termination. A
Holder shall not be deemed to have received benefits of ownership with respect
to shares subject to an Award merely because the Holder has voting rights with
respect to such shares or where dividends accumulate with respect to such shares
if such dividends are forfeited by the Holder when and if the underlying shares
of Stock are forfeited.
(d) Stock delivered by the Company in settlement under the Plan may be
authorized and unissued Stock, Stock held in the treasury of the Company, Stock
purchased on the open market, or Stock purchased by private purchase at prices
no higher than the Fair Market Value as defined in paragraph 2(j) at the time of
purchase.
6. ELIGIBILITY
Officers and key employees of the Company and its Subsidiaries who, in the
opinion of the Committee, are mainly responsible for the continued growth and
development and financial success of the business of the Company or one or more
of its Subsidiaries shall be eligible to be granted Awards under the Plan.
Subject to the provisions of the Plan, the Committee shall, from time to time,
select from such eligible persons those to whom Awards shall be granted and
determine the size or amount of each such Award.
7. STOCK OPTIONS
One or more Options can be granted to any Eligible Employee. Each Option so
granted shall be subject to the following conditions:
<PAGE>
(a) Option Price. The option price per share of Stock shall be set by the
grant, provided that in the case of an Incentive Stock Option, the option price
per share may not be less than Fair Market Value at the Date of Grant.
(b) Form of Payment. Upon the exercise of all or any part of an Option, the
option price shall be payable in full by check, in shares of Stock owned by the
Holder to the extent permitted by law, or in any combination thereof at the
election of the Holder. Payment of the option price with shares of Stock owned
by the Holder shall be made by assigning and delivering such shares to the
Company. The shares shall be valued at Fair Market Value on the exercise date of
the Option. Except as otherwise provided by law or the terms of the Stock Option
Agreement, the option price may also be paid by the Holder directing the Company
to withhold from the shares of Stock that would otherwise be issued upon
exercise of the Option that number of shares having a Fair Market Value on the
exercise date equal to the option price. A Holder who elects to exercise all or
any part of his Option by directing the Company to withhold shares subject to
the exercised Option shall notify the Company in writing of his intent to do so.
A Holder electing to pay the option price in such manner shall receive the
number of shares of Stock determined pursuant to the following formula:
Number Number of Shares Fair Market Value Option
of = as to which the x on Exercise Date - Price
Shares Option is to be ---------------------------------
exercised Fair Market Value on
Exercise Date
(c) Other Terms and Conditions. If the Holder has not died or terminated,
the Option shall become exercisable in such manner and within such period or
periods, not to exceed 10 years from its Date of Grant, as set forth in the
Stock Option Agreement upon payment in full, in any manner permitted under
paragraph 7(b). Except as otherwise provided in this Plan or in the applicable
Stock Option Agreement, any Option may be exercised in whole or in part at any
time. An Option may lapse under the following circumstances:
(i) Prior to the Holder's termination of employment
for any reason, the Option shall lapse ten (10) years after it
is granted, unless an earlier time is set by the grant.
(ii) If the Holder separates from employment other
than by Normal Termination, it shall lapse at the time of
Termination.
(iii) If the Holder's Termination is a Normal
Termination, it shall lapse three months after his Normal
Termination.
(iv) If the Holder dies within the option period or
within three months after Normal Termination, the Option shall
lapse unless it is exercised within the option period and in
no event later than 15 months after the date of the Holder's
death. Upon the Holder's death, any exercisable Options may
<PAGE>
be exercised by the Holder's legal representative or
representatives, by the person or persons entitled to do so
under the Holder's last will and testament or, if the Holder
shall fail to make testamentary disposition of such Option or
shall die intestate, by the person or persons entitled to
receive said Option under the applicable laws of descent and
distribution.
(d) Stock Option Agreement. Each Option granted under the Plan shall be
evidenced by a "Stock Option Agreement" between the Company and the Holder of
the Option containing such provisions as may be determined by the Committee,
subject to the following terms and conditions.
(i) Any Option or portion thereof that is exercisable
shall be exercisable for the full amount or for any part
thereof, except as otherwise determined by the grant.
(ii) Every share purchased through the exercise of an
Option shall be paid for in full at the time of the exercise.
Each Option shall cease to be exercisable, as to any share,
when the Holder purchases the share or exercises a related SAR
or when the Option lapses.
(iii) Options shall not be transferable by the Holder
except by will or the laws of descent and distribution and
shall be exercisable during the Holder's lifetime only by him.
(iv) Notwithstanding any provision (other than
paragraph 7(e)), in the event of a public tender for all or
any portion of the Stock or in the event that a proposal to
merge, consolidate, or otherwise combine with another company
is submitted for shareholder approval, the Committee may in
its sole discretion declare previously granted Options to be
immediately exercisable.
(e) Individual Dollar limitations. The aggregate Fair Market Value
(determined as of the time the Option is granted) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by any Holder in
any calendar year may not exceed $[100,000].
8. STOCK APPRECIATION RIGHTS
Any Option granted under the Plan may include a SAR, either at the time of
grant or by amendment. SARs may also be separately granted pursuant to an Award.
Such SARs shall be subject to such terms and conditions not inconsistent with
the Plan as the Committee shall impose, including the following:
(a) Right to Exercise. A SAR issued pursuant to an Option shall be
exercisable to the extent the Option is exercisable and only with the consent of
<PAGE>
the Committee. A SAR which is not issued pursuant to an Option shall only be
exercisable during the Award period specified in the "Stock Rights Agreement"
pursuant to which the SAR is issued. Unless otherwise provided in the Stock
Rights Agreement, the Holder's right to exercise any outstanding SARs shall
terminate upon the Holder's termination of employment with the Company and its
Subsidiaries for any reason, including but not limited to, resignation,
discharge, death or disability.
(b) Failure to Exercise. If, on the last day of the option period or
specified Award period, the Fair Market Value of the Stock exceeds the option
price or SAR price determined at the time the Award is granted, and the Holder
has not exercised such SAR, such right shall be deemed to have been exercised by
the Holder on such last day.
(c) Payment. An exercisable SAR granted pursuant to an Option shall entitle
the Holder to surrender unexercised the Option in which it is included, or any
portion thereof, and to receive in exchange therefor an amount equal to the
excess of the "value", as hereinafter defined, of one share of Stock over the
option price per share multiplied by the number of shares subject to the Option
or portion thereof which is so surrendered. Upon exercise of a SAR not issued
pursuant to an Option, the Holder shall receive Stock and/or cash in an amount
equal to that number of shares of Stock having an aggregate value equal to the
excess of the value of one share of Stock over the SAR price specified in the
Stock rights agreement multiplied by the number of SARs exercised. The Committee
may, in its sole discretion, elect to have the Company settle its obligation
arising out of the exercise of a SAR by the payment of cash, the delivery of
shares of Stock having an aggregate value equal to the amount of the Company's
obligation as determined pursuant to this paragraph 8(c), or partially by the
payment of cash and partially by the delivery of shares. The Committee shall
also have the right to place such limitations and restrictions on the Company's
obligation to make such cash payments or deliver shares under SARs as the
Committee, in its sole discretion, deems to be in the best interest of the
Company. The term "value" as applied to shares shall be Fair Market Value on the
trading day next preceding the date on which the SAR is exercised. To the extent
that a SAR included in an Option is exercised, such Option shall be deemed to
have been exercised, and shall not be deemed to have lapsed.
(d) Other Limitations. Such other limitations as the Committee and/or the
Stock Option Agreement or Stock Rights Agreement shall impose.
9. PERFORMANCE SHARES
Each Performance Share shall be deemed to be the equivalent of one share of
Stock. The Award of Performance Shares under the Plan shall not entitle the
Holder to any interest in or to any dividend, voting, or other rights of a
shareholder of the Company. Performance Shares shall be credited to a
Performance Share account to be maintained for each Holder. The value of the
Performance Shares in a Holder's Performance Share account at the time of Award
or the time of payment shall be an amount equal to the Fair Market Value at such
time of an equivalent number of shares of the Stock (subject to the limitation
provided in paragraph 9(c).
<PAGE>
(a) Award Grants. Performance Share Awards may be made by the Committee, in
its discretion, taking into account a Holder's responsibility level,
performance, potential, cash compensation level, the Fair Market Value of the
Stock at the time of the Awards, and such other factors as it deems appropriate.
Grants of Performance Shares shall be deemed to have been on January 1 of the
year in which such grants are made.
The Committee shall not, over the term of the Plan, grant to any single
Holder as Performance Shares more than 30 percent of the maximum number of
shares of Stock which may be granted under paragraph 5(a). Awards cancelled or
portions of Awards not paid out in full to any single Holder shall not be
included for purposes of applying this limitation.
(b) Right to Payment of Performance Shares. Following the end of the Award
Period, the Holder of a Performance Share shall be entitled to receive payment
from his Performance Share account based on the achievement or performance
measures for such Award Period, as determined by the Committee. The Committee
shall have the right to establish average ROE requirements or other criteria for
measuring executive performance prior to the beginning of the Award Period but
subject to such later revisions as the Committee shall deem appropriate to
reflect significant or unforeseen events or changes.
In the event a Holder terminates employment during an Award Period, payment
of outstanding Performance Share Awards will be as follows:
(i) If the Holder resigns or is discharged, no
payment will be made and the Award will be completely
forfeited.
(ii) If the Holder retires pursuant to the Company or
Subsidiary retirement plan covering that Holder, the
Holder will be entitled to payment at the end of the Award
Period in an amount which bears the same relationship to
the Award's Fair Market Value upon the Valuation Date as
the period of service completed after the grant of the
Award but prior to the retirement bears to the Award
Period.
(iii) If the Holder dies or becomes disabled, the
Holder (or his designated beneficiary or the person
entitled to his Performance Shares under paragraph 12(d)
will be entitled to payment at the end of the Award Period
of a prorated amount which is determined in the same
manner as the amount payable under paragraph 9(b)(ii).
(c) Form and Timing of Payment. No payment of Performance Shares shall be
made prior to the end of an Award Period. Payment therefor shall be made as soon
as practicable after the receipt of audited financial statements relating to the
last year of such period. The Committee may, in its discretion, limit the
Company's payment obligation for Performance Shares to the lesser of Fair Market
<PAGE>
Value at the time of payment or an amount equal to not more than 200 percent of
the Fair Market Value at the time such Performance Shares were granted.
The payment to which a Holder shall be entitled at the end of an Award
Period shall be a dollar amount equal to the Fair Market Value on the Valuation
Date (or such lesser amounts as the Committee may establish) of the number of
shares of Stock equal to the number of Performance Shares earned and payable to
him in accordance with paragraph 9(b). Payment shall normally be made 50 percent
in cash and 50 percent in Stock. The Committee, however, may authorize payment
in such other combinations of cash and Stock or all in cash or all in Stock, as
it deems appropriate.
The number of shares of Stock to be paid in lieu of cash will be determined
by dividing the portion of the payment not paid in cash by:
(i) The Fair Market Value of Stock on the date on
which the shares are issued by the Company; or
(ii) The price per share paid for shares purchased
for a Holder's account should the Committee determine, in its
discretion, to authorize the purchase of shares on behalf of
the Holder on the open market or through private purchase.
10. RESTRICTED STOCK AWARDS
(a) Restriction Period to be Established by the Committee. At the time a
Restricted Stock Award is made, the Committee shall establish a period of time
(the "Restriction Period") applicable to such Award, which shall not be less
than [three] years. At the discretion of the Committee, each Restricted Stock
Award may have a different Restriction Period. In the event of a public tender
for all or any portion of the Stock or in the event that any proposal to merge
or consolidate the Company with another company is submitted to the shareholders
for a vote, the Committee may in its sole discretion change or eliminate the
Restriction Period. Except as permitted above, under paragraph 10(c), or
pursuant to paragraph 13, the Restriction Period applicable to a particular
Restricted Stock Award shall not be changed.
(b) Other Terms and Conditions. Stock awards pursuant to a Restricted Stock
Award shall be represented by a stock certificate registered in the name of the
Holder of such Restricted Stock Award. The Holder shall have the right to enjoy
all shareholder rights during the Restriction Period with the exception that:
(i) The Holder shall not be entitled to delivery of
the stock certificate until the Restriction Period has
expired.
<PAGE>
(ii) The Company may either issue shares subject to
such restrictive legends and/or stop transfer instructions as
it deems appropriate or provide for retention of custody of
the Stock during the Restriction Period.
(iii) The Holder may not sell, transfer, pledge,
exchange, hypothecate, or otherwise dispose of the Stock
during the Restricted Period.
(iv) A breach of the terms and conditions
established by the Committee pursuant to the Restricted Stock
Award shall cause a forfeiture of the Restricted Stock Award,
and any dividends withheld thereon.
(v) Cash and Stock dividends may be either
currently paid or withheld by the Company for the Holder's
account. At the discretion of the Committee, interest may be
paid on the amount of cash dividends withheld, including cash
dividends on stock dividends, at a rate and subject to such
terms as shall be determined by the Committee.
(c) Forfeiture Provisions. In the event a Holder terminates employment
during a Restriction Period, his right to a Restricted Stock Award will be
determined as follows:
(i) If the Holder resigns or is discharged, the
Award will be completely forfeited.
<PAGE>
(ii) Except as otherwise provided in paragraph 10(c)
(iv), if the Holder retires, pursuant to the Company or
Subsidiary retirement plan covering that Holder, the Holder
will be vested in that portion of the Award as bears the same
relationship to the entire Award as the period of service
completed beginning on the date the Award was made and ending
on such retirement bears to the Restriction Period.
(iii) Except as otherwise provided in paragraph 10(c)
(iv), if the Holder dies or becomes disabled, the Holder (or
his designated beneficiary or the person entitled to his
Restricted Stock under paragraph 12(d) will be vested in a
portion of the Award, with such portion to be determined in
the same manner as the portion under paragraph 10(c)(ii).
(iv) Notwithstanding paragraph 10(c)(ii) and (iii),
if one or more of the restrictions placed on a Restricted
Stock Award by the Committee require an action by the Holder
or the occurrence of an event other than the passage of time,
and the Holder retires, dies or becomes disabled before such
restriction or restrictions have been satisfied, the Holder
shall not be vested in any portion of the Award unless the
Committee, in its sole and absolute discretion, elects to
waive satisfaction of such restriction or restrictions as a
condition of receipt of all or any part of the Award.
<PAGE>
Any portion of a Restricted Stock Award in which the Holder is vested shall
be received as soon as practicable following termination.
(d) Payment for Restricted Stock. A Holder shall not be required to make
any payment for Stock received pursuant to a Restricted Stock Award.
11. DIVIDEND EQUIVALENTS
Any Option granted under the Plan may include at no additional cost
Dividend Equivalents, either at the time of grant or by amendment. Dividend
Equivalents will be based on the dividends declared on the Stock on record dates
during the period between the date an Option is granted or the date the Dividend
Equivalents are granted, if later, and the date such Option is exercised. Such
Dividend Equivalents shall be converted to additional shares of Stock as
follows:
Number of Dividend Number of Shares Dividend
Equivalent shares = under the Option x per share
----------------------------------------
Book value of share
The Dividend Equivalents earned with respect to a Holder shall be
distributed to the Holder (or his successor in interest) in the form of shares
of Stock at the time the Option is exercised. Dividend Equivalents shall be
computed, as of each dividend record date, both with respect to the number of
shares under the Option and with respect to the number of Dividend Equivalent
shares previously earned by the Holder (or his successor in interest) and not
issued during the period prior to the dividend record date. For purposes of this
paragraph 11, the book value of a share of the Stock shall be determined in
accordance with the Company's established accounting practices as of the last
business day of the month immediately preceding the dividend record date.
12. GENERAL
(a) Government and Other Regulations: The obligation of the Company to make
payment of Awards in Stock or otherwise shall be subject to all applicable laws,
rules, and regulations, and to such approvals by government agencies as may be
required. The Company shall be under no obligation to register under the
Securities Act of 1933, as amended (the "1933 Act"), any of the shares of Stock
issued under the Plan. If the shares to be issued under the Plan are to be
issued pursuant to certain exemptions from registration under the 1933 Act, the
Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
(b) Tax Withholding. The Company or a Subsidiary, as appropriate, shall
have the right to deduct from all Awards paid in cash any federal, state or
local taxes as required by law to be withheld with respect to such cash payments
and, in the case of Awards paid in Stock, the Holder may be required to pay to
the Company or a Subsidiary, by check, in shares of Stock owned by the Holder to
<PAGE>
the extent permitted by law, or in any combination thereof elected by the
Holder, the amount of any such taxes which the Company or Subsidiary is required
to withhold with respect to such Stock. Payment of taxes with shares of Stock
owned by the Holder shall be made by assigning and delivering such shares to the
Company. Such shares shall be valued at Fair Market Value on the business day
immediately preceding the date on which such shares are assigned or delivered.
Except as otherwise provided by law or the terms of the governing Award
agreement, any taxes which are required to be withheld with respect to an Award
paid in Stock may also be paid by the Holder directing the Company to withhold
from the shares of Stock that would otherwise be issued pursuant to the Award,
that number of shares having a Fair Market Value on the earlier of the date the
Award is exercised or the date the Award is paid (the "Applicable Date") equal
to the taxes due. A Holder who elects to pay any taxes due by directing the
Company to withhold shares subject to the Award shall notify the Company in
writing of his intent to do so. A Holder making such election shall receive the
number of shares of Stock determined pursuant to the following formula.
Number Number of Fair Market Value Taxes
of = Shares Subject x on Applicable Date - Due
Shares to Award --------------------------------
Fair Market Value on
Applicable Date
(c) Claim to Awards and Employment Rights. No employee or other person
shall have any claim or right to be granted an Award under the Plan. Neither
this Plan nor any action taken hereunder shall be construed as giving any
employee any right to be retained in the employ of the Company or a Subsidiary.
(d) Beneficiaries. Except as otherwise provided in paragraph 7, dealing
with Options, or in the agreement evidencing an Award, any payment of Awards due
under this Plan to a deceased Holder shall be paid to the beneficiary designated
by the Holder and filed with the Committee, provided that if the Holder is
married, a designation of a person other than the Holder's spouse as his
beneficiary with respect to more than 50 percent of the Holder's interest in the
Award shall not be effective without the written consent of the Holder's spouse.
If no such beneficiary has been designated or survives the Holder, payment shall
be made to the person entitled thereto under the Holder's will or the laws of
descent and distribution. Subject to the foregoing, a beneficiary designation
may be changed or revoked by a Holder at any time provided the change or
revocation is filed with the Committee.
(e) Non-transferability. Subject to paragraphs 7(d)(iii) and 12(d), a
person's rights and interests under the Plan, including amounts payable, may not
be assigned, pledged, or transferred, provided that a person's rights and
interests under the Plan may be assigned, pledged or transferred pursuant to a
domestic relations order which satisfies the requirements for a "qualified
domestic relations order" set forth in Section 414(p)(1)(A) of the Internal
Revenue Code.
<PAGE>
(f) Indemnification. Each person who is or shall have been a member of the
Committee or of the Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action or failure to act under the Plan and against
and from any and all amounts paid by him in satisfaction of judgment in such
action, suit, or proceeding against him. He shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Articles of Incorporation
or By-Laws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
(g) Reliance on Reports. Each member of the Committee and each member of
the Board shall be fully justified in relying or acting in good faith upon any
report made by the independent public accountants of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than himself. In no event shall any person
who is or shall have been a member of the Committee or of the Board be liable
for any determination made or other action taken, including the furnishing of
information, or failure to act, if in good faith.
(h) Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.
(i) Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.
(j) Pronouns. Masculine pronouns and other words of masculine gender shall
refer to both men and women.
(k) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
(l) Fractional Shares. No fractional shares of stock shall be issued and
the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or rounding down.
<PAGE>
13. CHANGES IN CAPITAL STRUCTURE
In the event a stock dividend is declared upon the Stock, the shares of
Stock then subject to each Award (and the number of shares subject thereto)
shall be increased proportionately without any change in the aggregate purchase
price therefor. In the event the Stock shall be changed into or exchanged for a
different number or class of shares of stock or stock of another corporation,
whether through reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, there shall be substituted for each such share
of Stock then subject to each Award (and for each share of Stock then subject
thereto) the number and class of shares of Stock into which each outstanding
share of Stock shall be so exchanged, all without any change in the aggregate
purchase price for the shares then subject to each Award.
Subject to any required action by the stockholders, if the Company shall be
the surviving or resulting corporation in any merger or consolidation, any Award
granted hereunder shall pertain to and apply to the securities or rights to
which a holder of the number of shares of Stock subject to the Award would have
been entitled; but a dissolution or liquidation of the Company or a merger or
consolidation in which the Company is not the surviving or resulting
corporation, shall, in the sole discretion of the Committee:
(a) Cause every Award outstanding hereunder to terminate, except that the
surviving or resulting corporation, in its absolute and uncontrolled discretion,
may tender an option or options to purchase its shares or exercise such rights
on terms and conditions, as to the number of shares and rights and otherwise,
which shall substantially preserve the rights and benefits of any Award then
outstanding hereunder; or
(b) Subject to the requirements of paragraph 7(e), give each Holder the
right to exercise Options and/or other Awards prior to the occurrence of the
event otherwise terminating the Options and/or other Awards over such period as
the Committee, in its sole and absolute discretion, shall determine.
14. AMENDMENTS AND TERMINATION
The Board may at any time terminate the Plan.
The Board may, at any time, or from time to time, amend or suspend and, if
suspended, reinstate, the Plan, in whole or in part, provided, however, that
without further shareholder approval, the Board shall not:
(a) Increase the maximum number of shares which may be issued on exercise
of Options or SARs or pursuant to Restricted Stock Awards, Dividend Equivalent
Awards or Performance Share Awards, except as provided in paragraph 13;
(b) Change the minimum option price;
(c) Extend the maximum option term;
<PAGE>
(d) Extend the termination date of the Plan; or
(e) Permit the granting of an Award to a person who is not an employee.
The Committee may cancel or reduce or otherwise alter a Holder's
outstanding Awards thereunder if, in its judgment, (a) such action is necessary
to comply with applicable securities laws, or (b) such action would be in the
best interests of the Company provided that it obtains the written consent of
the Holder.
Opinion of Snell & Wilmer, L.L.P.
Snell & Wilmer SALT LAKE CITY, UTAH
Law Offices
111 East Broadway, Suite 900 PHOENIX, ARIZONA
Broadway Centre
Salt Lake City, Utah 84111 TUCSON, ARIZONA
(801) 237-1900
Fax: (801) 237-1950 IRVINE, CALIFORNIA
December 2, 1996
TELS CORPORATION
406 West South Jordan Parkway, Suite 250
South Jordan, Utah 84095
Ladies and Gentlemen:
Reference is made to your proposed registration and offering of 1,867,151
shares of Common Stock of TELS Corporation, as contemplated by the Registration
Statement (the "Registration Statement") on Form S-8 filed by you on December
2, 1996, with the Securities and Exchange Commission under the Securities Act
of 1933, as amended.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such corporate records, agreements, and other instruments,
certificates, orders, opinions, correspondence with public officials,
certificates provided by your officers and representatives, and other documents,
as we have deemed necessary or advisable for the purposes of rendering the
opinions set forth herein.
Based solely on the foregoing, it is our opinion that after the
Registration Statement shall have become effective and the shares shall have
been issued and delivered as described therein, such shares of Common Stock will
be validly issued, fully paid and non-assessable.
Consent is hereby given to the use of this opinion as part of the
Registration Statement referred to above and to the use of our name wherever it
appears in said Registration Statement and the related prospectus.
Very truly yours,
/s/Snell & Wilmer L.L.P.
SNELL & WILMER L.L.P.
Consent of Coopers & Lybrand, L.L.P.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Tels Corporation of Form S-8 of our report dated April 9, 1996, on our audit of
the financial statements and financial statement schedule of Tels Corporation as
of December 31, 1995, and for the year then ended, which report is included in
the Tels Corporation Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Salt Lake City, Utah
November 27, 1996
Consent of KPMG Peat Marwick, L.L.P.
Accountants' Consent
The Board of Directors
TELS Corporation:
We consent to incoproration by reference in the registration statement of the
1993 Tel Electronics, Inc. Stock Option and Incentive Plan on Form S-8 of TELS
Corporation of our report dated March 6, 1995 relating to the consolidated
balance sheet of TELS Corporation and subsidiaries as of December 31, 1994, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the two-year period ended December 31, 1994,
and related schedule, which report appears in the December 31, 1995 annual
report on Form 10-K of TELS Corporation.
/s/KPMG peat Marwick LLP
KPMG Peat Marwick LLP
Salt Lake City, Utah
December 2, 1996
Consent of Snell & Wilmer
(Included in the opinion filed as Exhibit 5)
