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)
------------------------------------------
TEL Electronics, Inc. 1994 Director Option Plan
1993 Tel Electronics, Inc. Stock Option and Incentive Plan
1984 Incentive Stock Option Plan for Key Employees of Telectronics, Inc.
1984 Non-Qualified Stock Option Plan
1984 Executive Stock Bonus Plan
(Full title of plans)
-----------------------------------------
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)
----------------------------------------
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 Plans (as defined herein).
CALCULATION OF REGISTRATION FEE
Title of each class Proposed Proposed
of securities to be Amount to be maximum maximum Amount of
registered(2) registered(3) offering price aggregate registration
per unit(1) offering price(1) fee
Common Stock, $.02 1,274,274 $.5782 $736,785.23 $223.27
par value
=================== ============= ============== ================= ============
1
<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 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, 105,000 shares represent shares authorized for issuance
upon exercise of options previously granted by the Company under the
1993 TEL Electronics, Inc. Stock Option and Incentive Plan (the "1993
Plan"), 230,000 shares represent shares authorized for issuance upon
exercise of options previously granted by the Company under the TEL
Electronics, Inc. 1994 Director Option Plan (the "1994 Director Plan"),
59,000 shares represent shares authorized for issuance upon exercise of
options previously granted by the Company under the 1984 Incentive
Stock Option Plan for Key Employees of Telectronics, Inc., 343,250
shares represent shares authorized for issuance upon exercise of
options previously granted by the Company Under the 1984 Non-Qualified
Stock Option Plan, and 537,024 shares are the shares previously issued
under the 1993 TEL Electronics, Inc. Stock Option and Incentive Plan,
1984 Incentive Stock Option Plan for Key Employees of Telectronics,
Inc., the 1984 Executive Stock Bonus Plan, and the 1984 Non-Qualified
Stock Option Plan (the "1984 Plans"). The 1984 Plans, the 1993 Plan,
and the 1994 Directors Plan are collectively referred to hereinafter as
the "Plans." There are a total of 2,000,000 shares of Common Stock
authorized for issuance under the 1993 Plan, the remaining 1,867,151 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.
There are a total of 500,000 shares of Common Stock authorized for
issuance under the 1994 Directors Plan, the remaining 270,000 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.
Pursuant to General Instruction C of Form S-8, this Registration
Statement contains a prospectus meeting the requirements of Part I of Form S-3
relating to reofferings or resales by certain persons of up to 737,250 shares of
common stock, par value $.02 per share (the "Common Stock"), of TELS Corporation
to be acquired pursuant to future exercise of outstanding stock options under
the TEL Electronics, Inc. 1994 Director Option Plan, 1993 TEL Electronics, Inc.
Stock Option and Incentive Plan; 1984 Non-Qualified Stock Option Plan, and 1984
Incentive Stock Option Plan for Key Employees of Telectronics, Inc., and up to
537,024 shares of Common Stock previously acquired by certain persons under the
1984 Executive Stock Bonus Plan; 1984 Non-Qualified Stock Option Plan; 1984
Incentive Stock Option Plan for Key Employees of Telectronics, Inc.; and 1993
TEL Electronics, Inc. Stock Option and Incentive Plan.
<PAGE>
PROSPECTUS
TELS Corporation
406 West South Jordan Parkway
Suite 250
South Jordan, Utah 84095
(801) 571-1182
Common Stock, par value $.02 per share
1,274,274 Shares
This Prospectus relates to the resale or offer for sale of shares of
Common Stock, par value $.02 per share (the "Common Stock"), of TELS
Corporation, a Utah corporation (the "Company"), which have been acquired by
certain persons identified in this Prospectus (the "Selling Stockholders"), or
which may hereafter be acquired from time to time by Selling Stockholders,
including persons who may be deemed affiliates of the Company, pursuant to the
following plans: (i) 1984 Incentive Stock Option Plan for Key Employees of
Telectronics, Inc.; (ii) 1984 Executive Stock Bonus Plan; (iii) 1984
Non-Qualified Stock Option Plan; (iv) TEL Electronics, Inc. 1994 Director Option
Plan (the "1994 Director Plan"); and (v) 1993 TEL Electronics, Inc. Stock Option
and Incentive Plan (the "1993 Plan"). The 1984 Incentive Stock Option Plan, 1984
Executive Stock Bonus Plan, and 1984 Non-Qualified Stock Option Plan are
collectively referred to as the "1984 Plans." The 1993 Plan, 1994 Directors Plan
and 1984 Plans are sometimes collectively referred to hereunder as the "Plans."
See "Selling Stockholders."
The Common Shares are traded on the Nasdaq SmallCap Market tier of the
Nasdaq Stock Market under the symbol "TELS." On November 25, 1996, the last
reported sales price of the Common Shares, as reported by Nasdaq, was $.5625 per
share.
It is anticipated that sales or offers made pursuant to this Prospectus
will be effected by one or more of the Selling Stockholders in their discretion,
on a delayed or continuing basis from time to time in broker's transactions, in
transactions directly with market makers, in privately negotiated transactions,
through the facilities of Nasdaq, or otherwise, with the timing and manner of
sales to be determined by the Selling Stockholders, in each case at market
prices prevailing at the time of such sale, at prices relating to such
prevailing market prices, or at negotiated prices. Such transactions may be
effected directly by the Selling Stockholders, each acting as principal for his
own account, or through brokers, dealers or other agents designated by the
Selling Stockholders, and such brokers, dealers or other agents may receive
compensation in the form of underwriting discounts, brokerage commissions or
other concessions from the Selling Stockholders or the purchasers of shares for
whom they may act as agent. The Company will not receive any of the proceeds
from the sale of shares of Common Stock by the Selling Stockholders. In
connection with such resales or offers for sale, the Selling Stockholders and
the brokers, dealers or agents through whom shares may be sold may be deemed to
be "underwriters" as that term is defined in Section 2(11) of the Securities Act
of 1933, as amended (the "Securities Act"), and any commissions or discounts
received and any profit realized by them on the sale of shares may be considered
to be underwriting compensation. To the Company's knowledge, no specific
brokers, dealers or
<PAGE>
agents have been designated by the Selling Stockholders nor has any agreement
been entered into in respect of brokerage commissions or for the exclusive or
coordinated sale of any securities which may be offered pursuant to this
Prospectus. All expenses of registration incurred in connection with the
registration of these securities, other than any underwriting or brokerage
discounts, commissions or selling expenses with respect to the Common Stock
being sold by the Selling Stockholders, will be borne by the Company.
SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is December 2, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company with the Commission may be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
regional offices of the Commission located at 7 World Trade Center, 13th Floor,
New York, New York 10048, and at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Company's Common Stock is listed on Nasdaq and similar information can be
inspected and copied at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on
Form S-8 (the "Registration Statement") under the Securities Act with respect to
the Common Stock offered hereby. This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information contained in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement, including the exhibits thereto. Statements contained
herein concerning the provisions of any documents filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete and, in each instance, reference is made to the copy of
such document as so filed. Each such statement is qualified in its entirety by
such reference.
No person is authorized to give any information or make any
representation other than those contained or incorporated by reference in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed by the Company with the
Commission and are hereby incorporated by reference into this Prospectus: (1)
Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (2)
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; (3)
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996; (4) Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996; (5) the Notice of
Annual Meeting of Stockholders and Proxy Statement for the Company's 1995 Annual
Meeting of Stockholders held on June 3, 1996, pursuant to Section 14 of the
Exchange
3
<PAGE>
Act; and (6) the description of the Company's Common Stock, par value $.02 per
share, which is contained in the Company's Form 8-A filed on November 15, 1984.
All other documents and reports filed pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all securities to
be offered pursuant hereto have been sold or which deregisters such securities
then remaining unsold shall be deemed to be incorporated by reference in this
Prospectus and to be made a part hereof from the date of the filing of such
reports and 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 Prospectus 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 such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will cause to be furnished without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference in the document
which this Prospectus incorporates). Requests should be directed to Stephen M.
Nelson, President, TELS Corporation, 406 West South Jordan Parkway, Suite 250,
South Jordan, Utah 84095; telephone (801) 571-1182.
4
<PAGE>
THE COMPANY
The Company and its subsidiaries operate as a full service turnkey or
consignment contract manufacturer of printed circuit boards, cable harnesses,
chassis wiring and electro-mechanical assemblies, and also design, build, sell
and service microprocessor based computer systems for telecommunications
applications in various industries, with a particular emphasis in the lodging
industry. Until early 1996, the Company also operated personal computer reseller
and systems integrator businesses, which businesses have been discontinued by
the Company.
The Company was incorporated in February 1981 under the laws of the
State of Utah and its executive offices and research and development facilities
are located at 406 West South Jordan Parkway, Suite 250, South Jordan, Utah
84095, telephone number (801) 571-1182. The Company and its subsidiaries also
own and occupy manufacturing facilities located in American Fork, Utah and in
Santa Clara, California. The Company and its subsidiaries employ approximately
130 full time employees.
As provided by the "Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995," which became law in late December 1995, the
Company cautions readers that, in addition to the historical information
contained herein, this registration statement includes certain forward-looking
statements, assumptions and discussions which involve risks and uncertainties,
including, but not limited to, economic, competitive and capital marketplace
factors which effect the Company's operations, markets, products, services and
prices and could cause the Company's future results and stockholder values to
differ materially from those expressed in any forward-looking comments made by,
or on behalf of, the Company.
5
<PAGE>
RISK FACTORS
Recent Operating Losses
The Company has experienced recent net losses as a result of the
discontinuation of its personal computer reseller and systems integration
operations, and as a result of decreased sales of its telecommunications
products, which historically have accounted for significantly higher gross
profits than other sectors of the Company. Although management believes that the
Company can return to profitability in 1996, there can be no assurances that it
will do so.
Rapid Technological Change and Frequent New Product Introductions
The market for the Company's products and services is characterized by
rapid technological change and frequent new product introductions. For example,
it is expected that recent changes in the telecommunications industry caused by
changes in the North American Numbering Plan and North American Dialing Plan
relating to the numbering plan and method for making telephone calls in the
United States will require further development in the Company's
telecommunications products and enhancements. In addition, the
telecommunications industry currently is experiencing significant changes
characterized by the aggressive pursuit of independent activities and
opportunities by cable television and utility concerns in the telecommunications
marketplace. The impact of these changes cannot be determined at this time and
could result in changing markets for and increased competition with respect to
the Company's products and technologies. The Company believes that its future
success depends upon its ability to develop and market products and services
which incorporate new technologies, and to enhance and expand its existing
product lines. There can be no assurance that the Company can develop or market
new products or services successfully, or respond effectively to technological
changes or new product announcements by its competitors, or that it will have
sufficient capital when required to implement such strategies.
6
<PAGE>
Aggressive Competition
The telecommunications and computer component industries are highly
competitive. The Company's sales and potential profitability will be effected by
competition from other businesses, including established firms with greater
financial and technical resources. The Company is aware of numerous competitors
which provide products and services similar to those offered by the Company,
including the regional Bell operating companies. Additional competitors may
exist which are not known to the Company, and still others may enter the market
as demand for the Company's products and services expands. The Company's sales
and marketing efforts will be critical as the Company continues to face
competition in the marketplace. There can be no assurance that the Company will,
in the future, be able to provide the technological enhancements and new
products necessary to maintain its competitive position, or that the Company
will have the financial resources to make the required investments in sales,
marketing, engineering, and research and development, or that the Company will
be able to develop or sustain a competitive position for its products and
services. The Company's results may be effected adversely by the actions of
existing or future competitors, including the development of new technologies,
the introduction of new products and the reduction of prices to gain or retain
market share.
Industry Standards Effecting Manufacturing Businesses
The Company's electronics production and contract manufacturing
operations are certified in accordance with ISO 9002, which is a set of rigid
quality standards adopted by the international business community. The Company's
management believes that its continued ISO 9002 certification will enhance the
Company's ability to compete and is vital to the success of its operations. No
assurances can be given that the Company's operations will comply with existing
ISO 9002 certification standards, or that such standards will not be altered or
interpreted in ways that adversely effect the Company's future or existing
compliance with such standards.
Dependence on Senior Management and Key Employees
The Company's success depends to a significant extent upon the
performance of its executive officers and other key personnel. The loss of the
services of any of its executive officers or other key employees could have a
material adverse effect on the Company. The Company's future success will also
be dependent in part upon its ability to attract and retain additional highly
qualified personnel. There can be no assurance that the Company will be
successful in attracting and retaining such persons.
Dependence Upon Strategic Alliances or Relationships
The Company's future success may, in part, depend upon its ability to
develop strategic alliances or relationships with dealers and with other
marketing and sales partners. The
7
<PAGE>
Company may be dependent on the subsequent success of such third parties to
market and distribute its products. There can be no assurance that the Company
will be able to develop strategic relationships, or that any strategic partner
will contractually commit to utilize the Company's products or technology. The
inability of the Company to develop and maintain strategic relationships could
have a material adverse effect on the Company's business. In addition, there can
be no assurance that the Company's collaborators will not pursue alternative
technologies or develop alternative products either on their own or in
collaboration with others, including the Company's competitors.
Dependence on Suppliers
Certain components used in the Company's products are obtained from
third party suppliers and subcontractors. Although to date the Company has been
able to obtain adequate supplies of these components, the Company's inability in
the future to obtain sufficient components or to develop alternative sources
could result in delays in product introductions or shipments, which could have a
material adverse effect on the Company's operating results.
Proprietary Rights
The success of the Company will be dependent upon its ability to
protect its intellectual property and maintain the proprietary nature of its
technology. The Company does not hold and has not applied for any patents. The
Company seeks copyright protection for its names, software and developmental
products. There can be no assurance as to the range or degree of protection
which the Company's existing or future copyrights will afford or that others
will not obtain copyrights similar to those issued to the Company. There can be
no assurance that any copyrights claimed by the Company will not be challenged
by third parties, invalidated, rendered unenforceable or designed around. There
can be no assurance that the Company will be successful in protecting its
proprietary rights. No assurance can be given that the Company's technology will
not infringe patents or proprietary rights of others, nor that the Company can
obtain licenses to use such proprietary rights if necessary. In addition, there
can be no assurance that the Company's competitors will not independently
develop technologies that are substantially equivalent or superior to the
Company's technology. Further, the laws of certain countries in which the
Company's products may be sold or licensed may not protect the Company's
products and intellectual property rights to the same extent as the laws of the
United States.
Government Regulation
The Federal Communications Commission ("FCC") regulates, among other
things, the interconnection of communications equipment with telephone lines,
radiation emanations of certain equipment, and the ability of public switched
network services (such as the Company's lodging industry and other customers) to
earn revenues through the re-sale of telephone calls. Although the Company's
products which are subject to such regulations have complied with
8
<PAGE>
applicable FCC regulations and have received FCC approvals, there can be no
assurance that the Company's new products will meet future FCC regulations or
that existing regulations will not be altered or interpreted in ways that
adversely affect the Company's ability to maintain and receive such FCC
approvals.
Customer Concentrations
Certain of the Company's current product sales are concentrated with
one or more customers, which customers are responsible for a significant
percentage of the Company's revenue from sales of such products. Although the
Company believes that its current relationships with its customers are good, the
loss of one or more of its major customers could have a material adverse effect
on the Company.
Holdings By Existing Shareholders
The current officers and directors of the Company beneficially own
approximately 24% of the outstanding shares of Common Stock of the Company.
Certain of such shareholders also hold stock options to purchase additional
Common Stock, the exercise of which would increase their percentage beneficial
ownership of the Company. Accordingly, the officers and directors, acting as a
group, will likely be able to exert significant influence on the election of the
Company's directors and with respect to other corporate actions requiring
shareholder approval. The continuing ownership of such securities by such
shareholders could have the effect of delaying or preventing a change in control
of the Company.
Dilution
Certain events, such as the issuance of additional Common Stock,
including the issuance of such shares upon the exercise or conversion of
outstanding options, could result in substantial dilution of the Common Stock.
The issuance of such Common Shares, including the shares of Common Stock which
the Company is registering for resale herein, and the potential "overhang" of
such shares on the market, could adversely affect the prevailing market price of
the Company's Common Stock and result in dilution to existing shareholders.
No Dividends
The Company has not paid any dividends on its Common Stock, and does
not plan to pay dividends on its Common Stock for the foreseeable future. In
addition, the provisions of certain of the Company's loan agreements prohibit
the payment of dividends without the prior agreement of the Company's lender.
9
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
shares of Common Stock offered hereby. However, if all of the outstanding
options under the Plans were exercised, the Company would receive gross proceeds
of $644,513, which proceeds the Company expects to use for general corporate
purposes.
SELLING STOCKHOLDERS
Shares of the Company's Common Stock offered hereby by the Selling
Stockholders will be acquired upon the exercise of stock options previously
granted by the Company under the 1993 Plan and under the 1994 Directors Plan,
and pursuant to the issuance of shares of Common Stock upon exercise of stock
options under the 1984 Plans. The following table provides information with
respect to the shares of Common Stock owned by each Selling Stockholder as of
October 31, 1996, and as adjusted to reflect the sale of the securities offered
hereby, by the Selling Stockholders. Except as otherwise indicated, to the
knowledge of the Company, all persons listed below have sole voting and
investment power with respect to their securities, except to the extent that
authority is shared by spouses under applicable law or as otherwise noted below.
<TABLE>
<CAPTION>
Number of Common Shares
Acquired or to be
Common Shares Acquired Pursuant to Common Shares
Beneficially the Plan and Which Beneficially
Owned Prior to May be Offered Owned After
Name of the Offering(1) Pursuant Hereto (2) the Offering(3)
-------------------- ----------------------- -------------------
Selling Stockholder Number Percent Number Number Percent
- ------------------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Dr. John L. Gunter(4) 734,600 17% 350,000 394,600(4) 10%
Willard H. Gardner(5) 147,000 3% 152,000 12,000 *
David K. Doyle(6) 139,000 3% 140,000 16,000 *
Stephen M. Nelson(7) 289,500 7% 282,500 8,000 *
R. James Taylor(8) 69,240 2% 123,374 0 0%
Janet Roundy 9,500 * 12,875 625 *
Vaughn Moulton 27,125 * 39,125 0 0%
Susan Wilcox 16,250 * 26,250 0 0%
Patrick B. Hansen 7,250 * 11,250 0 0%
John Lee Gunter, II 2,615 * 2,000 1,015 *
Diane McPhie 1,600 * 2,000 0 0%
Monica Riding 1,600 * 2,000 0 0%
Bruce Tenney 1,600 * 2,000 0 0%
Gail Bradley 1,666 * 2,500 0 0%
Rita Shemberger 1,667 * 2,500 0 0%
Deborah Wallford 4,333 * 11,000 0 0%
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Kurt Holmstead 1,250 * 1,250 0 0%
Sean Gunter 25,000 * 68,500 500 *
Robert Albinowski 4,000 * 4,000 0 0%
Suzanne Albinowski 2,000 * 2,000 0 0%
Michael Allison 1,000 * 1,000 0 0%
Dennis Anderson 1,000 * 1,000 0 0%
Lynn Anderson 1,000 * 1,000 0 0%
Linda R. Bolin 100 * 100 0 0%
Laura M. Buckley-Frost 100 * 100 0 0%
Ronald E. Busby 100 * 100 0 0%
Roy B. Butterworth 100 * 100 0 0%
Marcella C. Chandler 100 * 100 0 0%
Karen A. Chandler 100 * 100 0 0%
Stephen K. Clark 1,250 * 1,250 0 0%
Jeff Frier 1,000 * 1,000 0 0%
Ray M. Harding, Jr. 22,000 * 6,000 16,000 *%
James W. Head 100 * 100 0 0%
Deborah Hicken 1,000 * 1,000 0 0%
Rob Hill 1,000 * 1,000 0 0%
Alan Lebaron 1,000 * 1,000 0 0%
Mark Lee 1,000 * 1,000 0 0%
Sandra Lew-Moll 1,000 * 1,000 0 0%
Frank Melville 1,000 * 1,000 0 0%
Sherie Leo-Mumford 4,000 * 4,000 0 0%
John E. Pepper 1,000 * 1,000 0 0%
Dixie Roundy 1,000 * 1,000 0 0%
Nello Tanner 1,000 * 1,000 0 0%
Rolf Thompson 1,000 * 1,000 0 0%
Richard F. Wall 100 * 100 0 0%
David Williford 100 * 100 0 0%
Malini Wright 1,000 * 1,000 0 0%
Kenith Babbs 0 * 10,000 0 0%
</TABLE>
- -----------------------
* Less than one percent.
(1) Includes all Common Stock beneficially owned by the Selling Stockholder
as a percentage of the 4,436,002 shares of restricted and free trading
Common Stock outstanding on October 31, 1996, including the shares of
Common Stock that the identified person had the right to acquire within
60 days of October 31, 1996 pursuant to the exercise of stock options
or conversion of securities.
(2) Represents all shares of Common Stock underlying options granted under
the Plans to each Selling Stockholder, whether or not exercisable as
of, or within, 60 days of October 31, 1996.
(3) Assumes that the Selling Stockholder acquires and disposes of all of
the shares of Common Stock covered by this Prospectus and does not
acquire any additional shares of Common
11
<PAGE>
Stock. Represents all shares of Common Stock underlying options granted
under the Plans to each Selling Stockholder, whether or not exercisable
as of, or within, 60 days of October 31, 1996, and all shares of
unrestricted Common Stock beneficially owned by each Selling
Stockholder.
(4) Includes 196,600 shares of Common Stock owned by Dr. Gunter's spouse,
P. Diane Gunter. Dr. Gunter is the Chairman of the Board of Directors
and Chief Executive Officer of the Company.
(5) Mr. Gardner is a Director and Secretary of the Company.
(6) Mr. Doyle is a Director of the Company.
(7) Mr. Nelson is a Director, and President of the Company.
(8) Mr. Taylor is Executive Vice President and Chief Technical Officer of
the Company, Vice President of Hash Tech, and General Manager of
Micromega, Inc., which are both wholly owned subsidiaries of the
Company.
12
<PAGE>
DESCRIPTION OF SECURITIES
Description of Securities
The Shares offered pursuant to this Prospectus are 1,274,274 shares of
Common Stock, par value $.02 per share. There are approximately 3,891,820 shares
of Common Stock issued and outstanding as of October 31, 1996, held by
approximately 1,460 record holders.
The holders of Common Stock are entitled to such dividends, if any, as
may be declared by the Board of Directors at its discretion out of funds legally
available for that purpose, and to participate pro rata in any distribution of
the Company's assets upon liquidation after the payment of all debts.
The holders of Common Stock have no preemptive or conversion rights,
nor are there any redemption or sinking fund rights with respect to Common
Stock. Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of shareholders. There is no cumulative voting with respect
to the election of directors, which means that the holders of a majority of the
shares can elect all of the directors if they choose to do so, and the holders
of the remaining shares would not be able to elect any directors. The
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable.
The above summary of certain provisions of the Common Stock does not
purport to be complete and is subject to, and is qualified in its entirety by,
the amended Articles of Incorporation of the Company and the Bylaws of the
Company and by the provisions of applicable law.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer.
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
13
<PAGE>
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
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.
14
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered by this Prospectus may be sold by
the Selling Stockholders from time to time in broker transactions, in privately
negotiated transactions, through the facilities of the Nasdaq, or otherwise, at
market prices prevailing at the time of such sale, at prices relating to such
prevailing market prices, or at negotiated prices. The Company will not receive
any of the proceeds from the sale of Common Stock by the Selling Stockholders.
The net proceeds to the Selling Stockholders will be the proceeds received by
them upon such sales, less brokerage commissions or other discounts.
The Company will pay substantially all of the expenses incident to the
registration of the Common Stock offered hereby, other than underwriting or
brokerage discounts, commissions and selling expenses with respect to the shares
of Common Stock being sold by the Selling Stockholders. There is no assurance
that the Selling Stockholders will ultimately acquire or sell any or all of the
shares of Common Stock offered hereby. The Selling Stockholders and brokers,
dealers and other agents through whom sales are made by the Selling Stockholders
may be regarded as "underwriters" within the meaning of the Securities Act, and
their compensation may be regarded as underwriters' compensation.
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Snell & Wilmer, L.L.P., 111 East Broadway, Suite
900, Salt Lake City, Utah 84111.
EXPERTS
The consolidated financial statements of the Company for the fiscal
year ended December 31, 1995 incorporated by reference in this prospectus, have
been incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The financial statements and schedule of the Company as of December 31,
1994, and for each of the years in the two-year period then ended, appearing in
the Company's 1995 Annual Report on Form 10-K have been incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
15
<PAGE>
No dealer, sales representative, or
other person has been authorized to
give any information or to make any
representation not contained in
this Prospectus and, if given or
made, such information or
representation must not be relied 1,274,274
upon as having been authorized by Common Shares
the Company, the Selling
Securityholders, or any other
person. This Prospectus does not TELS CORPORATION
constitute an offer of any
securities other than those to
which it relates or an offer to
sell, or a solicitation of an offer
to buy, to any person in any
jurisdiction where such an offer to
buy, to any person in any
jurisdiction where such an offer or
solicitation would be unlawful.
Neither the delivery of this
Prospectus nor any sale made
hereunder and thereunder shall,
under any circumstances, create any
implication that the information
contained herein is correct as of
any time subsequent to the date
hereof.
PROSPECTUS
TABLE OF CONTENTS
Page
Available Information............3
Information Incorporated
by Reference...................3
The Company......................5
Risk Factors.....................6
Use of Proceeds.................10
Selling Stockholders............10
Description of Securities.......13
Indemnification of Officers
and Directors..................13
Plan of Distribution............15
Legal Opinions..................15
Experts.........................15
December 2, 1996
================================== =====================================
16
<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 July
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.
II-1
<PAGE>
Item 5. Interests of Named Experts and Counsel
Not applicable.
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
II-2
<PAGE>
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
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
Included among the shares of Common Stock offered hereby are 911,425
options and shares of Common Stock issued pursuant to the 1984 Plans. Such
shares were issued to 42 persons pursuant to the provisions of 1984 plans in
reliance on Section 4(2) under the Securities Act.
Pursuant to the 1993 Plan and the 1994 Directors Plan, 362,849 options
and shares were granted to certain employees and directors pursuant to the
provisions of such plans in reliance on Section 4(2) of the Securities Act.
All of the Selling Stockholders to whom shares of Common Stock were
issued or options were granted under the Plans had at the time of such issuances
and grants preexisting business or other relationships with the Company or its
subsidiaries.
Item 8. Exhibits
Exhibit No. Description
4.1 TEL Electronics, Inc. 1994 Director Stock Option Plan.
4.2 1993 TEL Electronics, Inc. Stock Option and Incentive
Plan.
4.3 1984 Incentive Stock Option Plan for Key Employees of
Telectronics, Inc. (Previously filed as Exhibit 10.2
to the Company's Registration Statement on Form S-18,
SEC File No. 2-93915-D, and incorporated herein by
reference).
II-3
<PAGE>
4.4 1984 Non-Qualified Stock Option Plan. (Previously
filed as Exhibit 10.4 to the Company's Registration
Statement on Form S-18, SEC File No. 2-93915-D, and
incorporated herein by reference).
4.5 1984 Executive Stock Bonus Plan. (Previously filed as
Exhibit 10.1 to the Company's Registration Statement
on Form S-18, SEC File No. 2-93915-D and incorporated
herein by reference).
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.
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.
II-4
<PAGE>
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-5
<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-6
TEL Electronics, Inc. 1994 Director Option Plan
<PAGE>
TEL electronics, inc.
1994 Director Option Plan
<PAGE>
TABLE OF CONTENTS
PURPOSES OF THE PLAN......................................................... 1
DEFINITIONS.................................................................. 1
STOCK SUBJECT TO THE PLAN.................................................... 3
ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN....................... 3
Procedure for Grants................................................ 3
ELIGIBILITY.................................................................. 5
TERM OF PLAN................................................................. 5
FORM OF CONSIDERATION........................................................ 5
EXERCISE OF OPTION........................................................... 6
Procedure for Exercise: Rights as a Stockholder..................... 6
Rule 16b-3.......................................................... 6
Termination of Continuous Status as a Director...................... 6
Disability of Optionee.............................................. 7
Death of Optionee................................................... 7
NON-TRANSFERABILITY OF OPTIONS............................................... 7
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER
OR ASSET SALE....................................................... 7
Changes in Capitalization........................................... 7
Dissolution or Liquidation.......................................... 8
Merger or Asset Sale................................................ 8
AMENDMENT AND TERMINATION OF THE PLAN........................................ 8
Amendment and Termination........................................... 8
Effect of Amendment or Termination.................................. 8
TIME OF GRANTING OPTIONS..................................................... 8
CONDITIONS UPON ISSUANCE OF SHARES........................................... 8
RESERVATION OF SHARES........................................................ 9
OPTION AGREEMENT............................................................. 9
STOCKHOLDER APPROVAL......................................................... 9
i
<PAGE>
TEL electronics, inc.
1994 DIRECTOR OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1994 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be "non-statutory stock options."
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Board" means the Board of Directors of the Company;
(b) "Code" means the Internal Revenue Code of 1986, as
amended;
(c) "Common Stock" means the Common Stock of the Company;
(d) "Company" means TEL electronics, inc.;
(e) "Continuous Status as a Director" means the absence
of any interruption or termination of service as a Director;
(f) "Director" means a member of the Board;
(g) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a Director's fee by the Company shall not be
sufficient in and of itself to constitute "employment" by the Company;
(h) "Exchange Act" means the Securities Exchange Act of
1934, as amended;
(i) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without
limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation
("Nasdaq") System, the Fair Market Value of a Share of Common
Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such
system or exchange (or the exchange with the greatest volume
of trading in Common Stock) on the date of grant, as reported
in The Wall Street Journal or such other source as the Board
deems reliable;
<PAGE>
(ii) If the Common Stock is quoted on the Nasdaq
System (but not on the National Market System thereof) or
regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a Share of
Common Stock shall be the mean between the bid and asked
prices for the Common Stock on the last market trading day
prior to the day of determination, as reported in The Wall
Street Journal or such other source as the Board deems
reliable, or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be
determined in good faith by the Board.
(j) "Increase in Stockholder Value" means the value determined
based on the following formula (as determined on December 31
of each year based on the annual audited financial
statements):
(i) The Sum of
1) two times the percentage increase
in the market capitalization of the
Company;
2) one times the percentage increase
in the retained earnings of the
Company;
3) one times the percentage increase
in earnings of the Company;
4) three times the percentage
increase in gross profit from
revenues of the Company;
5) three times the percentage
increase in total assets of the
Company;
(ii) Divided by 10 and multiplied by 2.
(k) "Option" means a stock option granted pursuant to the
Plan;
(l) "Optioned Stock" means the Common Stock subject to an
Option
(m) "Optionee" means an Outside Director who receives an
Option;
(n) "Outside Director" means a Director who is not an
Employee;
(o) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code;
2
<PAGE>
(p) "Plan" means this 1994 Director Option Plan;
(q) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 10 of the Plan;
(r) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the
Internal Revenue Code of 1986;
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section
10 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is five hundred thousand (500,000) Shares (the "Pool") of
Common Stock. The Shares may be authorized but unissued, or reacquired Common
Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) Procedure for Grants. The provisions set forth in this
Section 4(a) shall not be amended more than once every six months,
other than to comport with changes in the Code, the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder. All
grants of Options to Outside Directors under this Plan shall be
automatic and non-discretionary and shall be made strictly in
accordance with the following provisions:
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to
determine the number of Shares to be covered by Options
granted to Outside Directors;
(ii) Each Outside Director shall be automatically
granted an Option to purchase five thousand (5,000) Shares
(their "First Option") on the date on which the later of the
following events occurs: (1) the effective date of this Plan,
as determined in accordance with Section 6 hereof, or (2) the
date on which such person first becomes a Director, whether
through election by the stockholders of the Company or
appointment by the Board to fill a vacancy;
(iii) After the First Option has been granted to the
Outside Directors, the Outside Director shall thereafter be
automatically granted an Option to purchase five thousand
(5,000) additional Shares on January 1 of each year, (if on
such date, he shall have served on the Board for at least six
(6) months), plus an additional Option to purchase up to a
maximum of fifteen thousand (15,000) additional Shares in
accordance with the formula set forth below which is based on
the Increase in Company's Stockholder Value, provided,
3
<PAGE>
however, that in no event shall any one Director receive
Options to purchase in excess of 20,000 Shares in one year,
or 40,000 Shares over three years. (The Options described
in this subparagraph (iii) shall collectively be referred to
as the "Subsequent Option")
Formula:
(1) In the event the Increase in
Company's Stockholder Value equals
or exceeds 30%, the Outside
Directors shall receive Options to
purchase five thousand (5,000)
Shares.
(2) In the event the Increase in
Company's Stockholder Value equals
or exceeds 60%, the Outside
Directors shall receive additional
Options to purchase ten thousand
(10,000) Shares.
(3) In the event the Increase in
Company's Stockholder Value equals
or exceeds 90%, the Outside
Directors shall receive additional
Options to purchase fifteen thousand
(15,000) Shares.
(iv) Notwithstanding the above provisions, any
exercise of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 16
hereof shall be conditioned upon obtaining such stockholder
approval of the Plan in accordance with Section 16 hereof;
(v) The terms of a First Option granted
hereunder shall be as follows:
(1) the term of the First Option shall
be ten (10) years;
(2) the First Option shall be
exercisable only while the Outside
Director remains a Director of the
Company, except as set forth in
Section 8 hereof;
(3) the exercise price per Share shall
be 100% of the fair market value per
Share on the date of grant of the
First Option;
(4) the First Option shall be fully
exercisable upon the six (6) month
anniversary of receipt.
(vi) The terms of a Subsequent Option granted
hereunder shall be as follows:
(1) the term of the Subsequent Option
shall be ten (10) years;
4
<PAGE>
(2) the Subsequent Option shall be
exercisable only while the Outside
Director remains a Director of the
Company, except as set forth in
Section 8 hereof;
(3) the exercise price per Share shall
be 100% of the fair market value per
Share on the date of grant of the
Subsequent Option;
(4) the Subsequent Option shall be fully
exercisable upon the six (6) month
anniversary of receipt.
(vii) In the event that any Option granted under the
Plan would cause the number of Shares subject to outstanding
Options plus the number of Shares previously purchased under
Options to exceed the Pool, then the remaining Shares
available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants
shall be made until such time, if any, as additional Shares
become available for grant under the Plan through action of
the stockholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
5. ELIGIBILITY. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4 hereof. An Outside Director who has been granted an Option
may, if he is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the stockholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. FORM OF CONSIDERATION. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i)cash, (ii)check, (iii)other shares which (a) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (b) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised, or (iv) delivery of a properly executed
exercise notice together with such other documentation as the Company and the
broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price.
5
<PAGE>
8. EXERCISE OF OPTION.
(a) Procedure for Exercise: Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times as are set
forth in Section 4 hereof; provided, however, that no Options shall be
exercisable until stockholder approval of the Plan in accordance with
Section 16 hereof has been obtained;
An Option may not be exercised for a fraction of a Share;
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may consist of
any consideration and method of payment allowable under Section 7 of
the Plan. Until the issuance (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to
vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise
of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise
of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 10 of the Plan;
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
(b) Rule 16b-3. Options granted to Outside Directors must
comply with the applicable provisions of Rule 16b-3 promulgated under
the Exchange Act or any successor thereto and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act
with respect to Plan transactions;
(c) Termination of Continuous Status as a Director. In the
event an Optionee's Continuous Status as a Director terminates (other
than upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code)), the Optionee may exercise
his or her Option, but only within three (3) months from the date of
such termination, and only to the extent that the Optionee was entitled
to exercise it at the date of such termination (but in no event later
than the expiration of its ten (10) year term). To the extent that the
Optionee was not entitled to exercise an Option at the date of such
termination, and to the extent that the Optionee does not exercise such
Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate;
(d) Disability of Optionee. In the event Optionee's Continuous
Status as a Director terminates as a result of total and permanent
6
<PAGE>
disability (as defined in Section 22(e)(3) of the Code), the Optionee
may exercise his or her Option, but only within twelve (12) months from
the date of such termination, and only to the extent that the Optionee
was entitled to exercise it at the date of such termination (but in no
event later than the expiration of its ten (10) year term). To the
extent that the Optionee was not entitled to exercise an Option at the
date of termination, or if he or she does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the
Option shall terminate;
(e) Death of Optionee. In the event of an Optionee's death,
the Optionee's estate or a person who acquired the right to exercise
the Option by bequest or inheritance may exercise the Option, but only
within twelve (12) months following the date of death, and only to the
extent that the Optionee was entitled to exercise it at the date of
death (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an
Option at the date of death, and to the extent that the Optionee's
estate or a person who acquired the right to exercise such Option does
not exercise such Option (to the extent otherwise so entitled) within
the time specified herein, the Option shall terminate.
9. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
MERGER OR ASSET SALE.
(a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of Shares covered by
each outstanding Option and the number of Shares which have been
authorized for issuance under the Plan but as to which no Options have
yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per Share
covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued Shares
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration." Except
as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of Shares subject to an
Option;
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option
7
<PAGE>
has not been previously exercised, it will terminate immediately prior
to the consummation of such proposed action;
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially
all of the assets of the Company, each outstanding Option shall be
assumed or an equivalent option shall be substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In
the event that the successor corporation does not agree to assume the
Option or to substitute an equivalent option, each outstanding Option
shall become fully vested and exercisable, including as to Shares as to
which it would not otherwise be exercisable, unless the Board, in its
discretion, determines otherwise. If an Option becomes fully vested and
exercisable in the event of a merger or sale of assets, the Board shall
notify the Optionee that the Option shall be fully exercisable for a
period of thirty (30) days from the date of such notice, and the Option
will terminate upon the expiration of such period. For the purposes of
this paragraph, the Option shall be considered assumed if, following
the merger or sale of assets, the option or right confers the right to
purchase, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the
merger or sale of assets by holders of Common Stock for each Share held
on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares).
11. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Amendment and Termination. Except as set forth in Section
4, the Board may at any time amend, alter, suspend, or discontinue the
Plan, but no amendment, alteration, suspension, or discontinuation
shall be made which would impair the rights of any Optionee under any
grant theretofore made, without his or her consent. In addition, to the
extent necessary and desirable to comply with Rule 16b-3 under the
Exchange Act (or any other applicable law or regulation), the Company
shall obtain stockholder approval of any Plan amendment in such a
manner and to such a degree as required;
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and
such Options shall remain in full force and effect as if this Plan had
not been amended or terminated.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof. Notice
of the determination shall be given to each Outside Director to whom an Option
is so granted within a reasonable time after the date of such grant.
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
8
<PAGE>
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the granting of an Option hereunder.
Such stockholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
9
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
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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 1,274,274
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, or already have been, 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. We also consent to the
reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Salt Lake City, Utah
Novemver 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
TEL Electronics, Inc. 1994 Director Option Plan, the 1993 Tel Electronics, Inc.
Stock Option and Incentive Plan, the 1984 Incentive Stock Option Plan for Key
Employees of Telectronics, Inc., the 1984 Non-Qualified Stock Option Plan, and
the 1984 Executive Stock Bonus 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 and to the reference to our firm under the heading
"Experts in the registration statement.
/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)
