-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, HUiU98nv/xIm5QKs2CAOD3gv4MK4Ximh7z3a86Kc+il0/jCXJhO3bMlpvR5OLkXS dJ4FLkpkTJ/KW0/OTF/8Ww== 0000096966-95-000002.txt : 19950509 0000096966-95-000002.hdr.sgml : 19950508 ACCESSION NUMBER: 0000096966-95-000002 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19950112 EFFECTIVENESS DATE: 19950131 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELEPHONE & DATA SYSTEMS INC CENTRAL INDEX KEY: 0000096966 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 362669023 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 033-57257 FILM NUMBER: 95501239 BUSINESS ADDRESS: STREET 1: 30 N LASALLE ST STE 4000 CITY: CHICAGO STATE: IL ZIP: 60602 BUSINESS PHONE: 3126301900 MAIL ADDRESS: STREET 1: 301 S. WESTFIELD RD STREET 2: PO BOX 5158 CITY: MADISON STATE: WI ZIP: 53705-0158 FORMER COMPANY: FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC STOCK OPTION PLANS DATE OF NAME CHANGE: 19741118 FORMER COMPANY: FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC DATE OF NAME CHANGE: 19740509 S-8 1 FORM S-8 Registration No. 33- ================================================================= SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM S-8 REGISTRATION STATEMENT Under the SECURITIES ACT OF 1933 _______________ TELEPHONE AND DATA SYSTEMS, INC. (Exact name of registrant as specified in its charter) Iowa 36-2669023 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 30 North LaSalle Street, Suite 4000 Chicago, Illinois 60602 (Address of Principal Executive Offices) (Zip Code) Telephone and Data Systems, Inc. 1994 Long-Term Incentive Plan (Full title of the plan) LeRoy T. Carlson, Jr. President Telephone and Data Systems, Inc. 30 North LaSalle Street, Suite 4000 Chicago, Illinois 60602 (Name and address of agent for service) (312) 630-1900 (Telephone number, including area code, of agent for service) _______________ CALCULATION OF REGISTRATION FEE ============================================================================= Proposed Proposed Title of Maximum Maximum Securities Amount Offering Aggregate Amount of to be to be Price Per Offering Registration Registered Registered Share (1) Price Fee ----------------------------------------------------------------------------- Common Shares $1.00 par value 800,000 shares(2) $ 44.9375 $35,950,000 $ 12,397 ============================================================================= (1) Estimated for the Common Shares solely for the purpose of calculating the registration fee on the basis of the average of the high and low prices of the Common Shares of the Company on the American Stock Exchange on January 10, 1995. (2) In addition, this Registration Statement also covers an indeterminate amount of additional securities which may be issued under the above- referenced Plan pursuant to the anti-dilution provisions of such Plan. PART I INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS Item 1. Plan Information.* ---------------- Item 2. Registration Information and Employee Plan Annual ------------------------------------------------- Information.* ----------- * Information required by Part I to be contained in the Section 10(a) prospectus is omitted from the Registration Statement in accordance with Rule 428 under the Securities Act of 1933, as amended (the "1933 Act") and the Note to Part I of Form S-8. PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Documents by Reference. --------------------------------------- The following documents which have heretofore been filed by Telephone and Data Systems, Inc. (the "Company" or the "Registrant"), with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), are incorporated by reference herein and shall be deemed to be a part hereof: 1. The Company's Annual Report on Form 10-K as amended by form 10-K/A-1 as filed on November 9, 1994, for the year ended December 31, 1993. 2. The Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30, 1994. 3. The Company's Current Reports on Form 8-K, dated January 19, February 7, March 30 and April 22, 1994. 4. The description of the Common Shares, par value $1.00 per share ("Common Shares"), of the Company contained in the Company's Report on Form 8-A/A-2, dated December 20, 1994. All documents, subsequently filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act, prior to the filing of a post-effective amendment to this Registration Statement which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and made a part hereof from their respective dates of filing (such documents, and the documents enumerated above, being hereinafter referred to as "Incorporated Documents"). Any statement contained in an Incorporated Document shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed Incorporated Document modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. Item 4. Description of Securities. ------------------------- See Item 3. Item 5. Interests of Named Experts and Counsel. -------------------------------------- Certain legal matters relating to the securities registered hereby will be addressed by Sidley & Austin, One First National Plaza, Chicago, Illinois 60603. The Company is controlled by a voting trust. Walter C.D. Carlson, a trustee and beneficiary of the voting trust and a director of the Company and certain subsidiaries of the Company, Michael G. Hron, the Secretary of the Company and certain subsidiaries of the Company, Stephen P. Fitzell, the Secretary of certain subsidiaries of the Company, and Sherry S. Treston, the Assistant Secretary of certain subsidiaries of the Company, are partners of Sidley & Austin. -2- Item 6. Indemnification of Directors and Officers. ----------------------------------------- The Iowa Business Corporation Act, as amended, provides for indemnification of directors and officers in a variety of circumstances, which may include liabilities under the 1933 Act. The Company's Bylaws provide for indemnification of the Company's directors and officers (and those serving in such capacity with a consolidated subsidiary or other entity at the request of the Board of Directors of the Company) in the circumstances, and to the extent, permitted by the Iowa Business Corporation Act, as amended. The Company has directors' and officers' liability insurance which provides, subject to certain policy limits, deductible amounts and exclusions, coverage for all persons who have been, are or may in the future be, directors or officers of the Company, against amounts which such persons must pay resulting from claims against them by reason of their being such directors or officers during the policy period for certain breaches of duty, omissions or other acts done or wrongfully attempted or alleged. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers and persons controlling the Company pursuant to the foregoing provisions, or otherwise, the Company has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. Item 7. Exemption from Registration Claimed. ----------------------------------- Not Applicable. Item 8. Exhibits. -------- The exhibits accompanying this Registration Statement are listed on the accompanying Exhibit Index. The Plan is not intended to be qualified under Section 401(a) of the Internal Revenue Code. Item 9. Undertakings. ------------ The Company hereby undertakes: 1. To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (a) To include any prospectus required by Section 10(a)(3) of the 1933 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 the Registration Statement; (c) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; -3- Provided, however, that paragraphs 1.(a) and 1.(b) -------- ------- do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Company pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference in the Registration Statement. 2. That, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. ---- ---- 3. To remove from registration by means of a post- effective amendment any of the Common Shares being registered hereby which remain unsold at the termination of the offering. 4. That, for the purposes of determining any liability under the 1933 Act, each filing of the Company's Annual Report pursuant to Section 13(a) or Section 15(d) of the 1934 Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the 1934 Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering hereof. ---- ---- 5. That, insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. -4- SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on the 12th day of January, 1995. TELEPHONE AND DATA SYSTEMS, INC. By: /s/ LeRoy T. Carlson ----------------------------- LeRoy T. Carlson Chairman Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated and on the 12th day of January, 1995. /s/LeRoy T. Carlson Chairman and Director - ----------------------------- LeRoy T. Carlson /s/LeRoy T. Carlson, Jr. President and Director (Chief - ----------------------------- LeRoy T. Carlson, Jr. Executive Officer) /s/Murray L. Swanson Executive Vice President-Finance and - ----------------------------- Murray L. Swanson Director (Principal Financial Officer) /s/Rudolph E. Hornacek Director - ----------------------------- Rudolph E. Hornacek /s/James Barr III Director - ----------------------------- James Barr III /s/Lester O. Johnson Director - ----------------------------- Lester O. Johnson /s/Donald C. Nebergall Director - ----------------------------- Donald C. Nebergall /s/Herbert S. Wander Director - ----------------------------- Herbert S. Wander /s/Walter C.D. Carlson Director - ----------------------------- Walter C.D. Carlson /s/Donald R. Brown Director - ----------------------------- Donald R. Brown /s/Robert J. Collins Director - ----------------------------- Robert J. Collins /s/Gregory J. Wilkinson Vice President and Controller - ----------------------------- Gregory J. Wilkinson (Principal Accounting Officer) EXHIBIT INDEX The following documents are filed herewith or incorporated herein by reference. Exhibit No. Description - ------- ----------- 4.1 Articles of Incorporation of the Company, as amended (Incorporated herein by reference to Exhibit 1 to the Company's Report on Form 8-A/A-2, dated December 20, 1994) 4.2 Bylaws of the Company (Incorporated herein by reference to Exhibit 2 to the Company's Report on Form 8-A/A-2, dated December 20, 1994) 5 Opinion of Counsel 23.1 Consent of Independent Public Accountants 23.2 Consents of Independent Accountants 23.3 Consent of Counsel (contained in Exhibit 5) 99.1 Telephone and Data Systems, Inc. 1994 Long-Term Incentive Plan 99.2 Form of 1994 Long-Term Stock Option Agreement (Transferable Form) 99.3 Form of 1994 Long-Term Stock Option Agreement (Nontransferable Form) 99.4 Form of 1995 Performance Stock Option Agreement (Transferable Form) 99.5 Form of 1995 Performance Stock Option Agreement (Nontransferable Form) EX-5 2 EXHIBIT 5 EXHIBIT 5 SIDLEY & AUSTIN ONE FIRST NATIONAL PLAZA CHICAGO, ILLINOIS 60603 January 12, 1995 Telephone and Data Systems, Inc. Suite 4000 30 North LaSalle Street Chicago, Illinois 60602 Re: Telephone and Data Systems, Inc. Registration Statement on Form S-8 ---------------------------------- Gentlemen: We are counsel to Telephone and Data Systems, Inc., an Iowa corporation (the "Company"), and have represented the Company in connection with the Registration Statement on Form S-8 (the "Registration Statement") being filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the offer and sale of 800,000 shares, par value $1.00 per share (the "Common Shares"), of the Company pursuant to the Telephone and Data Systems, Inc. 1994 Long-Term Incentive Plan (the "Plan"). In rendering this opinion, we have examined and relied upon a copy of the Plan and the Registration Statement, including the related Prospectus dated the date hereof. We have also examined and relied upon originals, or copies of originals certified to our satisfaction, of such agreements, documents, certificates and other statements of governmental officials and other instruments, and examined such questions of law and have satisfied ourselves as to such matters of fact, as we have considered relevant and necessary as a basis for this opinion. We have assumed the authenticity of all documents submitted to us as originals, the genuiness of all signatures, the legal capacity of all natural persons and the conformity with the original documents of any copies thereof submitted to us for our examination. Based on the foregoing, we are of the opinion that: 1. The Company is duly incorporated and validly existing under the laws of the State of Iowa; and 2. The Common Shares will be legally issued, fully paid and nonassessable when: (i) the Registration Statement shall have become effective under the Securities Act; (ii) the Common Shares shall have been duly issued and sold in the manner contemplated by the Plan; and (iii) certificates representing the Common Shares shall have been duly executed, countersigned and registered and duly delivered to the purchasers thereof against payment of the agreed consideration therefor. We do not find it necessary for the purposes of this opinion to cover, and accordingly we express no opinion as to, the application of the securities or "Blue Sky" laws of the various states to the sale of the Common Shares. Except as expressly stated in the next sentence, this opinion is limited to the Securities Act to the extent applicable. Insofar as the opinions expressed above relate to matters governed by the laws of the State of Iowa, we have not made an independent examination of such laws, but have relied, with your consent, Telephone and Data Systems, Inc. January 12, 1995 Page 2 as to such laws upon the attached opinion of Nyemaster, Goode, McLaughlin, Voigts, West, Hansel & O'Brien, P.C. of Des Moines, Iowa. The Company is controlled by a voting trust. Walter C.D. Carlson, a trustee and beneficiary of the voting trust and a director of the Company and certain subsidiaries of the Company, Michael G. Hron, the Secretary of the Company and certain subsidiaries of the Company, Stephen P. Fitzell, the Secretary of certain subsidiaries of the Company, and Sherry S. Treston, the Assistant Secretary of certain subsidiaries of the Company, are partners of this Firm. This opinion is being delivered in connection with the Registration Statement and, accordingly, may not be utilized for any other purpose without our prior written consent. We assume no obligation to update or supplement this opinion to reflect any facts or circumstances which may hereafter come to our attention with respect to the opinions expressed above, including any changes in applicable law which may hereafter occur. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to all references to our Firm in or made a part of the Registration Statement. Very truly yours, SIDLEY & AUSTIN NYEMASTER, GOODE, McLAUGHLIN, VOIGTS, WEST, HANSELL & O'BRIEN 1900 Hub Tower 699 Walnut Street Des Moines, Iowa 50309 (515) 283-3100 January 12, 1995 Sidley & Austin One First National Plaza Chicago, Illinois 60603 Re: Telephone and Data Systems, Inc. Form S-8 Registration Statement ------------------------------- Ladies and Gentlemen: We have acted as your Iowa counsel with respect to the Registration Statement on Form S-8 (the "Registration Statement") being filed by Telephone and Data Systems, Inc. (the "Company") with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), relating to the registration of 800,000 Common Shares, $1.00 par value, of the Company (the "Shares") to be offered and sold pursuant to the terms of the Telephone and Data Systems, Inc. 1994 Long-Term Incentive Plan (the "Plan"). In rendering our opinion, we have examined and relied upon a copy of the Plan, the Prospectus relating to the Plan and the Registration Statement. We have also examined such records, documents and questions of law as we have considered relevant and necessary as a basis for this opinion. As to matters of fact material to our opinions, we have with your agreement relied upon certificates of officers of the Company. We have assumed with your agreement the authenticity of all documents submitted to us as originals, the conformity with the original documents of any copies submitted to us for our examination and the authenticity of the original of any such copies. Based on the foregoing, and subject to the foregoing qualifications and limitations, it is our opinion that: 1. The Company is duly incorporated and validly existing under the laws of the State of Iowa. 2. The Shares will be legally issued, fully paid and non-assessable when: (i) the Registration Statement shall have become effective under the Securities Act; (ii) the Shares shall have been duly issued and sold in the manner contemplated by the Plan, and (iii) certificates representing the Shares shall have been duly executed, countersigned and registered and duly delivered to the purchasers thereof against payment of the agreed consideration therefor. We are admitted to the Bar of the State of Iowa, and express no opinion herein as to the laws of any other jurisdiction, including the laws of the United States of America. Except as expressly set forth herein, we express no opinion, and no opinion is implied or may be inferred, in connection with the Registration Statement or the issuance of the Shares. Without limiting the Sidley & Austin January 12, 1995 Page 2 generality of the foregoing, we express no opinion with respect to the Securities or blue sky laws of the various states. This opinion is being delivered solely for the benefit of the persons to whom it is addressed; accordingly, it may not be quoted, filed with any governmental authority or other regulatory agency or otherwise circulated or utilized for any other purpose without our prior written consent. Sidley & Austin may refer to or quote from this opinion in its discretion in connection with opinions it may be requested or required to give in connection with the Registration Statement. The undersigned law firm also hereby consents to the filing of this opinion as an Exhibit to the Registration Statement and to the use of its name in the Registration Statement. Very truly yours, NYEMASTER, GOODE, McLAUGHLIN, VOIGTS, WEST, HANSELL & O'BRIEN, P.C. By: /s/ Mark C. Dickinson --------------------------- Mark C. Dickinson EX-23 3 EXHIBIT 23-1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Form S-8 Registration Statement of Telephone and Data Systems, Inc. of our report dated February 8, 1994, on the consolidated financial statements of Telephone and Data Systems, Inc. and Subsidiaries, incorporated by reference in the Telephone and Data Systems, Inc. Form 10-K for the year ended December 31, 1993, to the incorporation by reference in this Form S-8 Registration Statement of our report dated February 8, 1994, on the financial statement schedules of Telephone and Data Systems, Inc., included in the Telephone and Data Systems, Inc. Form 10-K for the year ended December 31, 1993, and to the incorporation by reference in this Form S-8 Registration Statement of our compilation report dated February 11, 1994 (except with respect to the matters discussed in the third, fifth and sixth paragraphs of Note 7, as to which the date is October 17, 1994) on the combined financial statements of the Los Angeles SMSA Limited Partnership, the Nashville/Clarksville MSA Limited Partnership and the Baton Rouge MSA Limited Partnership, included in the Telephone and Data Systems, Inc. Form 10-K for the year ended December 31, 1993. We also consent to all references to our Firm included in this Form S-8 Registration Statement. ARTHUR ANDERSEN LLP Chicago, Illinois January 6, 1995 EX-23 4 EXHIBIT 23-2 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Form S-8 Registration Statement of Telephone and Data Systems, Inc. of our report, which includes explanatory paragraphs relating to contingencies, dated February 4, 1994, except for the information presented in paragraphs three, five and six of Note 9, as to which the date is October 17, 1994, on our audits of the financial statements of the Los Angeles SMSA Limited Partnership as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, included in the Telephone and Data Systems, Inc. Annual Report on Form 10-K/A-1 for the year ended December 31, 1993; such financial statements were not included separately in such Form 10-K/A-1. COOPERS & LYBRAND L.L.P. Newport Beach, California January 11, 1995 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Form S-8 Registration Statement of Telephone and Data Systems, Inc. of our reports dated February 11, 1994, February 11, 1993 and February 10, 1992, on our audits of the financial statements of the Nashville/Clarksville MSA Limited Partnership as of December 31, 1993, 1992 and 1991 and for the years ended December 31, 1993, 1992 and 1991, included in the Telephone and Data Systems, Inc. Annual Report on Form 10-K, as amended by From 10-K/A-1 as filed on November 9, 1994, for the year ended December 31, 1993; such financial statements were not included separately in such Form 10-K. COOPERS & LYBRAND L.L.P. Atlanta, Georgia January 11, 1995 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Form S-8 Registration Statement of Telephone and Data Systems, Inc. of our reports dated February 11, 1994, February 11, 1993 and February 10, 1992, respectively, on our audits of the financial statements of the Baton Rouge MSA Limited Partnership as of December 31, 1993, 1992 and 1991 and for the years ended December 31, 1993, 1992 and 1991, included in the Telephone and Data Systems, Inc. Annual Report on Form 10-K, as amended by Form 10-K/A-1 as filed on November 9, 1994, for the year ended December 31, 1993; such financial statements were not included separately in such Form 10-K. COOPERS & LYBRAND L.L.P. Atlanta, Georgia January 11, 1995 EX-99 5 EXHIBIT 99-1 TELEPHONE AND DATA SYSTEMS, INC. 1994 LONG-TERM INCENTIVE PLAN ARTICLE I PURPOSE ------- The purposes of the Telephone and Data Systems, Inc. 1994 Long-Term Incentive Plan (the "Plan") are (i) to align the interests of the stockholders of Telephone and Data Systems, Inc. (the "Company") and the key executive and management employees of the Company who receive options under the Plan by increasing the proprietary interest of such employees in the Company's growth and success, (ii) to advance the interests of the Company by attracting and retaining key executive and management employees of the Company, and (iii) to motivate such employees to act in the long-term best interests of the Company's stockholders. ARTICLE II DEFINITIONS ----------- For purposes of the Plan, the following capitalized terms shall have the meanings set forth in this Article. 2.1 "Affiliate" shall mean a corporation which owns directly or indirectly at least 50% of the outstanding stock of the Company or the combined voting power of such outstanding stock or a corporation at least 50% of whose outstanding stock or the combined voting power of such outstanding stock is owned directly or indirectly by the Company. 2.2 "Award" shall mean a written agreement between the Company and an optionee evidencing an option granted hereunder. 2.3 "Board" shall mean the Board of Directors of the Company. 2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.5 "Committee" shall mean a Committee designated by the Board, consisting of two or more members of the Board, each of whom are "outside directors" within the meaning of section 162(m) of the Code. No member of the Committee during the one year prior to serving as a Committee member, or while serving as a Committee member, shall have been, or shall be, granted or awarded shares of Common Stock, or options to purchase shares of Common Stock or other Stock of the Company, or stock appreciation rights pursuant to the Plan or any other plan of the Company or any of its affiliates, except for a grant or award which would not result in such member ceasing to be a "disinterested person" within the meaning of Rule 16b-3 under the Exchange Act. 2.6 "Common Stock" shall mean the class of shares of the Company designated as "Common Shares" in its Articles of Incorporation. 2.7 "Disability" shall mean a total physical disability which, in the committee's judgment, prevents an optionee from performing substantially such optionee's employment duties and responsibilities for a continuous period of at least six months. -2- 2.8 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 2.9 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 2.10 "Fair Market Value" of a share of Stock shall mean its closing sale price on the principal national stock exchange on which the Stock is traded on the date as of which such value is being determined, or, if there shall be no reported sale for such date, on the next preceding date for which a sale was reported; provided that if Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate. 2.11 "Incentive Stock Option" shall mean an option to purchase shares of Stock which meets the requirements of section 422 of the Code (or any successor provision) and which is intended by the Committee to constitute an Incentive Stock Option. 2.12 "Legal Representative" shall mean a guardian, legal representative or other person acting in a similar capacity with respect to an optionee. 2.13 "Mature Shares" shall mean shares of Stock (i) for which the holder thereof has good title, free and clear of all liens and encumbrances, and (ii) which such holder has held for at least six months or has purchased on the open market. -3- 2.14 "Non-Qualified Stock Option" shall mean an option to purchase shares of Stock which is not an Incentive Stock Option. 2.15 "Performance Measures" shall mean criteria and objectives established by the Committee which must be satisfied during a Performance Period in order for an employee eligible to participate in the Plan to be granted a Performance Stock Option. Such criteria and objectives may include, but are not limited to, the attainment by a share of Stock of a specified Fair Market Value for a specified period of time, certain earnings per share or return on equity, increased cash flows, revenues, or market share, or attainment of cost reduction goals, attainment of individual performance objectives, or any other criteria and objectives established by the Committee or any combination thereof. 2.16 "Performance Period" shall mean a period designated by the Committee during which Performance Measures shall be measured. 2.17 "Permanent and Total Disability" shall have the meaning set forth in section 22(e)(3) of the Code (or any successor thereto). 2.18 "Permitted Transferee" shall mean (i) an optionee's spouse, (ii) any of an optionee's lineal descendants or (iii) a trust or similar arrangement of which such spouse, a lineal descendant of such optionee, or one or more of such persons are the only current beneficiaries, provided that such spouse or descendant (or the Legal Representative of such spouse or descendant) or such trust or similar arrangement, as the case may be, has entered into a written agreement with the Company authorizing the Company to withhold shares of Stock which would otherwise be delivered to such -4- person upon an exercise of a Non-Qualified Stock Option to pay any federal, state, local or other taxes which may be required to be withheld or paid in connection with such exercise in the event that the optionee does not provide for an arrangement satisfactory to the Company to assure that such taxes will be paid. 2.19 "Stock" shall mean Common Stock and any other equity security which (i) is designated by the Board to be available for stock option grants under the Plan or (ii) becomes available for grants under the Plan by reason of a stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, spin-off or other similar change in capitalization or event or any distribution to holders of shares of Common Stock. ARTICLE III ELIGIBILITY AND ADMINISTRATION ------------------------------ 3.1 Eligibility. Participants in the Plan shall consist of such key executive and management employees of the Company as the Committee in its sole discretion may select from time to time. The Committee's selection of an employee to participate in the Plan at any time shall not require the Committee to select such employee to participate in the Plan at any other time. 3.2 Committee Administration. (a) In General. The Plan shall be administered by the Committee in accordance with the terms of the Plan. The Committee, in its discretion, shall select those eligible key executive and management employees for participation in the Plan as the Committee determines and shall determine the form and timing of each grant of an option and the number of shares of Stock subject to each option, the purchase price per share of Stock purchasable upon -5- exercise of the option, the time and conditions of exercise of the option and all other terms and conditions of the option, including, without limitation, the form of the Award evidencing the option. The Committee shall interpret the Plan and establish any rules and procedures it deems necessary or desirable for the administration of the Plan and may impose, incidental to the grant of an option, conditions with respect to the option, such as restricting or limiting competitive employment or other activities. All such interpretations, rules, procedures and conditions shall be conclusive and binding on the parties. A majority of the members of the Committee shall constitute a quorum. The acts of the Committee shall be either (i) acts of a majority of the members of the Committee present at any meeting at which a quorum is present or (ii) acts approved in writing by a majority of the Committee without a meeting. (b) Delegation. The Committee may delegate some or all of its power and authority hereunder to the President and Chief Executive Officer or other executive officer of the Company as the Committee deems appropriate; provided, however, that the Committee may not delegate its power and authority with regard to (A) the selection for participation in the Plan of (i) the Chief Executive Officer of the Company (or any employee who is acting in such capacity), one of the four highest compensated officers of the Company (other than the Chief Executive Officer), or any other person deemed to be a "covered employee" within the meaning of section 162(m) of the Code or who, in the Committee's judgment, is likely to be a covered employee at any time during the exercise period of the option to be granted to such employee, or (ii) an officer or other person subject to section 16 of the Exchange Act, or (B) decisions concerning the timing, pricing or number of shares subject to an option granted to such an employee, officer or other person who is, or who in the Committee's judgment is likely to be, a covered employee. -6- (c) Indemnification. No member of the Board or Committee, and neither the President and Chief Executive Officer nor any other executive officer to whom the Committee shall delegate any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan and each member of the Board and the Committee and the President and Chief Executive Officer and each such other executive officer who is designated by the Committee to exercise any power or authority hereunder shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys' fees) arising therefrom to the full extent permitted by law, except as otherwise may be provided in the Company's articles of incorporation or by-laws, and under any directors' and officers' liability insurance which may be in effect from time to time. 3.3 Shares Available. Subject to adjustment as provided in Section 5.7, 800,000 shares of Common Stock shall initially be available under the Plan. Such shares of Common Stock and shares of each other class of Stock which become available under the Plan shall be reduced by the sum of the aggregate number of shares of such Stock then subject to outstanding options under the Plan. To the extent that an outstanding option expires or terminates unexercised or is cancelled or forfeited, then the shares of Stock subject to such expired, unexercised, cancelled or forfeited portion of such option shall again be available under the Plan. Shares of Stock to be delivered under the Plan shall be made available from authorized and unissued shares of Stock, or authorized and issued shares of Stock reacquired and held as treasury shares or otherwise or a combination thereof. -7- ARTICLE IV STOCK OPTIONS 4.1 In General. The Committee may, in its discretion, grant options to purchase shares of Stock to such eligible employees as may be selected by the Committee. Each option, or portion thereof, that is not an Incentive Stock Option, shall be a Non-Qualified Stock Option. Each Incentive Stock Option shall be granted within ten years of the effective date of the Plan. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Stock with respect to which options designated as Incentive Stock Options are exercisable for the first time by an option holder during any calendar year (under the Plan or any other plan of the Company or any of its subsidiaries) exceeds $100,000, such options shall constitute Non-Qualified Stock Options. Options shall be subject to the terms and conditions set forth in this Section 4.1 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem advisable, except that the Committee shall not grant an option or options in any calendar year to any eligible employee which, in the aggregate, give such an employee an option to purchase more than 50,000 shares of Stock (as may be adjusted pursuant to Section 5.7). 4.2 Number of Shares and Purchase Price. The number of shares of Stock subject to an option and the purchase price per share of Stock purchasable upon exercise of the option shall be determined by the Committee; provided, however, that the purchase price per share of Stock purchasable upon exercise of either an Incentive Stock Option or a Non-Qualified Stock Option shall generally be the average Fair Market Value of a share of Stock during the 20 trading days immediately preceding the date the option is granted, but in the case of an Incentive Stock Option, shall not be less than 100% of the Fair Market Value of a share of Stock on the date such option is -8- granted; provided further, that if an Incentive Stock Option shall be granted to an employee who owns capital stock possessing more than ten percent of the total combined voting power of all classes of capital stock of the Company or any of its subsidiaries ("Ten Percent Holder"), the purchase price per share of Stock shall be at least 110% of its Fair Market Value. 4.3 Option Period and Exercisability. The period during which an option may be exercised shall be determined by the Committee; provided, however, that no Incentive Stock Option shall be exercised later than ten years after its date of grant; provided further, that if an Incentive Stock Option shall be granted to a Ten Percent Holder, such option shall be exercised within five years of its date of grant. The Committee may, in its discretion, establish Performance Measures which must be satisfied during a Performance Period as a condition either to a grant of an option or to the exercisability of all or a portion of an option. The Committee shall determine whether an option shall become exercisable in cumulative or non-cumulative installments or in part or in full at any time. An option may be exercised only with respect to whole shares of Stock. 4.4 Method of Exercise. An option may be exercised (i) by giving written notice to the Vice President-Human Resources of the Company specifying the number of whole shares of Stock to be purchased and by accompanying such notice with payment therefor in full (unless another arrangement for such payment which is satisfactory to the Company has been made) either (A) in cash, (B) in Mature Shares having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (C) by authorizing the Company to withhold whole shares of Stock which would otherwise be delivered upon exercise of the option having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (D) in cash by a broker-dealer acceptable to the Company -9- to whom the optionee has submitted an irrevocable notice of exercise or (E) a combination of (A), (B) and (C), in each case to the extent determined by the Committee at the time the option is granted, and (ii) by executing such documents as the Company may reasonably request. The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (B)-(E) in the preceding sentence and, in the case of an optionee who is subject to section 16 of the Exchange Act, the Company may require that the method of making such payment be in compliance with section 16 of the Exchange Act and the rules and regulations thereunder. If payment of the purchase price is to be made pursuant to clause (B) or (C) (or a combination thereof) of the first sentence of this Section 4.4, any fraction of a share of Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the optionee. No share of Stock shall be delivered until the full purchase price therefor has been paid. 4.5 Termination of Employment. (a) Disability. Unless otherwise specified in an Award evidencing the grant of an option and, in the case of an Incentive Stock Option, subject to Section 4.5(f), if an optionee's employment with the Company terminates by reason of Disability, the option held by such optionee shall be exercisable only to the extent that such option is exercisable on the effective date of such optionee's termination of employment and after such date may be exercised by such optionee (or such optionee's Legal Representative) for a period of 12 months after the effective date of such optionee's termination of employment or until the expiration of the term of such option, whichever period is shorter. If the optionee shall die within such period (or other period specified in the Award), the option shall be exercisable by the beneficiary or beneficiaries duly designated by the optionee or, if none, the executor or administrator of the optionee's estate or, if none, the person to whom the optionee's rights under such option shall pass by will or by applicable laws of descent and distribution, to the same extent such option was exercisable by the optionee on -10- the date of the optionee's death, for a period ending on the later of (i) the last day of such period and (ii) 90 days after the date of the optionee's death. (b) Retirement or Resignation with Prior Consent of the Board. Unless otherwise specified in an Award evidencing the grant of an option and, in the case of an Incentive Stock Option, subject to Section 4.5(f), if an optionee's employment with the Company terminates by reason of the optionee's retirement after attainment of age 65 or by reason of the optionee's resignation of employment at any age with the prior consent of the Board (as evidenced in the Company's minute book), the option held by such optionee shall be exercisable only to the extent that such option is exercisable on the effective date of such optionee's retirement or resignation, as the case may be, and after such date may be exercised by such optionee (or such optionee's Legal Representative) for a period of 90 days after such effective date or until the expiration of the term of such option, whichever period is shorter. If the optionee who has so retired or resigned shall die within such period (or other period specified in the Award), the option shall be exercisable by the beneficiary or beneficiaries duly designated by the optionee or, if none, the executor or administrator of the optionee's estate or, if none, the person to whom the optionee's rights under such option shall pass by will or by the applicable laws of descent and distribution, to the same extent such option was exercisable by the optionee on the date of the optionee's death, for a period ending 180 days after the effective date of such optionee's retirement or resignation. (c) Transfer to Affiliate. Unless otherwise specified in an Award evidencing the grant of an option, and in the case of an Incentive Stock Option, subject to Section 4.5(f), if an optionee's employment with the Company terminates by reason of the optionee's transfer of employment to an Affiliate, then the optionee's employment with such Affiliate shall be deemed to be employment with -11- the Company solely for the purpose of determining the exercisability of any outstanding option awarded to such optionee, except that such option shall be exercisable only to the extent it is exercisable at the time of such transfer. (d) Death. Unless otherwise specified in an Award evidencing the grant of an option and, in the case of an Incentive Stock Option, subject to Section 4.5(f), if an optionee's employment with the Company terminates by reason of death, the option held by such optionee shall be exercisable only to the extent that such option is exercisable on the date of such optionee's death, and after such date may be exercised by the beneficiary or beneficiaries duly designated by the optionee or, if none, the executor or administrator of the optionee's estate or, if none, the person to whom the optionee's rights under such option shall pass by will or by the applicable laws of descent or distribution for a period of 180 days after the date of death or until the expiration of the term of such option, whichever period is shorter. (e) Other Termination of Employment. Unless otherwise specified in an Award evidencing the grant of an option and, in the case of an Incentive Stock Option, subject to Section 4.5(f), if an optionee's employment with the Company terminates for any reason other than Disability, retirement after attainment of age 65, resignation of employment with the prior consent of the Board, a transfer to an Affiliate or death, the option held by such optionee shall be exercisable only to the extent that such option is exercisable on the effective date of such optionee's termination of employment and after such date may be exercised by such optionee (or such optionee's Legal Representative) for a period of 30 days after such effective date or until the expiration of the term of such option, whichever period is shorter. If the optionee shall die within such period (or other period specified in the Award), the option held by such optionee shall be exercisable only to the extent that -12- such option is exercisable on the date of such optionee's death, and after such date may be exercised by the beneficiary or beneficiaries duly designated by the optionee or, if none, the executor or administrator of the optionee's estate or, if none, the person to whom the optionee's rights under such option shall pass by will or by the applicable laws of descent or distribution for a period of 120 days after the date of death or until the expiration of the term of such option, whichever period is shorter. Notwithstanding the first sentence of this subsection (e), if an optionee ceases to be employed by the Company on account of such optionee's negligence, willful misconduct, competition with the Company or an Affiliate or misappropriation of confidential information of the Company or an Affiliate, the option shall terminate on the date the optionee's employment with the Company terminates, unless such option terminates earlier pursuant to Section 4.6. (f) Termination of Employment - Incentive Stock Options. If the employment with the Company of an optionee of an Incentive Stock Option terminates by reason of death or Permanent and Total Disability, each Incentive Stock Option held by such optionee shall be exercisable only to the extent that such option is exercisable on the date of such optionee's death or on the effective date of such optionee's termination of employment by reason of Permanent and Total Disability, as the case may be. In the case of the optionee's Permanent and Total Disability, the option may thereafter be exercised by such optionee (or such optionee's Legal Representative) for a period of one year (or such shorter period as the Committee may specify in the Award) after the effective date of such optionee's termination of employment by reason of Permanent and Total Disability or until the expiration of the term of such Incentive Stock Option, whichever period is shorter. In the case of the optionee's death, the option may thereafter be exercised by the beneficiary or beneficiaries duly designated by the optionee or, if none, the executor or administrator of the optionee's estate or, if none, the person to whom the optionee's rights under such option shall pass by will or by the applicable laws of descent -13- and distribution for a period of one year (or such other period as the Committee may specify in the Award) after the date of such optionee's death or until the expiration of the term of such Incentive Stock Option, whichever period is shorter. If the employment with the Company of an optionee terminates for any reason other than death or Permanent and Total Disability, each Incentive Stock Option held by such optionee shall be exercisable only to the extent such option is exercisable on the effective date of such optionee's termination of employment, and may thereafter be exercised by such optionee (or such optionee's Legal Representative) for a period of three months after the effective date of such optionee's termination of employment or until the expiration of the term of the Incentive Stock Option, whichever period is shorter. If an optionee dies during the exercise period specified in the Award evidencing the grant of such option following termination of employment by reason of Permanent and Total Disability, or if the optionee dies during the three-month period following termination of employment for any reason other than death or Permanent and Total Disability, each Incentive Stock Option held by such optionee shall be exercisable only to the extent such option is exercisable on the date of the optionee's death and may thereafter be exercised by the beneficiary or beneficiaries duly designated by the optionee or, if none, the executor or administrator of the optionee's estate or, if none, the person to whom the optionee's rights under such option shall pass by will or by the applicable laws of descent and distribution for a period of one year (or such shorter period as the Committee may specify in the Award) after the date of death or until the expiration of the term of such Incentive Stock Option, whichever period is shorter. -14- 4.6 Forfeiture of Option Upon Competition with Company or Any Affiliate or Misappropriation of Confidential Information. Notwithstanding any other provision herein, an option granted pursuant to an Award under the Plan shall not be exercisable on or after any date on which such optionee (a) enters into competition with the Company or an Affiliate, or (b) misappropriates confidential information of the Company or an Affiliate, as determined by the Committee or the Company in its sole discretion, and, accordingly, shall be terminated and thereby forfeited to the extent it has not been exercised as of such date. For purposes of the preceding sentence, an optionee shall be treated as entering into competition with the Company or an Affiliate if such optionee (i) directly or indirectly, individually or in conjunction with any person, firm or corporation, has contact with any customer of the Company or an Affiliate or any prospective customer which has been contacted or solicited by or on behalf of the Company or an Affiliate for the purpose of soliciting or selling to such customer or prospective customer any product or service, except to the extent such contact is made on behalf of the Company or an Affiliate, or (ii) otherwise competes with the Company or an Affiliate in any manner or otherwise engages in the business of the Company or an Affiliate. An optionee shall be treated as misappropriating confidential information of the Company or an Affiliate if such optionee (i) uses confidential information (as described below) for the benefit of anyone other than the Company or such Affiliate, as the case may be, or discloses the confidential information to anyone not authorized by the Company or such Affiliate, as the case may be, to receive such information, (ii) upon termination of employment, makes any summaries of, takes any notes with respect to, or memorizes any information or takes any confidential information or reproductions thereof from the facilities of the Company or an Affiliate, or (iii) upon termination of -15- employment or upon the request of the Company or an Affiliate, fails to return all confidential information then in the optionee's possession. "Confidential information" shall mean any confidential and proprietary drawings, reports, sales and training manuals, customer lists, computer programs, and other material embodying trade secrets or confidential technical, business, or financial information of the Company or an Affiliate. ARTICLE V GENERAL ------- 5.1 Effective Date and Term of Plan. The Plan shall become effective as of November 4, 1994 and shall terminate ten years thereafter unless terminated earlier by the Board. Termination of the Plan shall not affect the terms or conditions of any option granted prior to termination. Grants of options hereunder may be made at any time on or after the effective date and prior to the termination of the Plan. The Plan shall be submitted to the stockholders of the Company for approval and, in the event that the Plan is not approved by such stockholders, no Incentive Stock Options shall be granted hereunder. 5.2 Amendments. The Board may amend the Plan as it shall deem advisable, subject to any requirement of stockholder approval under applicable law, including Rule 16b-3 under the Exchange Act and section 162(m) of the Code; provided, however, that, except as provided in Section 5.7, no amendment shall be made without stockholder approval if such amendment (a) would increase the maximum number of shares of Stock available for issuance under the Plan or (b) would reduce the minimum purchase price in the case of an option; provided further that no amendment shall extend the term of the Plan or shall effect any change inconsistent with section 422 -16- of the Code with respect to any Incentive Stock Option which shall have been, or may be, granted under the Plan. No amendment may impair the rights of a holder of an outstanding option without the consent of such holder. 5.3 Award. Each option granted under the Plan shall be evidenced by an Award setting forth the terms and conditions applicable to such option. No option shall be valid until an Award is executed by the Company and the optionee and, upon execution by each party and delivery of the Award to the Company, such option shall be effective as of the effective date set forth in the Award. 5.4 Transferability of Stock Options. No Incentive Stock Option shall be transferable other than by will or the laws of descent and distribution or pursuant to a beneficiary designation effective on the optionee's death. No Non-Qualified Stock Option shall be transferable other than (a) by will or the laws of descent and distribution, (b) pursuant to a beneficiary designation effective on the optionee's death, or (c) to the extent permitted under (i) securities laws relating to the registration of securities subject to employee benefit plans, (ii) Rule 16b-3 under the Exchange Act and (iii) the Award evidencing the grant of such option, by gift to a Permitted Transferee. Each option may be exercised during the optionee's lifetime only by the optionee (or the optionee's Legal Representative) or, if applicable, by a Permitted Transferee. Except as permitted by the preceding sentences, no option may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any option such award and all rights thereunder shall immediately become null and void. -17- 5.5 Tax Withholding. The Company shall have the right to require, prior to the issuance or delivery of any shares of Stock, payment by the holder of the option being exercised of any federal, state, local or other taxes which may be required to be withheld or paid in connection with the exercise of such option. As determined by the Committee at the time of the grant of an option, an Award may provide that (i) the Company shall withhold whole shares of Stock which would otherwise be delivered to a holder, having an aggregate Fair Market Value determined as of the date the obligation to withhold or pay taxes arises in connection with an option (the "Tax Date") in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation by any of the following means: (A) a cash payment to the Company, (B) delivery to the Company of Mature Shares the aggregate Fair Market Value of which shall be determined as of the Tax Date, (C) authorizing the Company to withhold whole shares of Stock which would otherwise be delivered the aggregate Fair Market Value of which shall be determined as of the Tax Date, (D) a cash payment by a broker-dealer acceptable to the Company to whom the holder has submitted an irrevocable notice of exercise or (E) any combination of (A), (B) and (C); provided, however, that the Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (B)-(E), and that in the case of an optionee who is subject to section 16 of the Exchange Act, the Company may require that the method of satisfying such an obligation be in compliance with section 16 of the Exchange Act and the rules and regulations thereunder. An Award may provide for shares of Stock to be delivered or withheld having an aggregate Fair Market Value in excess of the minimum amount required to be withheld. Any fraction of a share of Stock which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder. 5.6 Restrictions on Shares. Each option granted hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of -18- the shares of Stock subject to such option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing shares of Stock delivered pursuant to any option made hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder. 5.7 Adjustment. In the event of any stock split, stock dividend, recapitalization, reclassification, reorganization, merger, consolidation, spin-off, combination of shares in a reverse stock split or other similar event, each holder of an option shall be entitled to receive upon the exercise of an option, at a price determined by the Committee in its sole discretion, such shares of Stock and other securities to which the holder would be entitled had the holder exercised such option prior to the occurrence of such event. If any other event shall occur which in the judgment of the Board would warrant an adjustment to (i) the number or designation of the class or classes of securities available under the Plan or (ii) the number or designation of the class or classes of securities subject to each outstanding option or the purchase price of a share of Stock subject to the option, or any combination of adjustments provided for in clauses (i) and (ii), such adjustments shall be authorized by the Board and made by the Committee upon such terms and conditions as it may deem equitable and appropriate. To the extent that any such event or any action taken under this Section 5.7 shall entitle a holder of an option to purchase additional shares of Stock or other security, the shares of Stock available under the Plan shall be deemed to include such additional shares of -19- Stock or other security. If any such adjustment would result in a fractional security being generally available under the Plan, such fractional security shall be disregarded. If any such adjustment would result in a fractional security being subject to an outstanding option under the Plan, the Company shall pay the holder of such an option, in connection with the first exercise of such option occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date over (B) the purchase price of such security. Any determination made by the Committee under this Section 5.7 shall be final, binding and conclusive on all holders of outstanding options granted under the Plan. 5.8 Change in Control. (a) Notwithstanding any other provision of the Plan or any provision of any agreement, in the event of a Change in Control, all outstanding options shall become immediately exercisable in full. In the event of a Change in Control pursuant to Section (b)(3) below, there may be substituted for each share of Stock available under the Plan, whether or not then subject to an outstanding option, the number and class of shares into which each outstanding share of such Stock shall be converted pursuant to such Change in Control. In the event of such a substitution, the purchase price per share of stock then subject to an outstanding option under the Plan shall be appropriately adjusted by the Committee, but in no event shall the aggregate purchase price for such shares be greater than the aggregate purchase price for the shares of Stock subject to such option prior to the Change in Control. -20- (b) For purposes of the Plan, "Change in Control" shall mean: (1) the acquisition by any individual, entity or group (a "Person"), including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 25% or more of the combined voting power of the then outstanding securities of the Company entitled to vote generally on matters (without regard to the election of directors) (the "Outstanding Voting Securities"), excluding, however, the following: (i) any acquisition directly from the Company or an Affiliate (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege, unless the security being so exercised, converted or exchanged was acquired directly from the Company or an Affiliate), (ii) any acquisition by the Company or an Affiliate, (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 5.8(b), or (v) any acquisition by the following persons: (A) LeRoy T. Carlson or his spouse, (B) any child of LeRoy T. Carlson or the spouse of any such child, (C) any grandchild of LeRoy T. Carlson, including any child adopted by any child of LeRoy T. Carlson, or the spouse of any such grandchild, (D) the estate of any of the persons described in clauses (A)-(C), (E) any trust or similar arrangement (including any acquisition on behalf of such trust or similar arrangement by the trustees or similar persons) provided that all of the current beneficiaries of such trust or similar arrangement are persons described in clauses (A)-(C) or their lineal descendants, or (F) the voting trust which expires on June 30, 2009, or any successor to such voting trust, including -21- the trustees of such voting trust on behalf of such voting trust (all such persons, collectively, the "Exempted Persons"); (2) individuals who, as of November 4, 1994, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to November 4, 1994, whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board; (3) approval by the stockholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Corporate Transaction"), excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 51% of the combined voting power of the outstanding securities of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns, either directly or indirectly, the Company or all or substantially all of the Company's assets) which are entitled -22- to vote generally on matters (without regard to the election of directors), in substantially the same proportions relative to each other as the shares of Outstanding Voting Securities are owned immediately prior to such Corporate Transaction, (ii) no Person (other than the following Persons: (v) the Company or an Affiliate, (w) any employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (x) the corporation resulting from such Corporate Transaction, (y) the Exempted Persons, (z) and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 25% or more of the Outstanding Voting Securities) will beneficially own, directly or indirectly, 25% or more of the combined voting power of the outstanding securities of such corporation entitled to vote generally on matters (without regard to the election of directors) and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (4) approval by the stockholders of the Company of a plan of complete liquidation or dissolution of the Company. 5.9 No Right of Participation or Employment. No person shall have any right to participate in the Plan. Neither the Plan nor any option granted hereunder shall confer upon any person any right to continued employment by the Company or any of its subsidiaries or affiliates or affect in any manner the right of the Company or any of its subsidiaries or affiliates to terminate the employment of any person at any time without liability hereunder. -23- 5.10 Rights as Stockholder. No person shall have any right as a stockholder of the Company with respect to any shares of Stock of the Company which are subject to an option granted hereunder unless and until such person becomes a stockholder of record with respect to such shares of Stock. 5.11 Governing Law. The Plan, each option granted hereunder and the related Award, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Illinois and construed in accordance therewith without giving effect to principles of conflicts of laws. 5.12 Severability. If a provision of the Plan shall be held illegal or invalid, the illegality or invalidity shall not affect the remaining parts of the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included in the Plan. -24- EX-99 6 EXHIBIT 99-2 TELEPHONE AND DATA SYSTEMS, INC. 1994 LONG-TERM INCENTIVE PLAN 1994 LONG-TERM STOCK OPTION AWARD Telephone and Data Systems, Inc., an Iowa corporation (the "Company"), hereby (i) grants to ___________________________________ (the "Optionee"), as of November 4, 1994 (the "Option Date"), pursuant to the provisions of the Telephone and Data Systems, Inc. 1994 Long-Term Incentive Plan (the "Plan"), a Non-Qualified Stock Option (the "Option") to purchase from the Company ________ shares of Common Stock at the price of $47.59 per share upon and subject to the terms and conditions set forth below and (ii) extends to the Optionee an opportunity to participate in a performance stock option program which has been established by the Committee for the years 1995 through 1999 (the "Performance Stock Option Program"). Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Time and Manner of Exercise of Option. ------------------------------------- 1.1. Exercise of Option. (a) In general. The Option shall become exercisable (i) on December 15, 1994 with respect to one-fifth of the number of shares of Common Stock subject to the Option on the Option Date, (ii) on each of December 15, 1995, December 15, 1996 and December 15, 1997 with respect to an additional one-fifth of the number of shares of Stock subject to the Option on the Option Date and (iii) on December 15, 1998 with respect to the remaining one-fifth of the shares of Stock subject to the Option on the Option Date. In no event may the Option be exercised, in whole or in part, after November 4, 2004 (the "Expiration Date"). (b) Disability. If the Optionee's employment by the Company terminates by reason of Disability, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 12 months after the effective date of the Optionee's termination of employment or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution, to the same extent the Option was exercisable by the Optionee on the date of the Optionee's death, for a period ending on the later of (i) the last day of such period and (ii) 90 days after the date of the Optionee's death. (c) Retirement or Resignation with Prior Consent of the Board. If the Optionee's employment by the Company terminates by reason of the Optionee's retirement after attainment of age 65 or by reason of the Optionee's resignation of employment at any age with the prior consent of the Board (as evidenced in the Company's minute book), the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 90 days after the effective date of the Optionee's retirement or resignation, as the case may be, or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution, to the same extent the Option was exercisable by the Optionee on the date of the Optionee's death, for a period ending 180 days after the effective date of the Optionee's retirement or resignation. -2- (d) Transfer to Affiliate. If an Optionee's employment by the Company terminates by reason of the Optionee's transfer of employment to an Affiliate, then the Optionee's employment with such Affiliate shall be deemed to be employment with the Company solely for the purpose of determining the exercisability of the Option, except that the Option shall be exercisable only to the extent it is exercisable at the time of such transfer. (e) Death. If the Optionee's employment by the Company terminates by reason of death, the Option shall be exercisable only to the extent it is exercisable on the date of death and after the date of death may be exercised by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution for a period of 180 days after the date of death or until the Expiration Date, whichever period is shorter. (f) Other Termination of Employment. If the Optionee's employment by the Company terminates for any reason other than Disability, retirement after attainment of age 65, resignation of employment with the prior consent of the Board (as evidenced in the Company's minute book), a transfer to an Affiliate or death, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 30 days after the effective date of the Optionee's termination of employment or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable only to the extent it is exercisable on the date of death and after the date of death may be exercised by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution for a period of 120 days -3- after the date of death or until the Expiration Date, whichever period is shorter. Notwithstanding the first sentence of this subsection (f), if the Optionee ceases to be employed by the Company on account of the Optionee's negligence, willful misconduct, competition with the Company or an Affiliate or misappropriation of confidential information of the Company or an Affiliate, the Option shall terminate on the date the Optionee's employment with the Company terminates, unless such Option terminates earlier pursuant to Section 1.2. 1.2 Forfeiture of Option Upon Competition with Company or Any Affiliate or Misappropriation of Confidential Information. Notwithstanding any other provision herein, the Option granted pursuant to this Award shall not be exercisable on or after any date on which the Optionee (a) enters into competition with the Company or an Affiliate, or (b) misappropriates confidential information of the Company or an Affiliate, as determined by the Committee or the Company in its sole discretion, and, accordingly, shall be terminated and thereby forfeited to the extent it has not been exercised as of such date. For purposes of the preceding sentence, the Optionee shall be treated as entering into competition with the Company or an Affiliate if the Optionee (i) directly or indirectly, individually or in conjunction with any person, firm or corporation, has contact with any customer of the Company or an Affiliate or any prospective customer which has been contacted or solicited by or on behalf of the Company or an Affiliate for the purpose of soliciting or selling to such customer or prospective customer any product or service, except to the extent such contact is made on behalf of the Company or an Affiliate, or (ii) otherwise competes with the Company or an Affiliate in any manner or otherwise engages in the business of the Company or an Affiliate. -4- The Optionee shall be treated as misappropriating confidential information of the Company or an Affiliate if the Optionee (i) uses confidential information (as described below) for the benefit of anyone other than the Company or such Affiliate, as the case may be, or discloses the confidential information to anyone not authorized by the Company or such Affiliate, as the case may be, to receive such information, (ii) upon termination of employment, makes any summaries of, takes any notes with respect to, or memorizes any information or takes any confidential information or reproductions thereof from the facilities of the Company or an Affiliate, or (iii) upon termination of employment or upon the request of the Company or an Affiliate, fails to return all confidential information then in the Optionee's possession. "Confidential information" shall mean any confidential and proprietary drawings, reports, sales and training manuals, customer lists, computer programs, and other material embodying trade secrets or confidential technical, business, or financial information of the Company or an Affiliate. 1.3. Method of Exercise. Subject to the limitations set forth in this Award, the Option may be exercised by the holder of the Option (1) by giving written notice to the Vice President-Human Resources of the Company at least 15 days prior to the exercise date specified in such notice, which notice shall specify the number of whole shares of Stock to be purchased and shall be accompanied by payment therefor in full (unless another arrangement for such payment which is satisfactory to the Company has been made) either (i) in cash, (ii) in previously owned whole shares of Stock (which the holder has held (or the holder and Optionee have held) for at least six months prior to the delivery of such shares of Stock or which the holder purchased on the open market and for which the holder has good title free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the holder has submitted an irrevocable notice of exercise, (iv) by authorizing the Company to withhold whole shares -5- of Stock which would otherwise be delivered upon exercise of the Option having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, or (v) a combination of (i), (ii) and (iv), and (2) by executing such documents as the Company may reasonably request. The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (ii) - (iv), and if Optionee is subject to section 16 of the Exchange Act, the Company may require that the method of making such payment be in compliance with section 16 of the Exchange Act and the rules and regulations thereunder. Any fraction of a share of Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the holder. No share of Stock shall be delivered until the full purchase price therefor has been paid. 1.4. Full or Partial Cancellation of Option. In the event that rights to purchase all or a portion of the shares of Stock subject to the Option expire or are exercised, cancelled or forfeited, the holder shall promptly return this Award to the Company. If the holder continues to have rights to purchase shares hereunder, the Company shall, within 10 days of the holder's delivery of the Award to the Company, either (i) mark the Award to indicate the extent to which the Option has expired or been exercised, cancelled or forfeited or (ii) issue to the holder a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Award in form and substance. If the holder does not return this Award to the Company, cancellation of the Option, to the extent it is expired, cancelled or forfeited shall nonetheless be effective. 2. Additional Terms and Conditions of Option. ----------------------------------------- -6- 2.1. Option Subject to Acceptance of Award. The Option shall become null and void unless the Optionee shall accept the Award by executing it in the space provided at the end hereof and returning it to the Company. 2.2 Transferability of Option. The Option may not be transferred by the Optionee other than (i) by will or the laws of descent and distribution, (ii) pursuant to a beneficiary designation effective on the Optionee's death, or (iii) to a Permitted Transferee. During the Optionee's lifetime, the Option is exercisable only by the Optionee (or the Optionee's Legal Representative) or a Permitted Transferee. Except as permitted by the foregoing, the Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the Option, the Option and all rights hereunder shall immediately become null and void. 2.3. Restriction on Sale of Shares. If the Optionee is subject to Section 16 of the Exchange Act on the date of exercise of the Option with respect to the portion of the Option which becomes exercisable on December 15, 1994, the Optionee shall not sell any shares of Stock received upon such exercise until the earliest of (i) six months after the date of exercise, (ii) six months after the first annual shareholders meeting occurring after December 31, 1994, and (iii) the date as of which Rule 16b-3 under the Exchange Act, as in effect on April 30, 1991, no longer applies. 2.4. Agreement by Optionee. As a condition precedent to any exercise of the Option, the holder shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of shares of Stock and, in connection -7- therewith, shall execute any documents which the Committee shall in its sole discretion deem necessary or advisable. 2.5. Withholding Taxes. (a) As a condition precedent to any exercise of the Option, the holder shall, upon request by the Company, pay to the Company in addition to the purchase price of the shares of Stock, such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to such exercise of the Option. If the holder shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the holder. (b) The holder may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 2.5(a), (2) delivery to the Company of previously owned whole shares of Stock (which the holder has held (or the holder and the Optionee have held) for at least six months prior to the delivery of such shares of Stock or which the holder purchased on the open market and for which the holder has good title, free and clear of all liens and encumbrances) the Fair Market Value of which shall be determined as of the date the obligation to withhold or pay taxes first arises in connection with the Option (the "Tax Date"), (3) authorizing the Company to withhold whole shares of Stock which would otherwise be delivered to the holder upon exercise of the Option the Fair Market Value of which shall be determined as of the Tax Date, (4) a cash payment by a broker- dealer acceptable to the Company to whom the holder has submitted an irrevocable notice of exercise or (5) any combination of (1), (2) and (3). The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (2)-(5), and if the Optionee is subject to section 16 of the Exchange Act, the Company -8- may require that the method of satisfying such an obligation be in compliance with section 16 of the Exchange Act and the rules and regulations thereunder. Shares of Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a share of Stock which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder. No share of Stock shall be delivered until the Required Tax Payments have been satisfied in full. 2.6. Adjustment. In the event of any stock split, stock dividend, recapitalization, reclassification, reorganization, merger, consolidation, spin-off, combination of shares in a reverse stock split or other similar event, the holder of the Option shall be entitled to receive upon the exercise of the Option, at a price determined by the Committee in its sole discretion, such shares of Stock and other securities to which the holder would be entitled had the holder exercised the Option prior to the occurrence of such event. If any other event shall occur which in the judgment of the Board would warrant an adjustment to the number or designation of the class or classes of securities subject to the Option or the purchase price of a share of Stock subject to the Option, such adjustments shall be authorized by the Board and made by the Committee upon such terms and conditions as it may deem equitable and appropriate. To the extent that any such event or action taken under this Section 2.6 shall entitle the holder of the Option to purchase additional shares of Stock, the shares of Stock subject to the Option shall be deemed to include such additional shares of Stock. If any such adjustment would result in a fractional security being subject to the Option, the Company shall pay the holder, in connection with the first exercise of the Option occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date over (B) the purchase price of a share of such security. Any determination made by the Committee under this Section 2.6 shall be final, binding and conclusive. -9- 2.7. Change in Control. (a) Notwithstanding any other provision of this Award or any provision of the Plan, in the event of a Change in Control, the Option shall become immediately exercisable in full. In the event of a Change in Control pursuant to Section (b)(3) below, there may be substituted for each share of Stock subject to the Option, the number and class of shares into which each share of such Stock shall be converted pursuant to such Change in Control. In the event of such a substitution, the purchase price per share of stock then subject to the Option shall be appropriately adjusted by the Committee, but in no event shall the aggregate purchase price for such shares be greater than the aggregate purchase price for the shares of Stock subject to the Option prior to the Change in Control. (b) For purposes of this Award, "Change in Control" shall mean: (1) the acquisition by any individual, entity or group (a "Person"), including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 25% or more of the combined voting power of the then outstanding securities of the Company entitled to vote generally on matters (without regard to the election of directors) (the "Outstanding Voting Securities"), excluding, however, the following: (i) any acquisition directly from the Company or an Affiliate (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege, unless the security being so exercised, converted or exchanged was acquired directly from the Company or an Affiliate), (ii) any acquisition by the Company or an Affiliate, (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 2.7(b), or (v) any acquisition by the following -10- persons: (A) LeRoy T. Carlson or his spouse, (B) any child of LeRoy T. Carlson or the spouse of any such child, (C) any grandchild of LeRoy T. Carlson, including any child adopted by any child of LeRoy T. Carlson, or the spouse of any such grandchild, (D) the estate of any of the persons described in clauses (A)-(C), (E) any trust or similar arrangement (including any acquisition on behalf of such trust or similar arrangement by the trustees or similar persons) provided that all of the current beneficiaries of such trust or similar arrangement are persons described in clauses (A)-(C) or their lineal descendants, or (F) the voting trust which expires on June 30, 2009, or any successor to such voting trust, including the trustees of such voting trust on behalf of such voting trust (all such persons, collectively, the "Exempted Persons"); (2) individuals who, as of November 4, 1994, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to November 4, 1994, whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board; (3) approval by the stockholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the -11- Company (a "Corporate Transaction"), excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 51% of the combined voting power of the outstanding securities of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns, either directly or indirectly, the Company or all or substantially all of the Company's assets) which are entitled to vote generally on matters (without regard to the election of directors), in substantially the same proportions relative to each other as the shares of Outstanding Voting Securities are owned immediately prior to such Corporate Transaction, (ii) no Person (other than the following Persons: (v) the Company or an Affiliate, (w) any employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (x) the corporation resulting from such Corporate Transaction, (y) the Exempted Persons, (z) and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 25% or more of the Outstanding Voting Securities) will beneficially own, directly or indirectly, 25% or more of the combined voting power of the outstanding securities of such corporation entitled to vote generally on matters (without regard to the election of directors) and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (4) approval by the stockholders of the Company of a plan of complete liquidation or dissolution of the Company. -12- 2.8. Compliance with Applicable Law. The Option is subject to the condition that if the listing, registration or qualification of the shares of Stock subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 2.9. Delivery of Certificates. Upon the exercise of the Option, in whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of shares of Stock purchased against full payment therefor. If the sale restrictions of Section 2.3 apply to such shares, the Company may require that certificates evidencing such shares bear a legend indicating that the sale, transfer or other disposition thereof by the holder is subject to the restrictions of this Award. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 2.5. 2.10. Option Confers No Rights as Stockholder. The holder of the Option shall not be entitled to any privileges of ownership with respect to shares of Stock subject to the Option unless and until such shares are purchased and delivered upon an exercise of the Option and the Optionee becomes a stockholder of record with respect to such delivered shares. The holder shall not be considered a stockholder of the Company with respect to any shares not so purchased and delivered. 2.11. Company to Reserve Shares. The Company shall at all times prior to the expiration or termination of the Option reserve and keep available, either in its treasury or out of its -13- authorized but unissued shares of Stock, the full number of shares subject to the Option from time to time. 3. Performance Stock Option Program 3.1. In General. The Optionee shall be entitled to participate in the Performance Stock Option Program (the "Program") established by the Committee under the Plan. For each of the years 1994 through 1998 (each such year is designated a "Performance Period"), the Committee shall establish corporate and individual Performance Measures which shall apply for the applicable 12-month period. If either the corporate or individual Performance Measures for a Performance Period shall have been satisfied and the Optionee is employed during the Performance Period at a grade level in which he or she would have been eligible to receive a 1994 Long-Term Stock Option Award, the Optionee will be awarded a Performance Stock Option in the year following such Performance Period; except that if the Optionee's grade level is not the same as the Optionee's grade level at the time the Optionee's 1994 Long-Term Stock Option Award was granted, the portion of the Performance Stock Option Award based upon individual Performance Measures shall be determined upon the criteria then applicable to the Optionee's grade level. A Performance Stock Option shall become fully exercisable as of the December 15 of the year in which it is granted. The number of shares of Stock subject to a Performance Stock Option will be dependent upon the extent to which the corporate Performance Measures or individual Performance Measures, or both, are satisfied. The purchase price per share of Stock purchasable upon exercise of the Performance Stock Option shall be the average Fair Market Value of a share of Stock during the 20 trading days immediately preceding April 30 of the year in which such Performance Stock Option is awarded. Each Performance Stock Option shall be subject to the terms and conditions, as determined by the Committee, which shall be set forth in the Award related to such option. -14- 3.2. Corporate Performance Measures. The number of shares of Stock subject to a Performance Stock Option in respect of corporate Performance Measures will be dependent upon the extent to which corporate Performance Measures are satisfied during the applicable Performance Period. The corporate Performance Measures will consist of (i) the percentage growth during the Performance Period in the Company's cash flow, after interest and taxes, per share of Common Stock and (ii) the percentage growth during the Performance Period in the Company's revenue per share of Common Stock. The achievement of the corporate Performance Measure described in clause (i) above shall be attributed a weight of 60%, and the achievement of the corporate Performance Measure described in clause (ii) above shall be attributed a weight of 40%. If during a Performance Period each such corporate Performance Measure is satisfied at its target level, as established by the Committee, the number of shares of Stock subject to a Performance Stock Option in respect of corporate Performance Measures will be equal to 50% of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long-Term Stock Option Award. If each such corporate Performance Measure is satisfied at its maximum level, as established by the Committee, the number of shares of Stock subject to a Performance Stock Option in respect of corporate Performance Measures will be equal to 100% of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long-Term Stock Option Award. If each such corporate Performance Measure fails to satisfy the minimum level, as established by the Committee, no shares of Stock will be subject to the Performance Stock Option in respect of corporate performance. If either corporate Performance Measure is satisfied at a level greater than the minimum level but less than the maximum level, the percentage of the number of shares of Stock subject to a Performance Stock Option in respect of corporate Performance Measures will be a percentage between 0% and 100% of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long- Term Stock Option Award. Such percentage will be selected by the Committee in accordance with the methodology by which the -15- percentages for the target, minimum and maximum levels were established, taking into account the designated weight assigned to each such corporate Performance Measure. 3.3. Individual Performance Measures. The number of shares of Stock subject to a Performance Stock Option in respect of individual Performance Measures will be dependent upon the extent to which the Optionee satisfies individual Performance Measures established by the Committee for the applicable Performance Period. If the individual Performance Measures are satisfied at the target level established by the Committee, the number of shares of Stock subject to a Performance Stock Option in respect of individual Performance Measures will be equal to 50% of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long-Term Stock Option Award. If the individual Performance Measures are satisfied at the outstanding level established by the Committee, the number of shares of Stock subject to a Performance Stock Option in respect of individual Performance Measures will be equal to 100% of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long- Term Stock Option Award. If the individual Performance Measures are satisfied at a level other than the target level or outstanding level, but at least the satisfactory level, the number of shares of Stock subject to a Performance Stock Option in respect of individual Performance Measures will be equal to a percentage, as determined by the Committee, of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long-Term Stock Option Award. Notwithstanding the previous sentences of this Section 3.3, unless the Optionee is an officer or other person subject to section 16 of the Exchange Act or a "covered employee" within the meaning of section 162(m) of the Code, or, in the Committee's judgment, is likely to become a covered employee during the exercise period of the Performance Stock Option, the Chief Executive Officer of the Company may, in his sole discretion, increase or decrease the number of shares subject to the Performance Stock Option in respect of individual Performance Measures. -16- 4. Miscellaneous Provisions. 4.1. Option Confers No Rights to Continued Employment. In no event shall the granting of the Option or the acceptance of this Award and the Option by the Optionee give or be deemed to give the Optionee any right to continued employment by the Company or any subsidiary or affiliate of the Company. 4.2. Decisions of Committee. The Committee shall have the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Committee regarding the Plan or this Award shall be final, binding and conclusive. 4.3. Award Subject to the Plan. The Award is subject to the provisions of the Plan, and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. 4.4. Successors. The Award shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Award or the Plan. 4.5. Notices. All notices, requests or other communications provided for in the Award shall be made in writing either (a) by actual delivery to the party entitled thereto, (b) by mailing in the United States mails to the last known address of the party entitled thereto, via certified or registered mail, postage prepaid and return receipt requested, or (c) by telecopy with confirmation of receipt. The notice shall be deemed to be received in case of delivery, on the date of its actual -17- receipt by the party entitled thereto, in case of mailing by certified or registered mail, five days following the date of such mailing, and in the case of telecopy, on the date of confirmation of receipt. 4.6. Governing Law. The Option, this Award, and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Illinois and construed in accordance therewith without regard to principles of conflicts of laws. 4.7. Counterparts. This Award may be executed in counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. Telephone and Data Systems, Inc. By:________________________________ LeRoy T. Carlson, Jr. President and Chief Executive Officer Accepted this ____ day of _________________, 1994. ___________________________________________________ Name: -18- TELEPHONE AND DATA SYSTEMS, INC. 1994 LONG-TERM INCENTIVE PLAN 1994 LONG-TERM STOCK OPTION AWARD BENEFICIARY DESIGNATION FORM ---------------------------- You may designate a primary beneficiary and a secondary beneficiary. You can name more than one person as a primary or secondary beneficiary. For example, you may wish to name your spouse as primary beneficiary and your children as secondary beneficiaries. Your secondary beneficiary(ies) will receive nothing if any of your primary beneficiaries survive you. All primary beneficiaries will share equally unless you indicate otherwise. The same rule applies for secondary beneficiaries. Designate Your Beneficiary(ies): Primary Beneficiary(ies) (give name, address and relationship to you): ___________________________________________________ ___________________________________________________ ___________________________________________________ Secondary Beneficiary(ies) (give name, address and relationship to you): _____________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ I certify that my designation of beneficiary set forth above is my free act and deed. ______________________________ ______________________________ Name Signature (please print) ______________________________ Date -19- EX-99 7 EXHIBIT 99-3 TELEPHONE AND DATA SYSTEMS, INC. 1994 LONG-TERM INCENTIVE PLAN 1994 LONG-TERM STOCK OPTION AWARD Telephone and Data Systems, Inc., an Iowa corporation (the "Company"), hereby (i) grants to ___________________________________ (the "Optionee"), as of November 4, 1994 (the "Option Date"), pursuant to the provisions of the Telephone and Data Systems, Inc. 1994 Long-Term Incentive Plan (the "Plan"), a Non-Qualified Stock Option (the "Option") to purchase from the Company ________ shares of Common Stock at the price of $47.59 per share upon and subject to the terms and conditions set forth below and (ii) extends to the Optionee an opportunity to participate in a performance stock option program which has been established by the Committee for the years 1995 through 1999 (the "Performance Stock Option Program"). Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Time and Manner of Exercise of Option. ------------------------------------- 1.1. Exercise of Option. (a) In general. The Option shall become exercisable (i) on December 15, 1994 with respect to one-fifth of the number of shares of Common Stock subject to the Option on the Option Date, (ii) on each of December 15, 1995, December 15, 1996 and December 15, 1997 with respect to an additional one-fifth of the number of shares of Stock subject to the Option on the Option Date and (iii) on December 15, 1998 with respect to the remaining one-fifth of the shares of Stock subject to the Option on the Option Date. In no event may the Option be exercised, in whole or in part, after November 4, 2004 (the "Expiration Date"). (b) Disability. If the Optionee's employment by the Company terminates by reason of Disability, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 12 months after the effective date of the Optionee's termination of employment or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution, to the same extent the Option was exercisable by the Optionee on the date of the Optionee's death, for a period ending on the later of (i) the last day of such period and (ii) 90 days after the date of the Optionee's death. (c) Retirement or Resignation with Prior Consent of the Board. If the Optionee's employment by the Company terminates by reason of the Optionee's retirement after attainment of age 65 or by reason of the Optionee's resignation of employment at any age with the prior consent of the Board (as evidenced in the Company's minute book), the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 90 days after the effective date of the Optionee's retirement or resignation, as the case may be, or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution, to the same extent the Option was exercisable by the Optionee on the date of the Optionee's death, for a period ending 180 days after the effective date of the Optionee's retirement or resignation. -2- (d) Transfer to Affiliate. If an Optionee's employment by the Company terminates by reason of the Optionee's transfer of employment to an Affiliate, then the Optionee's employment with such Affiliate shall be deemed to be employment with the Company solely for the purpose of determining the exercisability of the Option, except that the Option shall be exercisable only to the extent it is exercisable at the time of such transfer. (e) Death. If the Optionee's employment by the Company terminates by reason of death, the Option shall be exercisable only to the extent it is exercisable on the date of death and after the date of death may be exercised by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution for a period of 180 days after the date of death or until the Expiration Date, whichever period is shorter. (f) Other Termination of Employment. If the Optionee's employment by the Company terminates for any reason other than Disability, retirement after attainment of age 65, resignation of employment with the prior consent of the Board (as evidenced in the Company's minute book), a transfer to an Affiliate or death, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 30 days after the effective date of the Optionee's termination of employment or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable only to the extent it is exercisable on the date of death and after the date of death may be exercised by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution for a period of 120 days -3- after the date of death or until the Expiration Date, whichever period is shorter. Notwithstanding the first sentence of this subsection (f), if the Optionee ceases to be employed by the Company on account of the Optionee's negligence, willful misconduct, competition with the Company or an Affiliate or misappropriation of confidential information of the Company or an Affiliate, the Option shall terminate on the date the Optionee's employment with the Company terminates, unless such Option terminates earlier pursuant to Section 1.2. 1.2 Forfeiture of Option Upon Competition with Company or Any Affiliate or Misappropriation of Confidential Information. Notwithstanding any other provision herein, the Option granted pursuant to this Award shall not be exercisable on or after any date on which the Optionee (a) enters into competition with the Company or an Affiliate, or (b) misappropriates confidential information of the Company or an Affiliate, as determined by the Committee or the Company in its sole discretion, and, accordingly, shall be terminated and thereby forfeited to the extent it has not been exercised as of such date. For purposes of the preceding sentence, the Optionee shall be treated as entering into competition with the Company or an Affiliate if the Optionee (i) directly or indirectly, individually or in conjunction with any person, firm or corporation, has contact with any customer of the Company or an Affiliate or any prospective customer which has been contacted or solicited by or on behalf of the Company or an Affiliate for the purpose of soliciting or selling to such customer or prospective customer any product or service, except to the extent such contact is made on behalf of the Company or an Affiliate, or (ii) otherwise competes with the Company or an Affiliate in any manner or otherwise engages in the business of the Company or an Affiliate. The Optionee shall be treated as misappropriating confidential information of the Company or an Affiliate if the Optionee (i) uses confidential information (as described below) for the benefit of anyone other than the Company or such Affiliate, as the case may be, or discloses the -4- confidential information to anyone not authorized by the Company or such Affiliate, as the case may be, to receive such information, (ii) upon termination of employment, makes any summaries of, takes any notes with respect to, or memorizes any information or takes any confidential information or reproductions thereof from the facilities of the Company or an Affiliate, or (iii) upon termination of employment or upon the request of the Company or an Affiliate, fails to return all confidential information then in the Optionee's possession. "Confidential information" shall mean any confidential and proprietary drawings, reports, sales and training manuals, customer lists, computer programs, and other material embodying trade secrets or confidential technical, business, or financial information of the Company or an Affiliate. 1.3. Method of Exercise. Subject to the limitations set forth in this Award, the Option may be exercised by the holder of the Option (1) by giving written notice to the Vice President-Human Resources of the Company at least 15 days prior to the exercise date specified in such notice, which notice shall specify the number of whole shares of Stock to be purchased and shall be accompanied by payment therefor in full (unless another arrangement for such payment which is satisfactory to the Company has been made) either (i) in cash, (ii) in previously owned whole shares of Stock (which the holder has held (or the holder and Optionee have held) for at least six months prior to the delivery of such shares of Stock or which the holder purchased on the open market and for which the holder has good title free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the holder has submitted an irrevocable notice of exercise, (iv) by authorizing the Company to withhold whole shares of Stock which would otherwise be delivered upon exercise of the Option having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, or (v) a combination of (i), (ii) and (iv), and (2) by executing such documents as the -5- Company may reasonably request. The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (ii) - (iv), and if Optionee is subject to section 16 of the Exchange Act, the Company may require that the method of making such payment be in compliance with section 16 of the Exchange Act and the rules and regulations thereunder. Any fraction of a share of Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the holder. No share of Stock shall be delivered until the full purchase price therefor has been paid. 1.4. Full or Partial Cancellation of Option. In the event that rights to purchase all or a portion of the shares of Stock subject to the Option expire or are exercised, cancelled or forfeited, the holder shall promptly return this Award to the Company. If the holder continues to have rights to purchase shares hereunder, the Company shall, within 10 days of the holder's delivery of the Award to the Company, either (i) mark the Award to indicate the extent to which the Option has expired or been exercised, cancelled or forfeited or (ii) issue to the holder a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Award in form and substance. If the holder does not return this Award to the Company, cancellation of the Option, to the extent it is expired, cancelled or forfeited shall nonetheless be effective. 2. Additional Terms and Conditions of Option. ----------------------------------------- 2.1. Option Subject to Acceptance of Award. The Option shall become null and void unless the Optionee shall accept the Award by executing it in the space provided at the end hereof and returning it to the Company. -6- 2.2. Nontransferability of Option. The Option may not be transferred by the Optionee other than (i) by will or the laws of descent and distribution or (ii) pursuant to a beneficiary designation effective on the Optionee's death. During the Optionee's lifetime, the Option is exercisable only by the Optionee (or the Optionee's Legal Representative). Except as permitted by the foregoing, the Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the Option, the Option and all rights hereunder shall immediately become null and void. 2.3. Restriction on Sale of Shares. If the Optionee is subject to Section 16 of the Exchange Act on the date of exercise of the Option with respect to the portion of the Option which becomes exercisable on December 15, 1994, the Optionee shall not sell any shares of Stock received upon such exercise until the earliest of (i) six months after the date of exercise, (ii) six months after the first annual shareholders meeting occurring after December 31, 1994, and (iii) the date as of which Rule 16b-3 under the Exchange Act, as in effect on April 30, 1991, no longer applies. 2.4. Agreement by Optionee. As a condition precedent to any exercise of the Option, the holder shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of shares of Stock and, in connection therewith, shall execute any documents which the Committee shall in its sole discretion deem necessary or advisable. 2.5. Withholding Taxes. (a) As a condition precedent to any exercise of the Option, the holder shall, upon request by the Company, pay to the Company in addition to the -7- purchase price of the shares of Stock, such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to such exercise of the Option. If the holder shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the holder. (b) The holder may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 2.5(a), (2) delivery to the Company of previously owned whole shares of Stock (which the holder has held (or the holder and the Optionee have held) for at least six months prior to the delivery of such shares of Stock or which the holder purchased on the open market and for which the holder has good title, free and clear of all liens and encumbrances) the Fair Market Value of which shall be determined as of the date the obligation to withhold or pay taxes first arises in connection with the Option (the "Tax Date"), (3) authorizing the Company to withhold whole shares of Stock which would otherwise be delivered to the holder upon exercise of the Option the Fair Market Value of which shall be determined as of the Tax Date, (4) a cash payment by a broker- dealer acceptable to the Company to whom the holder has submitted an irrevocable notice of exercise or (5) any combination of (1), (2) and (3). The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (2)-(5), and if the Optionee is subject to section 16 of the Exchange Act, the Company may require that the method of satisfying such an obligation be in compliance with section 16 of the Exchange Act and the rules and regulations thereunder. Shares of Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a share of Stock which would be required to satisfy any such obligation shall be -8- disregarded and the remaining amount due shall be paid in cash by the holder. No share of Stock shall be delivered until the Required Tax Payments have been satisfied in full. 2.6. Adjustment. In the event of any stock split, stock dividend, recapitalization, reclassification, reorganization, merger, consolidation, spin-off, combination of shares in a reverse stock split or other similar event, the holder of the Option shall be entitled to receive upon the exercise of the Option, at a price determined by the Committee in its sole discretion, such shares of Stock and other securities to which the holder would be entitled had the holder exercised the Option prior to the occurrence of such event. If any other event shall occur which in the judgment of the Board would warrant an adjustment to the number or designation of the class or classes of securities subject to the Option or the purchase price of a share of Stock subject to the Option, such adjustments shall be authorized by the Board and made by the Committee upon such terms and conditions as it may deem equitable and appropriate. To the extent that any such event or action taken under this Section 2.6 shall entitle the holder of the Option to purchase additional shares of Stock, the shares of Stock subject to the Option shall be deemed to include such additional shares of Stock. If any such adjustment would result in a fractional security being subject to the Option, the Company shall pay the holder, in connection with the first exercise of the Option occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date over (B) the purchase price of a share of such security. Any determination made by the Committee under this Section 2.6 shall be final, binding and conclusive. 2.7. Change in Control. (a) Notwithstanding any other provision of this Award or any provision of the Plan, in the event of a Change in Control, the Option shall become immediately exercisable in full. In the event of a Change in Control pursuant to Section (b)(3) below, there may -9- be substituted for each share of Stock subject to the Option, the number and class of shares into which each share of such Stock shall be converted pursuant to such Change in Control. In the event of such a substitution, the purchase price per share of stock then subject to the Option shall be appropriately adjusted by the Committee, but in no event shall the aggregate purchase price for such shares be greater than the aggregate purchase price for the shares of Stock subject to the Option prior to the Change in Control. (b) For purposes of this Award, "Change in Control" shall mean: (1) the acquisition by any individual, entity or group (a "Person"), including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 25% or more of the combined voting power of the then outstanding securities of the Company entitled to vote generally on matters (without regard to the election of directors) (the "Outstanding Voting Securities"), excluding, however, the following: (i) any acquisition directly from the Company or an Affiliate (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege, unless the security being so exercised, converted or exchanged was acquired directly from the Company or an Affiliate), (ii) any acquisition by the Company or an Affiliate, (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 2.7(b), or (v) any acquisition by the following persons: (A) LeRoy T. Carlson or his spouse, (B) any child of LeRoy T. Carlson or the spouse of any such child, (C) any grandchild of LeRoy T. Carlson, including any child adopted by any child of LeRoy T. Carlson, or the spouse of any such grandchild, (D) the -10- estate of any of the persons described in clauses (A)-(C), (E) any trust or similar arrangement (including any acquisition on behalf of such trust or similar arrangement by the trustees or similar persons) provided that all of the current beneficiaries of such trust or similar arrangement are persons described in clauses (A)-(C) or their lineal descendants, or (F) the voting trust which expires on June 30, 2009, or any successor to such voting trust, including the trustees of such voting trust on behalf of such voting trust (all such persons, collectively, the "Exempted Persons"); (2) individuals who, as of November 4, 1994, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to November 4, 1994, whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board; (3) approval by the stockholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Corporate Transaction"), excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction will -11- beneficially own, directly or indirectly, more than 51% of the combined voting power of the outstanding securities of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns, either directly or indirectly, the Company or all or substantially all of the Company's assets) which are entitled to vote generally on matters (without regard to the election of directors), in substantially the same proportions relative to each other as the shares of Outstanding Voting Securities are owned immediately prior to such Corporate Transaction, (ii) no Person (other than the following Persons: (v) the Company or an Affiliate, (w) any employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (x) the corporation resulting from such Corporate Transaction, (y) the Exempted Persons, (z) and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 25% or more of the Outstanding Voting Securities) will beneficially own, directly or indirectly, 25% or more of the combined voting power of the outstanding securities of such corporation entitled to vote generally on matters (without regard to the election of directors) and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (4) approval by the stockholders of the Company of a plan of complete liquidation or dissolution of the Company. 2.8. Compliance with Applicable Law. The Option is subject to the condition that if the listing, registration or qualification of the shares of Stock subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the -12- purchase or delivery of shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 2.9. Delivery of Certificates. Upon the exercise of the Option, in whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of shares of Stock purchased against full payment therefor. If the sale restrictions of Section 2.3 apply to such shares, the Company may require that certificates evidencing such shares bear a legend indicating that the sale, transfer or other disposition thereof by the holder is subject to the restrictions of this Award. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 2.5. 2.10. Option Confers No Rights as Stockholder. The holder of the Option shall not be entitled to any privileges of ownership with respect to shares of Stock subject to the Option unless and until such shares are purchased and delivered upon an exercise of the Option and the Optionee becomes a stockholder of record with respect to such delivered shares. The holder shall not be considered a stockholder of the Company with respect to any shares not so purchased and delivered. 2.11. Company to Reserve Shares. The Company shall at all times prior to the expiration or termination of the Option reserve and keep available, either in its treasury or out of its authorized but unissued shares of Stock, the full number of shares subject to the Option from time to time. -13- 3. Performance Stock Option Program -------------------------------- 3.1. In General. The Optionee shall be entitled to participate in the Performance Stock Option Program (the "Program") established by the Committee under the Plan. For each of the years 1994 through 1998 (each such year is designated a "Performance Period"), the Committee shall establish corporate and individual Performance Measures which shall apply for the applicable 12-month period. If either the corporate or individual Performance Measures for a Performance Period shall have been satisfied and the Optionee is employed during the Performance Period at a grade level in which he or she would have been eligible to receive a 1994 Long-Term Stock Option Award, the Optionee will be awarded a Performance Stock Option in the year following such Performance Period; except that if the Optionee's grade level is not the same as the Optionee's grade level at the time the Optionee's 1994 Long-Term Stock Option Award was granted, the portion of the Performance Stock Option Award based upon individual Performance Measures shall be determined upon the criteria then applicable to the Optionee's grade level. A Performance Stock Option shall become fully exercisable as of the December 15 of the year in which it is granted. The number of shares of Stock subject to a Performance Stock Option will be dependent upon the extent to which the corporate Performance Measures or individual Performance Measures, or both, are satisfied. The purchase price per share of Stock purchasable upon exercise of the Performance Stock Option shall be the average Fair Market Value of a share of Stock during the 20 trading days immediately preceding April 30 of the year in which such Performance Stock Option is awarded. Each Performance Stock Option shall be subject to the terms and conditions, as determined by the Committee, which shall be set forth in the Award related to such option. 3.2. Corporate Performance Measures. The number of shares of Stock subject to a Performance Stock Option in respect of corporate Performance Measures will be dependent upon the -14- extent to which corporate Performance Measures are satisfied during the applicable Performance Period. The corporate Performance Measures will consist of (i) the percentage growth during the Performance Period in the Company's cash flow, after interest and taxes, per share of Common Stock and (ii) the percentage growth during the Performance Period in the Company's revenue per share of Common Stock. The achievement of the corporate Performance Measure described in clause (i) above shall be attributed a weight of 60%, and the achievement of the corporate Performance Measure described in clause (ii) above shall be attributed a weight of 40%. If during a Performance Period each such corporate Performance Measure is satisfied at its target level, as established by the Committee, the number of shares of Stock subject to a Performance Stock Option in respect of corporate Performance Measures will be equal to 50% of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long-Term Stock Option Award. If each such corporate Performance Measure is satisfied at its maximum level, as established by the Committee, the number of shares of Stock subject to a Performance Stock Option in respect of corporate Performance Measures will be equal to 100% of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long-Term Stock Option Award. If each such corporate Performance Measure fails to satisfy the minimum level, as established by the Committee, no shares of Stock will be subject to the Performance Stock Option in respect of corporate performance. If either corporate Performance Measure is satisfied at a level greater than the minimum level but less than the maximum level, the percentage of the number of shares of Stock subject to a Performance Stock Option in respect of corporate Performance Measures will be a percentage between 0% and 100% of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long- Term Stock Option Award. Such percentage will be selected by the Committee in accordance with the methodology by which the percentages for the target, minimum and maximum levels were established, taking into account the designated weight assigned to each such corporate Performance Measure. -15- 3.3. Individual Performance Measures. The number of shares of Stock subject to a Performance Stock Option in respect of individual Performance Measures will be dependent upon the extent to which the Optionee satisfies individual Performance Measures established by the Committee for the applicable Performance Period. If the individual Performance Measures are satisfied at the target level established by the Committee, the number of shares of Stock subject to a Performance Stock Option in respect of individual Performance Measures will be equal to 50% of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long-Term Stock Option Award. If the individual Performance Measures are satisfied at the outstanding level established by the Committee, the number of shares of Stock subject to a Performance Stock Option in respect of individual Performance Measures will be equal to 100% of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long- Term Stock Option Award. If the individual Performance Measures are satisfied at a level other than the target level or outstanding level, but at least the satisfactory level, the number of shares of Stock subject to a Performance Stock Option in respect of individual Performance Measures will be equal to a percentage, as determined by the Committee, of the number of shares of Stock which become exercisable during such Performance Period under this 1994 Long-Term Stock Option Award. Notwithstanding the previous sentences of this Section 3.3, unless the Optionee is an officer or other person subject to section 16 of the Exchange Act or a "covered employee" within the meaning of section 162(m) of the Code, or, in the Committee's judgment, is likely to become a covered employee during the exercise period of the Performance Stock Option, the Chief Executive Officer of the Company may, in his sole discretion, increase or decrease the number of shares subject to the Performance Stock Option in respect of individual Performance Measures. -16- 4. Miscellaneous Provisions. ------------------------ 4.1. Option Confers No Rights to Continued Employment. In no event shall the granting of the Option or the acceptance of this Award and the Option by the Optionee give or be deemed to give the Optionee any right to continued employment by the Company or any subsidiary or affiliate of the Company. 4.2. Decisions of Committee. The Committee shall have the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Committee regarding the Plan or this Award shall be final, binding and conclusive. 4.3. Award Subject to the Plan. The Award is subject to the provisions of the Plan, and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. 4.4. Successors. The Award shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Award or the Plan. 4.5. Notices. All notices, requests or other communications provided for in the Award shall be made in writing either (a) by actual delivery to the party entitled thereto, (b) by mailing in the United States mails to the last known address of the party entitled thereto, via certified or registered mail, postage prepaid and return receipt requested, or (c) by telecopy with confirmation of receipt. The notice shall be deemed to be received in case of delivery, on the date of its actual -17- receipt by the party entitled thereto, in case of mailing by certified or registered mail, five days following the date of such mailing, and in the case of telecopy, on the date of confirmation of receipt. 4.6. Governing Law. The Option, this Award, and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Illinois and construed in accordance therewith without regard to principles of conflicts of laws. 4.7. Counterparts. This Award may be executed in counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. Telephone and Data Systems, Inc. By:________________________________ LeRoy T. Carlson, Jr. President and Chief Executive Officer Accepted this ____ day of _________________, 1994. ___________________________________________________ Name: -18- TELEPHONE AND DATA SYSTEMS, INC. 1994 LONG-TERM INCENTIVE PLAN 1994 LONG-TERM STOCK OPTION AWARD BENEFICIARY DESIGNATION FORM ---------------------------- You may designate a primary beneficiary and a secondary beneficiary. You can name more than one person as a primary or secondary beneficiary. For example, you may wish to name your spouse as primary beneficiary and your children as secondary beneficiaries. Your secondary beneficiary(ies) will receive nothing if any of your primary beneficiaries survive you. All primary beneficiaries will share equally unless you indicate otherwise. The same rule applies for secondary beneficiaries. Designate Your Beneficiary(ies): Primary Beneficiary(ies) (give name, address and relationship to you): ___________________________________________________ ___________________________________________________ ___________________________________________________ Secondary Beneficiary(ies) (give name, address and relationship to you): _____________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ I certify that my designation of beneficiary set forth above is my free act and deed. ______________________________ ______________________________ Name Signature (please print) ______________________________ Date -19- EX-99 8 EXHIBIT 99-4 TELEPHONE AND DATA SYSTEMS, INC. 1994 LONG-TERM INCENTIVE PLAN 1995 PERFORMANCE STOCK OPTION AWARD Telephone and Data Systems, Inc., an Iowa corporation (the "Company"), hereby grants to ___________________________ (the "Optionee"), as of _______________, 1995 (the "Option Date"), pursuant to the provisions of the Telephone and Data Systems, Inc. 1994 Long-Term Incentive Plan (the "Plan"), a Non- Qualified Stock Option (the "Option") to purchase from the Company _______ shares of Common Stock at the price of $____ per share upon and subject to the terms and conditions set forth below. Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Time and Manner of Exercise of Option. ------------------------------------- 1.1. Exercise of Option. (a) Term. The Option shall become exercisable on December 15, 1995 and shall be exercisable until December 15, 2004 (the "Expiration Date"). (b) Disability. If the Optionee's employment by the Company terminates by reason of Disability, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 12 months after the effective date of the Optionee's termination of employment or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution, to the same extent the Option was exercisable by the Optionee on the date of the Optionee's death, for a period ending on the later of (i) the last day of such period and (ii) 90 days after the date of the Optionee's death. (c) Retirement or Resignation with Prior Consent of the Board. If the Optionee's employment by the Company terminates by reason of the Optionee's retirement after attainment of age 65 or by reason of the Optionee's resignation of employment at any age with the prior consent of the Board (as evidenced in the Company's minute book), the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 90 days after the effective date of the Optionee's retirement or resignation, as the case may be, or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution, to the same extent the Option was exercisable by the Optionee on the date of the Optionee's death, for a period ending 180 days after the effective date of the Optionee's retirement or resignation. (d) Transfer to Affiliate. If an Optionee's employment by the Company terminates by reason of the Optionee's transfer of employment to an Affiliate, then the Optionee's employment with such Affiliate shall be deemed to be employment with the Company solely for the purpose of determining the exercisability of the Option, except that the Option shall be exercisable only to the extent it is exercisable at the time of such transfer. -2- (e) Death. If the Optionee's employment by the Company terminates by reason of death, the Option shall be exercisable only to the extent it is exercisable on the date of death and after the date of death may be exercised by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution for a period of 180 days after the date of death or until the Expiration Date, whichever period is shorter. (f) Other Termination of Employment. If the Optionee's employment by the Company terminates for any reason other than Disability, retirement after attainment of age 65, resignation of employment with the prior consent of the Board (as evidenced in the Company's minute book), a transfer to an Affiliate or death, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 30 days after the effective date of the Optionee's termination of employment or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable only to the extent it is exercisable on the date of death and after the date of death may be exercised by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution for a period of 120 days after the date of death or until the Expiration Date, whichever period is shorter. Notwithstanding the first sentence of this subsection (f), if the Optionee ceases to be employed by the Company on account of the Optionee's negligence, willful misconduct, competition with the Company or an Affiliate or misappropriation of confidential information of the Company or an Affiliate, the Option shall terminate on the date the Optionee's employment with the Company terminates, unless such Option terminates earlier pursuant to Section 1.2. -3- 1.2. Forfeiture of Option Upon Competition with Company or Any Affiliate or Misappropriation of Confidential Information. Notwithstanding any other provision herein, the Option granted pursuant to this Award shall not be exercisable on or after any date on which the Optionee (a) enters into competition with the Company or an Affiliate, or (b) misappropriates confidential information of the Company or an Affiliate, as determined by the Committee or the Company in its sole discretion, and, accordingly, shall be terminated and thereby forfeited to the extent it has not been exercised as of such date. For purposes of the preceding sentence, the Optionee shall be treated as entering into competition with the Company or an Affiliate if the Optionee (i) directly or indirectly, individually or in conjunction with any person, firm or corporation, has contact with any customer of the Company or an Affiliate or any prospective customer which has been contacted or solicited by or on behalf of the Company or an Affiliate for the purpose of soliciting or selling to such customer or prospective customer any product or service, except to the extent such contact is made on behalf of the Company or an Affiliate, or (ii) otherwise competes with the Company or an Affiliate in any manner or otherwise engages in the business of the Company or an Affiliate. The Optionee shall be treated as misappropriating confidential information of the Company or an Affiliate if the Optionee (i) uses confidential information (as described below) for the benefit of anyone other than the Company or such Affiliate, as the case may be, or discloses the confidential information to anyone not authorized by the Company or such Affiliate, as the case may be, to receive such information, (ii) upon termination of employment, makes any summaries of, takes any notes with respect to, or memorizes any information or takes any confidential information or reproductions thereof from the facilities of the Company or an Affiliate, or (iii) upon termination of employment or upon the request of the Company or an Affiliate, fails to return all confidential -4- information then in the Optionee's possession. "Confidential information" shall mean any confidential and proprietary drawings, reports, sales and training manuals, customer lists, computer programs, and other material embodying trade secrets or confidential technical, business, or financial information of the Company or an Affiliate. 1.3. Method of Exercise. Subject to the limitations set forth in this Award, the Option may be exercised by the holder of the Option (1) by giving written notice to the Vice President-Human Resources of the Company at least 15 days prior to the exercise date specified in such notice, which notice shall specify the number of whole shares of Stock to be purchased and shall be accompanied by payment therefor in full (unless another arrangement for such payment which is satisfactory to the Company has been made) either (i) in cash, (ii) in previously owned whole shares of Stock (which the holder has held (or the holder and Optionee have held) for at least six months prior to the delivery of such shares of Stock or which the holder purchased on the open market and for which the holder has good title free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the holder has submitted an irrevocable notice of exercise, (iv) by authorizing the Company to withhold whole shares of Stock which would otherwise be delivered upon exercise of the Option having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, or (v) a combination of (i), (ii) and (iv), and (2) by executing such documents as the Company may reasonably request. The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (ii) - (iv), and if Optionee is subject to section 16 of the Exchange Act, the Company may require that the method of making such payment be in compliance with section 16 of the Exchange Act and the rules and regulations thereunder. Any fraction of a share of Stock which would be required to pay such purchase price shall be disregarded and the remaining -5- amount due shall be paid in cash by the holder. No share of Stock shall be delivered until the full purchase price therefor has been paid. 1.4. Full or Partial Cancellation of Option. In the event that rights to purchase all or a portion of the shares of Stock subject to the Option expire or are exercised, cancelled or forfeited, the holder shall promptly return this Award to the Company. If the holder continues to have rights to purchase shares hereunder, the Company shall, within 10 days of the holder's delivery of this Award to the Company, either (i) mark the Award to indicate the extent to which the Option has expired or been exercised, cancelled or forfeited or (ii) issue to the holder a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Award in form and substance. If the holder does not return this Award to the Company, cancellation of the Option, to the extent it is expired, cancelled or forfeited shall nonetheless be effective. 2. Additional Terms and Conditions of Option. ----------------------------------------- 2.1. Option Subject to Acceptance of Award. The Option shall become null and void unless the Optionee shall accept the Award by executing it in the space provided at the end hereof and returning it to the Company. 2.2. Transferability of Option. The Option may not be transferred by the Optionee other than (i) by will or the laws of descent and distribution, (ii) pursuant to a beneficiary designation effective on the Optionee's death, or (iii) to a Permitted Transferee. During the Optionee's lifetime the Option is exercisable only by the Optionee (or the Optionee's Legal Representative) or a Permitted Transferee. Except as permitted by the foregoing, the Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or -6- otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the Option, the Option and all rights hereunder shall immediately become null and void. 2.3. Agreement by Optionee. As a condition precedent to any exercise of the Option, the holder shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of shares of Stock and, in connection therewith, shall execute any documents which the Committee shall in its sole discretion deem necessary or advisable. 2.4. Withholding Taxes. (a) As a condition precedent to any exercise of the Option, the holder shall, upon request by the Company, pay to the Company in addition to the purchase price of the shares of Stock, such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to such exercise of the Option. If the holder shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the holder. (b) The holder may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 2.4(a), (2) delivery to the Company of previously owned whole shares of Stock (which the holder has held (or the holder and the Optionee have held) for at least six months prior to the delivery of such shares of stock or which the holder purchased on the open market and for which the holder has good title, free and clear of all liens and encumbrances) the Fair Market Value of which shall be -7- determined as of the date the obligation to withhold or pay taxes first arises in connection with the Option (the "Tax Date"), (3) authorizing the Company to withhold whole shares of Stock which would otherwise be delivered to the holder upon exercise of the Option the Fair Market Value of which shall be determined as of the Tax Date, (4) a cash payment by a broker-dealer acceptable to the Company to whom the holder has submitted an irrevocable notice of exercise or (5) any combination of (1), (2) and (3). The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (2)-(5), and if the Optionee is subject to section 16 of the Exchange Act, the Company may require that the method of satisfying such obligation be in compliance with section 16 of the Exchange Act and the rules and regulations thereunder. Shares of Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a Share of Stock which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder. No share of Stock shall be delivered until the Required Tax Payments have been satisfied in full. 2.5. Adjustment. In the event of any stock split, stock dividend, recapitalization, reclassification, reorganization, merger, consolidation, spin-off, combination of shares in a reverse stock split or other similar event, the holder of the Option shall be entitled to receive upon the exercise of the Option, at a price determined by the Committee in its sole discretion, such shares of Stock and other securities to which the holder would be entitled had the holder exercised the Option prior to the occurrence of such event. If any other event shall occur which in the judgment of the Board would warrant an adjustment to the number or designation of the class or classes of securities subject to the Option or the purchase price of a share of Stock subject to the Option, such adjustments shall be authorized by the Board and made by the Committee upon such terms and conditions as it may deem equitable and appropriate. To the extent that any such event or action taken under this Section 2.5 shall entitle the holder of the Option to purchase additional shares of Stock, the shares of -8- Stock subject to the Option shall be deemed to include such additional shares of Stock. If any such adjustment would result in a fractional security being subject to the Option, the Company shall pay the holder in connection with the first exercise of the Option occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date over (B) the purchase price of a share of such security. Any determination made by the Committee under this Section 2.5 shall be final, binding and conclusive. 2.6. Change in Control. (a) Notwithstanding any other provision of this Award or any provision of the Plan, in the event of a Change in Control, the Option shall become immediately exercisable in full. In the event of a Change in Control pursuant to Section (b)(3) below, there may be substituted for each share of Stock subject to the Option, the number and class of shares into which each share of such Stock shall be converted pursuant to such Change in Control. In the event of such a substitution, the purchase price per share of stock then subject to the Option shall be appropriately adjusted by the Committee, but in no event shall the aggregate purchase price for such shares be greater than the aggregate purchase price for the shares of Stock subject to the Option prior to the Change in Control. (b) For purposes of this Award, "Change in Control" shall mean: (1) the acquisition by any individual, entity or group (a "Person"), including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 25% or more of the combined voting power of the then outstanding securities of the Company entitled to vote generally on matters (without regard to the election of directors) -9- (the "Outstanding Voting Securities"), excluding, however, the following: (i) any acquisition directly from the Company or an Affiliate (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege, unless the security being so exercised, converted or exchanged was acquired directly from the Company or an Affiliate), (ii) any acquisition by the Company or an Affiliate, (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 2.6(b), or (v) any acquisition by the following persons: (A) LeRoy T. Carlson or his spouse, (B) any child of LeRoy T. Carlson or the spouse of any such child, (C) any grandchild of LeRoy T. Carlson, including any child adopted by any child of LeRoy T. Carlson, or the spouse of any such grandchild, (D) the estate of any of the persons described in clauses (A)-(C), (E) any trust or similar arrangement (including any acquisition on behalf of such trust or similar arrangement by the trustees or similar persons) provided that all of the current beneficiaries of such trust or similar arrangement are persons described in clauses (A)-(C) or their lineal descendants, or (F) the voting trust which expires on June 30, 2009, or any successor to such voting trust, including the trustees of such voting trust on behalf of such voting trust (all such persons, collectively, the "Exempted Persons"); (2) individuals who, as of November 4, 1994, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to November 4, 1994, whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided -10- further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board; (3) approval by the stockholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Corporate Transaction"), excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 51% of the combined voting power of the outstanding securities of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns, either directly or indirectly, the Company or all or substantially all of the Company's assets) which are entitled to vote generally on matters (without regard to the election of directors), in substantially the same proportions relative to each other as the shares of Outstanding Voting Securities are owned immediately prior to such Corporate Transaction, (ii) no Person (other than the following Persons: (v) the Company or an Affiliate, (w) any employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (x) the corporation resulting from such Corporate Transaction, (y) the Exempted Persons, (z) and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 25% or more of the Outstanding Voting Securities) will beneficially own, directly or indirectly, 25% or more of the combined voting power of the outstanding securities of such corporation entitled to vote generally on matters (without regard to the election of directors) -11- and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (4) approval by the stockholders of the Company of a plan of complete liquidation or dissolution of the Company. 2.7. Compliance with Applicable Law. The Option is subject to the condition that if the listing, registration or qualification of the shares of Stock subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 2.8. Delivery of Certificates. Upon the exercise of the Option, in whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of shares of Stock purchased against full payment therefor. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 2.4. 2.9. Option Confers No Rights as Stockholder. The holder of the Option shall not be entitled to any privileges of ownership with respect to shares of Stock subject to the Option unless and until such shares are purchased and delivered upon an exercise of the Option and the Optionee -12- becomes a stockholder of record with respect to such delivered shares. The holder shall not be considered a stockholder of the Company with respect to any shares not so purchased and delivered. 2.10. Company to Reserve Shares. The Company shall at all times prior to the expiration or termination of the Option reserve and keep available, either in its treasury or out of its authorized but unissued shares of Stock, the full number of shares subject to the Option from time to time. 3. Miscellaneous Provisions. ------------------------ 3.1. Option Confers No Rights to Continued Employment. In no event shall the granting of the Option or the acceptance of this Award and the Option by the Optionee give or be deemed to give the Optionee any right to continued employment by the Company or any subsidiary or affiliate. 3.2. Decisions of Committee. The Committee shall have the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determina- tion or other action made or taken by the Committee regarding the Plan or this Award shall be final, binding and conclusive. 3.3. Award Subject to the Plan. This Award is subject to the provisions of the Plan, and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. -13- 3.4. Successors. The Award shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Award or the Plan. 3.5. Notices. All notices, requests or other communications provided for in the Award shall be made in writing either (a) by actual delivery to the party entitled thereto, (b) by mailing in the United States mails to the last known address of the party entitled thereto, via certified or registered mail, postage prepaid and return receipt requested, or (c) by telecopy with confirmation of receipt. The notice shall be deemed to be received in case of delivery, on the date of its actual receipt by the party entitled thereto, in case of mailing by certified or registered mail, five days following the date of such mailing, and in the case of telecopy, on the date of confirmation of receipt. 3.6. Governing Law. The Option, this Award, and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Illinois and construed in accordance therewith without regard to principles of conflicts of laws. 3.7. Counterparts. This Award may be executed in counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. -14- Telephone and Data Systems, Inc. By:________________________________ LeRoy T. Carlson, Jr. President and Chief Executive Officer Accepted this ____ day of _________________, 1995. __________________________________ Name: -15- TELEPHONE AND DATA SYSTEMS, INC. 1994 LONG-TERM INCENTIVE PLAN 1995 PERFORMANCE STOCK OPTION AWARD BENEFICIARY DESIGNATION FORM ---------------------------- You may designate a primary beneficiary and a secondary beneficiary. You can name more than one person as a primary or secondary beneficiary. For example, you may wish to name your spouse as primary beneficiary and your children as secondary beneficiaries. Your secondary beneficiary(ies) will receive nothing if any of your primary beneficiaries survive you. All primary beneficiaries will share equally unless you indicate otherwise. The same rule applies for secondary beneficiaries. Designate Your Beneficiary(ies): Primary Beneficiary(ies) (give name, address and relationship to you): ___________________________________________________ ___________________________________________________ ___________________________________________________ Secondary Beneficiary(ies) (give name, address and relationship to you): _____________________________ ___________________________________________________ ___________________________________________________ I certify that my designation of beneficiary set forth above is my free act and deed. ______________________________ ______________________________ Name Signature (please print) ______________________________ Date -16- EX-99 9 EXHIBIT 99-5 TELEPHONE AND DATA SYSTEMS, INC. 1994 LONG-TERM INCENTIVE PLAN 1995 PERFORMANCE STOCK OPTION AWARD Telephone and Data Systems, Inc., an Iowa corporation (the "Company"), hereby grants to ___________________________ (the "Optionee"), as of _______________, 1995 (the "Option Date"), pursuant to the provisions of the Telephone and Data Systems, Inc. 1994 Long-Term Incentive Plan (the "Plan"), a Non- Qualified Stock Option (the "Option") to purchase from the Company _______ shares of Common Stock at the price of $____ per share upon and subject to the terms and conditions set forth below. Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Time and Manner of Exercise of Option. ------------------------------------- 1.1. Exercise of Option. (a) Term. The Option shall become exercisable on December 15, 1995 and shall be exercisable until December 15, 2004 (the "Expiration Date"). (b) Disability. If the Optionee's employment by the Company terminates by reason of Disability, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 12 months after the effective date of the Optionee's termination of employment or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution, to the same extent the Option was exercisable by the Optionee on the date of the Optionee's death, for a period ending on the later of (i) the last day of such period and (ii) 90 days after the date of the Optionee's death. (c) Retirement or Resignation with Prior Consent of the Board. If the Optionee's employment by the Company terminates by reason of the Optionee's retirement after attainment of age 65 or by reason of the Optionee's resignation of employment at any age with the prior consent of the Board (as evidenced in the Company's minute book), the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 90 days after the effective date of the Optionee's retirement or resignation, as the case may be, or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution, to the same extent the Option was exercisable by the Optionee on the date of the Optionee's death, for a period ending 180 days after the effective date of the Optionee's retirement or resignation. (d) Transfer to Affiliate. If an Optionee's employment by the Company terminates by reason of the Optionee's transfer of employment to an Affiliate, then the Optionee's employment with such Affiliate shall be deemed to be employment with the Company solely for the purpose of determining the exercisability of the Option, except that the Option shall be exercisable only to the extent it is exercisable at the time of such transfer. -2- (e) Death. If the Optionee's employment by the Company terminates by reason of death, the Option shall be exercisable only to the extent it is exercisable on the date of death and after the date of death may be exercised by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution for a period of 180 days after the date of death or until the Expiration Date, whichever period is shorter. (f) Other Termination of Employment. If the Optionee's employment by the Company terminates for any reason other than Disability, retirement after attainment of age 65, resignation of employment with the prior consent of the Board (as evidenced in the Company's minute book), a transfer to an Affiliate or death, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and after such date may be exercised by the Optionee (or the Optionee's Legal Representative) for a period of 30 days after the effective date of the Optionee's termination of employment or until the Expiration Date, whichever period is shorter. If the Optionee shall die within such period, the Option shall be exercisable only to the extent it is exercisable on the date of death and after the date of death may be exercised by the beneficiary or beneficiaries duly designated by the Optionee or, if none, the executor or administrator of the Optionee's estate or, if none, the person to whom the Optionee's rights hereunder shall pass by will or by applicable laws of descent and distribution for a period of 120 days after the date of death or until the Expiration Date, whichever period is shorter. Notwithstanding the first sentence of this subsection (f), if the Optionee ceases to be employed by the Company on account of the Optionee's negligence, willful misconduct, competition with the Company or an Affiliate or misappropriation of confidential information of the Company or an Affiliate, the Option shall terminate on the date the Optionee's employment with the Company terminates, unless such Option terminates earlier pursuant to Section 1.2. -3- 1.2. Forfeiture of Option Upon Competition with Company or Any Affiliate or Misappropriation of Confidential Information. Notwithstanding any other provision herein, the Option granted pursuant to this Award shall not be exercisable on or after any date on which the Optionee (a) enters into competition with the Company or an Affiliate, or (b) misappropriates confidential information of the Company or an Affiliate, as determined by the Committee or the Company in its sole discretion, and, accordingly, shall be terminated and thereby forfeited to the extent it has not been exercised as of such date. For purposes of the preceding sentence, the Optionee shall be treated as entering into competition with the Company or an Affiliate if the Optionee (i) directly or indirectly, individually or in conjunction with any person, firm or corporation, has contact with any customer of the Company or an Affiliate or any prospective customer which has been contacted or solicited by or on behalf of the Company or an Affiliate for the purpose of soliciting or selling to such customer or prospective customer any product or service, except to the extent such contact is made on behalf of the Company or an Affiliate, or (ii) otherwise competes with the Company or an Affiliate in any manner or otherwise engages in the business of the Company or an Affiliate. The Optionee shall be treated as misappropriating confidential information of the Company or an Affiliate if the Optionee (i) uses confidential information (as described below) for the benefit of anyone other than the Company or such Affiliate, as the case may be, or discloses the confidential information to anyone not authorized by the Company or such Affiliate, as the case may be, to receive such information, (ii) upon termination of employment, makes any summaries of, takes any notes with respect to, or memorizes any information or takes any confidential information or reproductions thereof from the facilities of the Company or an Affiliate, or (iii) upon termination of employment or upon the request of the Company or an Affiliate, fails to return all confidential information -4- then in the Optionee's possession. "Confidential information" shall mean any confidential and proprietary drawings, reports, sales and training manuals, customer lists, computer programs, and other material embodying trade secrets or confidential technical, business, or financial information of the Company or an Affiliate. 1.3. Method of Exercise. Subject to the limitations set forth in this Award, the Option may be exercised by the holder of the Option (1) by giving written notice to the Vice President-Human Resources of the Company at least 15 days prior to the exercise date specified in such notice, which notice shall specify the number of whole shares of Stock to be purchased and shall be accompanied by payment therefor in full (unless another arrangement for such payment which is satisfactory to the Company has been made) either (i) in cash, (ii) in previously owned whole shares of Stock (which the holder has held (or the holder and Optionee have held) for at least six months prior to the delivery of such shares of Stock or which the holder purchased on the open market and for which the holder has good title free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the holder has submitted an irrevocable notice of exercise, (iv) by authorizing the Company to withhold whole shares of Stock which would otherwise be delivered upon exercise of the Option having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, or (v) a combination of (i), (ii) and (iv), and (2) by executing such documents as the Company may reasonably request. The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (ii) - (iv), and if Optionee is subject to section 16 of the Exchange Act, the Company may require that the method of making such payment be in compliance with section 16 of the Exchange Act and the rules and regulations thereunder. Any fraction of a share of Stock which would be required to pay such purchase price shall be disregarded and the remaining -5- amount due shall be paid in cash by the holder. No share of Stock shall be delivered until the full purchase price therefor has been paid. 1.4. Full or Partial Cancellation of Option. In the event that rights to purchase all or a portion of the shares of Stock subject to the Option expire or are exercised, cancelled or forfeited, the holder shall promptly return this Award to the Company. If the holder continues to have rights to purchase shares hereunder, the Company shall, within 10 days of the holder's delivery of this Award to the Company, either (i) mark the Award to indicate the extent to which the Option has expired or been exercised, cancelled or forfeited or (ii) issue to the holder a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Award in form and substance. If the holder does not return this Award to the Company, cancellation of the Option, to the extent it is expired, cancelled or forfeited shall nonetheless be effective. 2. Additional Terms and Conditions of Option. ----------------------------------------- 2.1. Option Subject to Acceptance of Award. The Option shall become null and void unless the Optionee shall accept the Award by executing it in the space provided at the end hereof and returning it to the Company. 2.2. Nontransferability of Option. The Option may not be transferred by the Optionee other than (i) by will or the laws of descent and distribution or (ii) pursuant to a beneficiary designation effective on the Optionee's death. During the Optionee's lifetime, the Option is exercisable only by the Optionee (or the Optionee's Legal Representative). Except as permitted by the foregoing, the Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, -6- attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the Option, the Option and all rights hereunder shall immediately become null and void. 2.3. Agreement by Optionee. As a condition precedent to any exercise of the Option, the holder shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of shares of Stock and, in connection therewith, shall execute any documents which the Committee shall in its sole discretion deem necessary or advisable. 2.4. Withholding Taxes. (a) As a condition precedent to any exercise of the Option, the holder shall, upon request by the Company, pay to the Company in addition to the purchase price of the shares of Stock, such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to such exercise of the Option. If the holder shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the holder. (b) The holder may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 2.4(a), (2) delivery to the Company of previously owned whole shares of Stock (which the holder has held (or the holder and the Optionee have held) for at least six months prior to the delivery of such shares of stock or which the holder purchased on the open market and for which the holder has good title, free and clear of all liens and encumbrances) the Fair Market Value of which shall be -7- determined as of the date the obligation to withhold or pay taxes first arises in connection with the Option (the "Tax Date"), (3) authorizing the Company to withhold whole shares of Stock which would otherwise be delivered to the holder upon exercise of the Option the Fair Market Value of which shall be determined as of the Tax Date, (4) a cash payment by a broker-dealer acceptable to the Company to whom the holder has submitted an irrevocable notice of exercise or (5) any combination of (1), (2) and (3). The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (2)-(5), and if the Optionee is subject to section 16 of the Exchange Act, the Company may require that the method of satisfying such obligation be in compliance with section 16 of the Exchange Act and the rules and regulations thereunder. Shares of Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a Share of Stock which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder. No share of Stock shall be delivered until the Required Tax Payments have been satisfied in full. 2.5. Adjustment. In the event of any stock split, stock dividend, recapitalization, reclassification, reorganization, merger, consolidation, spin-off, combination of shares in a reverse stock split or other similar event, the holder of the Option shall be entitled to receive upon the exercise of the Option, at a price determined by the Committee in its sole discretion, such shares of Stock and other securities to which the holder would be entitled had the holder exercised the Option prior to the occurrence of such event. If any other event shall occur which in the judgment of the Board would warrant an adjustment to the number or designation of the class or classes of securities subject to the Option or the purchase price of a share of Stock subject to the Option, such adjustments shall be authorized by the Board and made by the Committee upon such terms and conditions as it may deem equitable and appropriate. To the extent that any such event or action taken under this Section 2.5 shall entitle the holder of the Option to purchase additional shares of Stock, the shares of -8- Stock subject to the Option shall be deemed to include such additional shares of Stock. If any such adjustment would result in a fractional security being subject to the Option, the Company shall pay the holder in connection with the first exercise of the Option occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date over (B) the purchase price of a share of such security. Any determination made by the Committee under this Section 2.5 shall be final, binding and conclusive. 2.6. Change in Control. (a) Notwithstanding any other provision of this Award or any provision of the Plan, in the event of a Change in Control, the Option shall become immediately exercisable in full. In the event of a Change in Control pursuant to Section (b)(3) below, there may be substituted for each share of Stock subject to the Option, the number and class of shares into which each share of such Stock shall be converted pursuant to such Change in Control. In the event of such a substitution, the purchase price per share of stock then subject to the Option shall be appropriately adjusted by the Committee, but in no event shall the aggregate purchase price for such shares be greater than the aggregate purchase price for the shares of Stock subject to the Option prior to the Change in Control. (b) For purposes of this Award, "Change in Control" shall mean: (1) the acquisition by any individual, entity or group (a "Person"), including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 25% or more of the combined voting power of the then outstanding securities of the Company entitled to vote generally on matters (without regard to the election of directors) -9- (the "Outstanding Voting Securities"), excluding, however, the following: (i) any acquisition directly from the Company or an Affiliate (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege, unless the security being so exercised, converted or exchanged was acquired directly from the Company or an Affiliate), (ii) any acquisition by the Company or an Affiliate, (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 2.6(b), or (v) any acquisition by the following persons: (A) LeRoy T. Carlson or his spouse, (B) any child of LeRoy T. Carlson or the spouse of any such child, (C) any grandchild of LeRoy T. Carlson, including any child adopted by any child of LeRoy T. Carlson, or the spouse of any such grandchild, (D) the estate of any of the persons described in clauses (A)-(C), (E) any trust or similar arrangement (including any acquisition on behalf of such trust or similar arrangement by the trustees or similar persons) provided that all of the current beneficiaries of such trust or similar arrangement are persons described in clauses (A)-(C) or their lineal descendants, or (F) the voting trust which expires on June 30, 2009, or any successor to such voting trust, including the trustees of such voting trust on behalf of such voting trust (all such persons, collectively, the "Exempted Persons"); (2) individuals who, as of November 4, 1994, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to November 4, 1994, whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided -10- further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board; (3) approval by the stockholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Corporate Transaction"), excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 51% of the combined voting power of the outstanding securities of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns, either directly or indirectly, the Company or all or substantially all of the Company's assets) which are entitled to vote generally on matters (without regard to the election of directors), in substantially the same proportions relative to each other as the shares of Outstanding Voting Securities are owned immediately prior to such Corporate Transaction, (ii) no Person (other than the following Persons: (v) the Company or an Affiliate, (w) any employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (x) the corporation resulting from such Corporate Transaction, (y) the Exempted Persons, (z) and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 25% or more of the Outstanding Voting Securities) will beneficially own, directly or indirectly, 25% or more of the combined voting power of the outstanding securities of such corporation entitled to vote generally on matters (without regard to the election of directors) -11- and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (4) approval by the stockholders of the Company of a plan of complete liquidation or dissolution of the Company. 2.7. Compliance with Applicable Law. The Option is subject to the condition that if the listing, registration or qualification of the shares of Stock subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 2.8. Delivery of Certificates. Upon the exercise of the Option, in whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of shares of Stock purchased against full payment therefor. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 2.4. 2.9. Option Confers No Rights as Stockholder. The holder of the Option shall not be entitled to any privileges of ownership with respect to shares of Stock subject to the Option unless and until such shares are purchased and delivered upon an exercise of the Option and the Optionee -12- becomes a stockholder of record with respect to such delivered shares. The holder shall not be considered a stockholder of the Company with respect to any shares not so purchased and delivered. 2.10. Company to Reserve Shares. The Company shall at all times prior to the expiration or termination of the Option reserve and keep available, either in its treasury or out of its authorized but unissued shares of Stock, the full number of shares subject to the Option from time to time. 3. Miscellaneous Provisions. ------------------------ 3.1. Option Confers No Rights to Continued Employment. In no event shall the granting of the Option or the acceptance of this Award and the Option by the Optionee give or be deemed to give the Optionee any right to continued employment by the Company or any subsidiary or affiliate. 3.2. Decisions of Committee. The Committee shall have the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Committee regarding the Plan or this Award shall be final, binding and conclusive. 3.3. Award Subject to the Plan. This Award is subject to the provisions of the Plan, and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. -13- 3.4. Successors. The Award shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Award or the Plan. 3.5. Notices. All notices, requests or other communications provided for in the Award shall be made in writing either (a) by actual delivery to the party entitled thereto, (b) by mailing in the United States mails to the last known address of the party entitled thereto, via certified or registered mail, postage prepaid and return receipt requested, or (c) by telecopy with confirmation of receipt. The notice shall be deemed to be received in case of delivery, on the date of its actual receipt by the party entitled thereto, in case of mailing by certified or registered mail, five days following the date of such mailing, and in the case of telecopy, on the date of confirmation of receipt. 3.6. Governing Law. The Option, this Award, and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Illinois and construed in accordance therewith without regard to principles of conflicts of laws. 3.7. Counterparts. This Award may be executed in counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. -14- Telephone and Data Systems, Inc. By:________________________________ LeRoy T. Carlson, Jr. President and Chief Executive Officer Accepted this ____ day of _________________, 1995. ___________________________________ Name: -15- TELEPHONE AND DATA SYSTEMS, INC. 1994 LONG-TERM INCENTIVE PLAN 1995 PERFORMANCE STOCK OPTION AWARD BENEFICIARY DESIGNATION FORM ---------------------------- You may designate a primary beneficiary and a secondary beneficiary. You can name more than one person as a primary or secondary beneficiary. For example, you may wish to name your spouse as primary beneficiary and your children as secondary beneficiaries. Your secondary beneficiary(ies) will receive nothing if any of your primary beneficiaries survive you. All primary beneficiaries will share equally unless you indicate otherwise. The same rule applies for secondary beneficiaries. Designate Your Beneficiary(ies): Primary Beneficiary(ies) (give name, address and relationship to you): ___________________________________________________ ___________________________________________________ ___________________________________________________ Secondary Beneficiary(ies) (give name, address and relationship to you): _____________________________ ___________________________________________________ ___________________________________________________ I certify that my designation of beneficiary set forth above is my free act and deed. ______________________________ ______________________________ Name Signature (please print) ______________________________ Date -16- -----END PRIVACY-ENHANCED MESSAGE-----