<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1998.
REGISTRATION NO. 333-38355
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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<TABLE>
<S> <C>
TDS CAPITAL I
TDS CAPITAL II TELEPHONE AND DATA
TDS CAPITAL III SYSTEMS, INC.
(Exact name of registrants as (Exact name of registrant as
specified in their Declarations of specified in its charter)
Trust)
DELAWARE DELAWARE
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Nos.)
36-7208939 36-7208942 36-7208944 36-2669023
30 N. LASALLE ST. LEROY T. CARLSON, JR., PRESIDENT
CHICAGO, IL 60602 TELEPHONE AND DATA SYSTEMS, INC.
(312) 630-1900 SUITE 4000
(Address, including zip code, and 30 N. LASALLE ST.
telephone number, including area CHICAGO, IL 60602
code, of registrants' principal (312) 630-1900
executive offices) (Name, Address including zip code,
and telephone number, including
area code, of agent for service)
</TABLE>
Please send copies of all correspondence to:
WILBUR C. DELP, JR.
SIDLEY & AUSTIN
ONE FIRST NATIONAL PLAZA
CHICAGO, IL 60603
(312) 853-7416
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME
TO TIME AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE, AS DETERMINED BY
MARKET CONDITIONS AND OTHER FACTORS.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
THE REGISTRANTS HEREBY AMEND THIS POST-EFFECTIVE AMENDMENT NO. 1 TO ITS
REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS POST-EFFECTIVE AMENDMENT NO. 1 TO ITS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE POST-EFFECTIVE AMENDMENT NO. 1 TO ITS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of March 6, 1998, between Telephone and Data Systems, Inc., an Iowa
corporation ("TDS Iowa"), and Telephone and Data Systems, Inc., a Delaware
corporation ("TDS Delaware"), which had been a wholly-owned subsidiary of TDS
Iowa, on May 22, 1988, TDS Iowa merged with and into TDS Delaware, with TDS
Delaware as the surviving corporation (the "Reincorporation Merger"). In the
Reincorporation Merger, each Common Share, $1.00 par value, of TDS Iowa
issued immediately prior to the Reincorporation Merger was automatically
converted into one issued and fully paid and nonassessable Common Share, $.01
par value, of TDS Delaware, each Series A Common Share, $1.00 par value, of
TDS Iowa issued immediately prior to the Reincorporation Merger was
automatically converted into one issued and fully paid and nonassessable
Series A Common Share, $.01 par value, of TDS Delaware, and each Preferred
Share, without par value, of TDS Iowa issued immediately prior to the
Reincorporation Merger was automatically converted into one issued and fully
paid and nonassessable Preferred Share, $.01 par value, of TDS Delaware with
the same rights, preferences and limitations as set forth in the original
certificate of designation for the series related to such Preferred Share.
The Reincorporation Merger and related transactions are described in the
Proxy Statement of TDS Iowa and Prospectus of TDS Delaware, dated March 24,
1998, which is incorporated by reference herein. TDS Iowa and its successor
TDS Delaware are herein referred to as "TDS," the "Company" or the
"Registrant."
Pursuant to Rule 414 promulgated under the Securities Act of 1933, as
amended (the "1933 Act"), TDS Delaware hereby adopts Registration Statement
No. 333-38355 as its own for all purposes under the 1933 Act and the
Securities Exchange Act of 1934, as amended (the "1934 Act"), as a result of
the transaction described above.
This Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 relates to $400,000,000 of securities for issuance for cash from time to
time, of which $100,000,000 remain available for issuance.
This Registration Statement contains a prospectus to be used in connection
with the offer and sale of Preferred Securities of TDS Capital I, TDS Capital II
and TDS Capital III, each a Delaware business trust (collectively, the
"Trusts"). TDS and the Trusts plan to consummate, from time to time,
transactions involving the sale of securities registered pursuant to this
Registration Statement, provided that the proceeds therefrom will not exceed an
aggregate amount of $400,000,000, of which $100,000,000 remain available for
issuance.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
<PAGE>
PRELIMINARY, SUBJECT TO COMPLETION, DATED JUNE 19, 1998
PROSPECTUS
$400,000,000
TDS CAPITAL I
TDS CAPITAL II
TDS CAPITAL III
PREFERRED SECURITIES
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TELEPHONE AND DATA SYSTEMS, INC.
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TDS Capital I, TDS Capital II, and TDS Capital III, each a statutory
business trust formed under the laws of the State of Delaware (each, a
"Trust" and, collectively, the "Trusts") may severally offer, from time to
time, their respective preferred securities (the "Preferred Securities")
representing preferred undivided beneficial interests in the assets of each
Trust. Telephone and Data Systems, Inc., a Delaware corporation ("TDS"), will
be the sole owner of the undivided common beneficial interests in such assets
represented by trust originated common securities (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securities") of each
Trust. The payment of periodic cash distributions ("distributions") with
respect to the Preferred Securities and payments on liquidation or redemption
with respect to such Preferred Securities will be each guaranteed by TDS in
the case of each Trust (a "Preferred Securities Guarantee"), in each case
only out of funds held by such Trust. TDS's obligations under the Preferred
Securities Guarantee will be subordinate and junior in right of payment to
all other liabilities of TDS and will rank PARI PASSU with the most senior
preferred stock issued by TDS. Concurrently with the issuance by a Trust of
its Preferred Securities, such Trust will invest the proceeds thereof in
TDS's junior subordinated deferrable interest debentures (the "Subordinated
Debentures") having terms corresponding to such Trust's Preferred Securities.
The Subordinated Debentures will be unsecured and subordinated indebtedness
of TDS issued under a Subordinated Indenture dated as of October 15, 1997
between the Company and The First National Bank of Chicago, as Trustee (such
indenture, as the same may be supplemented or amended from time to time,
herein referred to as the "Indenture"). The Subordinated Debentures held by
each Trust will be its sole assets, and the payments of principal of and
interest on such Subordinated Debentures will be its only revenues. The
Subordinated Debentures purchased by a Trust may be subsequently distributed
PRO RATA to holders of Preferred Securities and Common Securities in
connection with the dissolution of such Trust. In addition, upon the
occurrence of certain events, TDS may redeem the Subordinated Debentures and
cause the redemption of the Preferred Securities.
The Preferred Securities may be offered in amounts, at prices and on terms
to be determined at the time of offering, provided, however, that the aggregate
initial public offering price of all Preferred Securities issued pursuant to the
Registration Statement of which this Prospectus forms a part will not exceed
$400,000,000. Certain specific terms of each Trust's Preferred Securities in
respect of which this Prospectus is being delivered will be set forth in an
accompanying Prospectus Supplement, including, where applicable and to the
extent not set forth herein, the identity of the Trust, the specific title, the
aggregate amount, the distribution rate (or the method for determining such
rate), the stated liquidation amount, redemption provisions, other rights, the
initial public offering price and any other special terms, as well as any
planned listing on a securities exchange, of such Preferred Securities.
The Preferred Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. See "Plan of
Distribution." The names of any of the underwriters or dealers involved in the
sale of the Preferred Securities in respect of which this Prospectus is being
delivered, the number of Preferred Securities to be purchased by any such
underwriters or dealers, any applicable commissions or discounts and the net
proceeds to each Trust will be set forth in the applicable Prospectus
Supplement.
Each Prospectus Supplement will also contain information concerning certain
United States federal income tax considerations applicable to the Preferred
Securities offered thereby.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
--------------------------
THE DATE OF THIS PROSPECTUS IS _____________, 1998.
<PAGE>
AVAILABLE INFORMATION
TDS is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). TDS and the Trusts have filed with the Commission
a registration statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Preferred Securities offered hereby and certain related securities. This
Prospectus does not contain all of the information set forth in the Registration
Statement and reference is hereby made to the Registration Statement and the
exhibits thereto for further information with respect to TDS and the Preferred
Securities offered hereby. Such reports and other information may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; New
York Regional Office, Seven World Trade Center, New York, New York 10048; and
Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material also can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission maintains a web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. Such reports, proxy and
information statements and other information may be found on the Commission's
web site address, http:\\www.sec.gov. In addition, certain securities of TDS are
listed on the American Stock Exchange. Material filed by the Company may be
inspected at the office of the American Stock Exchange, Inc. at 86 Trinity
Place, New York, NY 10006-1881.
No separate financial statements of the Trusts are included herein. TDS
considers that such financial statements would not be material to holders of the
Preferred Securities because: (i) all of the Common Securities of the Trusts are
owned by TDS, a reporting company under the Exchange Act; (ii) the Trusts have
no independent operations; but exist for the sole purpose of issuing the Trust
Securities and holding the Subordinated Debentures as trust assets; and (iii)
the obligations of the Trusts under the Preferred Securities, to the extent
funds are available therefor, are fully and unconditionally guaranteed to the
extent set forth herein by TDS.
The Trusts are not currently subject to the information reporting
requirements of the Exchange Act. The Trusts will become subject to such
requirements upon the effectiveness of the Registration Statement, although they
intend to seek and expect to receive exemptions therefrom.
This Prospectus contains and each Prospectus Supplement and each document
incorporated by reference herein may contain "forward-looking" statements, as
defined in the Private Securities Litigation Reform Act of 1995, that are based
on current expectations, estimates and projections. Statements that are not
historical facts, including statements about the Company's beliefs and
expectations are forward-looking statements. These statements contain potential
risks and uncertainties and, therefore, actual results may differ materially.
The Company undertakes no obligation to update publicly any forward-looking
statements whether as a result of new information, future events or otherwise.
Important factors that may affect these projections or expectations include,
but are not limited to: changes in the overall economy; changes in competition
in markets in which the Company operates; advances in telecommunications
technology; changes in the telecommunications regulatory environment; pending
and future litigation; availability of future financing; start-up of PCS
operations; and unanticipated changes in growth in cellular customers,
penetration rates, churn rates and the mix of products and services offered in
the Company's markets. Readers should evaluate any statements in light of these
important factors.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents which have been filed with the Commission by TDS
Iowa (File No. 1-8251) or TDS Delaware (File No. 001-14157) pursuant to the
Exchange Act are hereby incorporated by reference:
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(i) Annual Report of TDS on Form 10-K for the year ended December 31,
1997;
(ii) Quarterly Report of TDS on Form 10-Q for the three months ended
March 31, 1998;
(iii) Current Reports of TDS on Form 8-K reporting events on January 28,
February 10, March 24, April 17, April 21, April 27, May 22, June 1 and
June 12, 1998; and
(iv) TDS Prospectus, dated March 24, 1998, which is part of its
Registration Statement on Form S-4 (Registration No. 333-42535).
All documents filed by TDS pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act (i) after the date of the initial registration statement and
prior to effectiveness of the registration statement shall be deemed to be
incorporated by reference into the prospectus, and (ii) from and after the date
of such effectiveness and prior to the termination of the offering of the
securities shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and the accompanying Prospectus Supplement to
the extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or the accompanying Prospectus Supplement.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus and the accompanying Prospectus
Supplement is delivered, upon written or oral request of such person, a copy of
any and all documents incorporated herein by reference (not including exhibits
to such documents, unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Telephone and
Data Systems, Inc., 30 North LaSalle Street, Chicago, Illinois 60602, Attention:
Shareholder Services (telephone number: (312) 630-1900).
THE COMPANY
Telephone and Data Systems, Inc. ("TDS" or the "Company") (AMEX symbol
"TDS"), is a diversified telecommunications service company with cellular
telephone, local telephone and personal communications services ("PCS")
operations. The Company's long-term business development strategy is to
expand its existing operations through internal growth and acquisitions and
to explore and develop other telecommunications businesses that management
believes will utilize the Company's expertise in customer-based
telecommunications services. The Company conducts substantially all of its
cellular telephone operations through its majority-owned subsidiary United
States Cellular Corporation (AMEX symbol "USM"). The Company conducts
substantially all of its telephone operations through its wholly-owned
subsidiary TDS Telecommunications Corporation. The Company conducts
substantially all of its PCS business through its majority-owned subsidiary
Aerial Communications, Inc. (NASDAQ symbol "AERL"), which launched commercial
service in the first half of 1997.
The Company is the successor to Telephone and Data Systems, Inc., an Iowa
corporation ("TDS Iowa"), which was incorporated in 1968. On May 22, 1998,
TDS Iowa was merged with and into the Company, with the Company surviving.
TDS's executive offices are located at 30 North LaSalle Street, Chicago,
Illinois 60602. Its telephone number is (312) 630-1900.
THE TRUSTS
Each of the Trusts is a statutory business trust formed under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary of
State on October 15, 1997. The business of each Trust is defined in a
Declaration of Trust, executed by TDS, as sponsor (the "Sponsor"), and the
Trustees (as defined herein). The Declaration of Trust of each Trust will be
amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the Registration
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Statement of which this Prospectus forms a part. The Declaration will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Upon issuance of the Preferred Securities, the
purchasers thereof will own all of the Preferred Securities. TDS will acquire
all of the Common Securities in an aggregate liquidation amount equal to
approximately 3% of the total capital of each Trust. Each Trust exists for the
exclusive purposes of (i) issuing the Trust Securities representing undivided
beneficial interests in the assets of the Trust, (ii) investing the gross
proceeds of the Trust Securities in the Subordinated Debentures and (iii)
engaging in only those other activities necessary or incidental thereto. Each
Trust has a term of 50 years, but may terminate earlier as provided in the
applicable Declaration.
Each Trust's business and affairs will be conducted by the trustees (the
"Trustees") appointed by TDS, as holder of the Common Securities. The duties and
obligations of the Trustees will be governed by the Declaration. Pursuant to the
Declaration, the number of Trustees will initially be five. Three of the
Trustees (the "Regular Trustees") will be persons who are employees or officers
of or affiliated with, TDS. The fourth Trustee will be a corporation which
maintains a principal place of business in the State of Delaware that will serve
for the sole purpose of complying with certain Delaware laws (the "Delaware
Trustee"). The fifth Trustee will be a financial institution unaffiliated with
TDS which will serve as property trustee under the Declaration and as indenture
trustee for purposes of the Trust Indenture Act (the "Property Trustee"). First
Chicago Delaware Inc. ("First Delaware") will act as the Delaware Trustee and
The First National Bank of Chicago as the Property Trustee, in each case until
removed or replaced by the holder of the Common Securities. The First National
Bank of Chicago will also act as indenture trustee under the Preferred
Securities Guarantee (the "Guarantee Trustee"). See "Description of the
Preferred Securities Guarantees."
The Property Trustee, acting in such capacity, will hold title to the
Subordinated Debentures held by each Trust for the benefit of the holders of the
Trust Securities issued by such Trust and will have the power to exercise all
rights, powers and privileges under the Indenture (as defined herein) as the
holder of such Subordinated Debentures. In addition, the Property Trustee will
maintain exclusive control of a segregated non-interest bearing bank account for
each Trust (the "Property Account") to hold all payments made in respect of the
Subordinated Debentures held by such Trust for the benefit of the holders of the
Trust Securities issued by such Trust. The Property Trustee will make payments
of distributions and payments on liquidation, redemption and otherwise to the
holders of the Trust Securities issued by each Trust out of funds from the
Property Account of such Trust. The Guarantee Trustee will hold each Preferred
Securities Guarantee for the benefit of the holders of the Preferred Securities.
TDS, as the direct or indirect holder of all the Common Securities, will have
the right to appoint, remove or replace any Trustee and to increase the number
of Trustees, provided that the number of Trustees will be at least three, two of
which will be Regular Trustees. TDS will pay all fees and expenses related to
the Trust, the offering of the Preferred Securities and the issuance of the
Subordinated Debentures. See "Description of the Subordinated Debentures --
Miscellaneous."
The rights of the holders of the Preferred Securities of each Trust,
including economic rights, rights to information and voting rights, are as set
forth in the Declaration for such Trust, the Delaware Business Trust Act, as
amended (the "Trust Act"), and the Trust Indenture Act. See "Description of the
Preferred Securities."
The Property Trustee for each Trust is The First National Bank of Chicago.
The principal place of business of each Trust shall be c/o Telephone and Data
Systems, Inc., 30 N. LaSalle Street, Chicago, Illinois 60602 (telephone number
312/630-1900).
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RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the unaudited consolidated ratio of earnings
to fixed charges and preferred stock dividends for the Company for each of the
following periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH YEAR ENDED DECEMBER 31
-------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges and
preferred stock dividends.................. 4.89x 1.28x .70x 3.50x 3.01x 2.75x 1.96x
</TABLE>
The increase in the ratio of earnings to fixed charges and preferred
stock dividends from the three-month period ended March 31, 1997 to the
three-month period ended March 31, 1998 is primarily due to the gains on
sales of cellular interests and other investments of $221.4 million in the
first three months of 1998. There were no gains during the same period at
1997. For the computation of the ratio of earnings to fixed charges and
preferred stock dividends: (i) earnings consist of net income from continuing
operations plus income taxes from continuing operations, fixed charges (less
capitalized interest), distributions from minority subsidiaries and minority
share in income of subsidiaries that have fixed charges, less equity in
undistributed earnings of unconsolidated investments and minority share of
losses; and (ii) fixed charges and preferred stock dividends consist of
interest expense, capitalized interest, estimated interest portion of rentals
and preferred stock dividend requirements increased to an amount representing
the pretax earnings required to cover such dividend requirements.
USE OF PROCEEDS
Each Trust will use the proceeds of the sale of the Trust Securities to
purchase Subordinated Debentures from TDS. Unless otherwise indicated in the
applicable Prospectus Supplement, TDS intends to use the net proceeds from the
sale of the Subordinated Debentures to repay certain short-term indebtedness and
for general corporate purposes, which may include capital expenditures,
repayment or repurchases of outstanding indebtedness, investments in
subsidiaries and working capital.
DESCRIPTION OF THE PREFERRED SECURITIES
The Declaration of each Trust authorizes the Regular Trustees of such Trust
to issue on behalf of such Trust only one series of Preferred Securities having
terms described in the Prospectus Supplement relating thereto. The Declaration
will be qualified as an indenture under the Trust Indenture Act. The Property
Trustee will act as Indenture Trustee for purposes of the Trust Indenture Act.
The Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as will be set forth in the
Declaration or made part of the Declaration by the Trust Indenture Act and which
will correspond to the terms of the Subordinated Debentures held by the Trust
and described in the Prospectus Supplement relating thereto. Reference is made
to the Prospectus Supplement relating to the Preferred Securities of each Trust
for specific terms, including (i) the distinctive designation of such Preferred
Securities; (ii) the number of Preferred Securities issuable by such Trust;
(iii) the annual distribution rate (or method of determining such rate) for
Preferred Securities issued by such Trust and the date or dates upon which such
distributions will be payable; (iv) whether distributions on Preferred
Securities issued by such Trust will be cumulative, and, in the case of
Preferred Securities having such cumulative distribution rights, the date or
dates or method of determining the date or dates from which distributions on
Preferred Securities issued by such Trust will be cumulative; (v) the amount or
amounts which will be paid out of the assets of such Trust to the holders of
Preferred Securities of such Trust upon voluntary or involuntary dissolution,
winding-up or termination of such Trust; (vi) the obligation, if any, of such
Trust to purchase or redeem Preferred Securities issued by such Trust and the
price or prices at which, the period or periods within which, and the terms and
5
<PAGE>
conditions upon which Preferred Securities issued by such Trust will be
purchased or redeemed, in whole or in part, pursuant to such obligation; (vii)
the voting rights, if any, of holders of Preferred Securities issued by such
Trust in addition to those required by law, including the number of votes per
Preferred Security and any requirement for approval by the holders of such
Preferred Securities, or of Preferred Securities issued by one or more Trusts,
or of both, as a condition to specified action or amendments to the Declaration
of such Trust; (viii) the terms and conditions, if any, upon which the
Subordinated Debentures owned by such Trust may be distributed to holders of
Preferred Securities of such Trust; (ix) if applicable, any securities exchange
upon which the Preferred Securities of such Trust will be listed; and (x) any
other relevant rights, preferences, privileges, limitations or restrictions of
Preferred Securities issued by such Trust not inconsistent with the Declaration
of such Trust or with applicable law. All Preferred Securities offered hereby
will be guaranteed by TDS to the extent set forth below under "Description of
the Preferred Securities Guarantees." Certain United States federal income tax
considerations applicable to any offering of Preferred Securities will be
described in the Prospectus Supplement relating thereto.
Each Trust will issue one series of Common Securities in connection with the
issuance of Preferred Securities. The Declaration of each Trust authorizes the
Regular Trustees of such Trust to issue on behalf of such Trust one series of
Common Securities having such terms including distributions, redemption, voting,
liquidation rights or such restrictions as will be set forth therein. Except for
voting rights, the terms of the Common Securities issued by a Trust will be
substantially identical to the terms of the Preferred Securities issued by such
Trust and such Common Securities will rank PARI PASSU, and payments will be made
thereon PRO RATA, with such Preferred Securities except that, upon an event of
default under the Declaration, the rights of the holders of such Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. The Common Securities of a Trust will also carry the
right to vote to appoint, remove or replace any of the Trustees of such Trust.
All of the Common Securities of each Trust will be directly or indirectly owned
by TDS.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If an Event of Default under a Declaration of a Trust occurs and is
continuing, then the holders of Preferred Securities of such Trust would rely on
the enforcement by the Property Trustee of its rights as a holder of the
applicable series of Subordinated Debentures against TDS. In addition, the
holders of a majority in liquidation amount of Preferred Securities of such
Trust will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee or to direct the
exercise of any trust or power conferred upon the Property Trustee under the
applicable Declaration, including the right to direct such Property Trustee to
exercise the remedies available to it as a holder of Subordinated Debentures. If
the Property Trustee fails to enforce its rights under the Subordinated
Debentures held by a Trust, a holder of Preferred Securities of such Trust may
institute a legal proceeding directly against TDS to enforce the Property
Trustee's rights under the Subordinated Debentures without first instituting any
legal proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default under the Declaration of a
Trust has occurred and is continuing and such event is attributable to the
failure of TDS to pay interest or principal on the applicable series of
Subordinated Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, on the redemption date), then a holder of
Preferred Securities of such Trust may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on such
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder (a "Direct
Action") on or after the respective due date specified in such Subordinated
Debentures. In connection with such Direct Action, TDS will be subrogated to the
rights of such holder of Preferred Securities under the applicable Declaration
to the extent of any payment made by TDS to such holder of Preferred Securities
in such Direct Action.
6
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DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees which will be executed and delivered by TDS for the
benefit of the holders from time to time of the Preferred Securities under each
Trust. Each Preferred Securities Guarantee will be qualified as an indenture
under the Trust Indenture Act. The Guarantee Trustee will act as the trustee
under the Preferred Securities Guarantees. The terms of each Preferred
Securities Guarantee will be those set forth therein and those made a part
thereof by the Trust Indenture Act. The following summary of the material terms
of the Preferred Securities Guarantees does not purport to be complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the form of the Preferred Securities Guarantees, which is filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part, and the Trust Indenture Act. Each Preferred Securities Guarantee will be
held by the Guarantee Trustee for the benefit of the holders of the Preferred
Securities of the applicable Trust.
GENERAL
Pursuant to each Preferred Securities Guarantee with respect to a Trust, TDS
will irrevocably and unconditionally agree, to the extent set forth therein, to
pay in full, to the holders of the Preferred Securities issued by such Trust,
the Guarantee Payments (as defined herein) (without duplication of amounts
theretofore paid by such Trust), as and when due regardless of any defense,
right of set-off or counterclaim which such Trust may have or assert. The
following payments or distributions with respect to the Preferred Securities of
a Trust, to the extent not paid or made by such Trust (the "Guarantee
Payments"), will be subject to the Preferred Securities Guarantee with respect
to such Trust (without duplication): (i) any accrued and unpaid distributions
which are required to be paid on the Preferred Securities, to the extent such
Trust has funds available therefor, (ii) the redemption price, including all
accrued and unpaid distributions to the date of the redemption (the "Redemption
Price"), to the extent such Trust has funds available therefor, with respect to
any Preferred Securities called for redemption by such Trust and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of such Trust
(other than in connection with the distribution of Subordinated Debentures held
by such Trust to the holders of Preferred Securities issued by such Trust in
exchange for such Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on such Preferred
Securities to the date of payment, to the extent such Trust has funds available
therefor and (b) the amount of assets of such Trust remaining available for
distribution to holders of such Preferred Securities in liquidation of such
Trust. The redemption price and liquidation amount will be fixed at the time the
Preferred Securities are issued. TDS's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by TDS to the holders
of Preferred Securities issued by a Trust or by causing such Trust to pay such
amounts to such holders.
The Preferred Securities Guarantee for a Trust will not apply to any payment
of distributions except to the extent such Trust has funds available therefor.
If TDS does not make interest payments on the Subordinated Debentures purchased
by a Trust, such Trust will not pay distributions on the Preferred Securities
issued by such Trust and will not have funds available therefor.
The Preferred Securities Guarantee for a Trust, when taken together with
TDS's obligations under the applicable Subordinated Debentures, the Indenture
and the applicable Declaration, including its obligation to pay costs, expenses,
debt, and liabilities of such Trust (other than with respect to its Trust
Securities), will be a full and unconditional guarantee, on a subordinated
basis, by TDS of payments due on the Preferred Securities issued by such Trust
from the time of issuance of such Preferred Securities, but will not apply to
the payment of distributions and other payments on such Preferred Securities
when the Property Trustee does not have sufficient funds in the Property Account
of such Trust to make such distributions or other payments. If TDS does not make
interest payments on the Subordinated Debentures held by the Property Trustee
for a Trust, such Trust will not make distributions on the Preferred Securities
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issued by such Trust and will not have funds available therefor. See
"Description of the Subordinated Debentures -- Certain Covenants."
CERTAIN COVENANTS OF TDS
In the Preferred Securities Guarantee for a Trust, TDS will covenant
that, so long as any Preferred Securities issued by such Trust remain
outstanding, if there shall have occurred and be continuing any event that
would constitute an event of default under such Preferred Securities
Guarantee or the Declaration of such Trust, then (a) TDS may not declare or
pay any dividend on, or make any distribution with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of shares of TDS
common stock in connection with the satisfaction by TDS of its obligations
under any employee benefit plans or any other contractual obligation of TDS
(other than a contractual obligation ranking PARI PASSU with or junior to the
Subordinated Debentures), (ii) as a result of a reclassification of TDS
capital stock or the exchange or conversion of one class or series of TDS
capital stock for another class or series of TDS capital stock or (iii) the
purchase of fractional interests in shares of TDS capital stock pursuant to
the conversion or exchange provisions of such TDS capital stock or the
security being converted or exchanged), (b) TDS may not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities (including guarantees) issued by TDS which rank PARI PASSU
with or junior to the Subordinated Debentures and (c) TDS may not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Preferred Securities Guarantees).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of Preferred Securities issued by a Trust (in which case
no approval will be required), the Preferred Securities Guarantee for such Trust
may be amended only with the prior approval of the holders of not less than
66 2/3% in liquidation amount of the outstanding Preferred Securities issued by
such Trust. The manner of obtaining any such approval of holders of Preferred
Securities will be set forth in the applicable Prospectus Supplement. All
guarantees and agreements contained in each Preferred Securities Guarantee will
bind the successors, assigns, receivers, trustees and representatives of TDS and
will inure to the benefit of the Guarantee Trustee and the holders of the
Preferred Securities of the applicable Trust then outstanding.
TERMINATION OF THE PREFERRED SECURITIES GUARANTEES
Each Preferred Securities Guarantee for a Trust will terminate as to the
Preferred Securities issued by such Trust upon full payment of the Redemption
Price of all such Preferred Securities, upon distribution of the Subordinated
Debentures held by such Trust to the holders of the Trust Securities of such
Trust, or upon full payment of the amounts payable upon liquidation of such
Trust. See "Status of the Preferred Securities Guarantees" and "Description of
the Subordinated Debentures -- Indenture Events of Default" for a description of
the events of default and enforcement rights of the holders of Subordinated
Debentures. Each Preferred Securities Guarantee for a Trust will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of Preferred Securities issued by such Trust must repay any sums paid to them
under such Preferred Securities or Preferred Securities Guarantee.
EVENTS OF DEFAULT
An event of default under each Preferred Securities Guarantee will occur
upon the failure of TDS to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
issued by a Trust will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Preferred Securities Guarantee for such Trust or to direct the
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exercise of any trust or power conferred upon the Guarantee Trustee under such
Preferred Securities Guarantee. If the Guarantee Trustee fails to enforce the
Preferred Securities Guarantee for a Trust, any holder of related Preferred
Securities may institute a legal proceeding directly against TDS to enforce the
Guarantee Trustee's rights under such Preferred Securities Guarantee, without
first instituting a legal proceeding against such Trust, the Guarantee Trustee
or any other person or entity.
STATUS OF THE PREFERRED SECURITIES GUARANTEES
TDS's obligations under each Preferred Securities Guarantee to make the
Guarantee Payments will constitute unsecured obligations of TDS and will rank
(i) subordinate and junior in right of payment to all other liabilities of TDS,
including the Subordinated Debentures, except those liabilities of TDS made PARI
PASSU or subordinate by their terms, (ii) PARI PASSU with the most senior
preferred stock now or hereafter issued by TDS and with any guarantee now or
hereafter entered into by TDS in respect of any preferred securities of any
affiliate of TDS, and (iii) senior to TDS common stock. The terms of the
Preferred Securities provide that each holder of Preferred Securities issued by
a Trust, by acceptance thereof, agrees to the subordination provisions and other
terms of the Preferred Securities Guarantee relating thereto.
Each Preferred Securities Guarantee will constitute guarantee of payment and
not of collection (i.e., the guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under such Preferred
Securities Guarantee without instituting a legal proceeding against any other
person or entity). Each Preferred Securities Guarantee will be deposited with
the Guarantee Trustee to be held for the benefit of the holders of the related
Preferred Securities. Except as otherwise noted herein, the Guarantee Trustee
has the right to enforce each Preferred Securities Guarantee on behalf of the
holders of the related Preferred Securities. Except as described under
"Termination of the Preferred Securities Guarantees" above, the Preferred
Securities Guarantee for a Trust will not be discharged except by payment of the
Guarantee Payments in full (without duplication of amounts theretofore paid by
such Trust).
CONSOLIDATION, MERGER AND SALE
TDS may consolidate with or merge into any other Person in a transaction in
which TDS is not the surviving entity, or sell, convey, transfer or otherwise
dispose of its properties as an entirety, or substantially as an entirety to,
any Person if (i) the Person formed in such consolidation or into which TDS is
merged or to which TDS has sold, conveyed, transferred or otherwise disposed of
its properties as an entirety, or substantially as an entirety, is an entity
validly existing under the laws of the jurisdiction of its organization and such
Person assumes TDS's obligations under the Preferred Securities Guarantees and
the Indenture, (ii) immediately after giving effect to the transaction no Event
of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing, and (iii) any
such Person not organized and validly existing under the laws of the United
States, any state thereof or the District of Columbia, shall expressly agree in
a supplemental indenture (a) to pay to the holders of Trust Securities any
additional amounts as may be necessary in order that every net payment or other
amount due on the Trust Securities, after withholding for or on account of any
present or future tax, assessment or governmental charge imposed upon such
holder of Trust Securities (except for a tax, assessment or charge imposed
solely as a result of a connection between the recipient and the jurisdiction
imposing such tax, assessment or charge) by reason of or as a result of such
payment or other amount being paid by an entity which is not an entity existing
under the laws of the United States or any state thereof or the District of
Columbia, will not be less than the amount provided for in the Trust Securities,
the Indenture or the Preferred Securities Guarantees, as the case may be, to be
then due and payable and (b) to the selection and jurisdiction of courts of the
State of Illinois or the U.S. District Court for the Northern District of
Illinois for any litigation arising out of, under or in connection with the
Indenture or the Preferred Securities Guarantees. The phrase "substantially as
an entirety" is not defined in the Indenture or the Preferred Securities
Guarantees, and TDS is unaware of an established meaning or
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qualification of the phrase under New York law, which is the law governing
construction of the Indenture and the Preferred Securities Guarantees. A holder
of Preferred Securities may bear the burden of establishing the meaning of the
phrase "substantially as an entirety".
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
a Preferred Securities Guarantee and after the curing of all such defaults that
may have occurred, undertakes to perform only such duties as are specifically
set forth in each Preferred Securities Guarantee and, during the continuance of
any default, will exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to such provisions,
the Guarantee Trustee is under no obligation to exercise any of the powers
vested in it by the Preferred Securities Guarantee for a Trust at the request of
any holder of Preferred Securities issued by such Trust, unless offered
reasonable indemnity against the costs, expenses and liabilities which might be
incurred thereby; but the foregoing shall not relieve the Guarantee Trustee,
upon the occurrence of an event of default under such Preferred Securities
Guarantee, from exercising the rights and powers vested in it by such Preferred
Securities Guarantee. The Guarantee Trustee also serves as Property Trustee.
TDS and its officers and directors have no material relationship with the
initial Guarantee Trustee except that TDS and certain of its subsidiaries
maintain normal banking relations and other financial service relations with The
First National Bank of Chicago.
GOVERNING LAW
The Preferred Securities Guarantees will be governed by, and construed in
accordance with, the internal laws of the State of New York.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a description of the terms of the Subordinated
Debentures which each of the Trusts will hold as trust assets. The following
description does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Subordinated Indenture
("Indenture"), dated as of October 15, 1997, between TDS and The First
National Bank of Chicago, as Trustee (the "Debt Trustee"), as supplemented by
the supplemental indenture creating each series of Subordinated Debentures
(the "Supplemental Indenture"). The Indenture and the form of Supplemental
Indenture are filed as exhibits to the Registration Statement of which this
Prospectus forms a part. The terms of each series of Subordinated Debentures
will include those stated in the Indenture and the related Supplemental
Indenture and those made a part of the Indenture by reference to the Trust
Indenture Act. Certain capitalized terms used herein are defined in the
Indenture and the related Supplemental Indenture.
Upon the dissolution of a Trust, Subordinated Debentures held by a Trust may
be distributed to the holders of Trust Securities issued by such Trust in
liquidation of such Trust. See "Description of the Preferred Securities --
Dissolution; Distribution of Subordinated Debentures" in the applicable
Prospectus Supplement.
If any Subordinated Debentures are distributed to the holders of Trust
Securities, TDS will use its best efforts to have such Subordinated Debentures
listed on the American Stock Exchange or on such other exchange as the related
Preferred Securities are then listed.
GENERAL
The Indenture provides for the issuance of Subordinated Debentures in an
unlimited amount from time to time. Each series of Subordinated Debentures will
constitute a separate series under the Indenture, will be in a principal amount
equal to the aggregate stated Liquidation Amount of the Preferred Securities
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issued by the Trust which will hold such Subordinated Debentures plus TDS's
concurrent investment in the Common Securities of such Trust and will rank PARI
PASSU with all other series of Subordinated Debentures.
The entire principal amount of the Subordinated Debentures held by a Trust
will mature and become due and payable, together with any accrued and unpaid
interest thereon, including Additional Interest (as defined herein), if any, on
the date set forth in the applicable Prospectus Supplement.
Reference is made to the Prospectus Supplement relating to the particular
Subordinated Debentures being offered thereby for the following terms: (1) the
designation and terms of such Subordinated Debentures; (2) the aggregate
principal amount of such Subordinated Debentures; (3) the date or dates on which
such Subordinated Debentures will mature and the right, if any, to extend or
shorten such date or dates; (4) the rate or rates, if any, per annum, at which
such Subordinated Debentures will bear interest, or the method of determination
of such rate or rates; (5) the date or dates from which such interest will
accrue, the interest payment dates on which such interest will be payable or the
manner of determination of such interest payment dates and the record dates for
the determination of holders to whom interest is payable on any such interest
payment dates; (6) the right, if any, to extend the interest payment periods and
the duration of such extensions; (7) provisions for a sinking, purchase or other
analogous fund; (8) the period or periods, if any, within which, the price or
prices at which, and the terms and conditions upon which such Subordinated
Debentures may be redeemed, in whole or in part, at the option of TDS or the
holder; (9) the form of such Subordinated Debentures; and (10) any other
specific terms of such Subordinated Debentures. Principal, premium, if any, and
interest, if any, will be payable, and the Subordinated Debentures offered
hereby will be transferable, at the corporate trust office of the Debt Trustee
in New York pursuant to the Indenture.
If a Prospectus Supplement specifies that a series of Subordinated
Debentures is denominated in a currency or currency unit other than United
States dollars, such Prospectus Supplement will also specify the denomination in
which such Subordinated Debentures will be issued and the coin or currency in
which the principal, premium, if any, and interest, if any, on such Subordinated
Debentures will be payable, which may be United States dollars based upon the
exchange rate for such other currency or currency unit existing on or about the
time a payment is due.
The covenants contained in the Indenture would not necessarily afford
protection to holders of the Subordinated Debentures in the event of a decline
in credit quality resulting from takeovers, recapitalizations or similar
restructurings of TDS.
If Subordinated Debentures held by a Trust are distributed to holders of its
Preferred Securities in liquidation of such holders' interests in such Trust,
such Subordinated Debentures will initially be issued as a Global Security. To
the extent described under "Description of the Subordinated Debentures -- Book-
Entry and Settlement" in the applicable Prospectus Supplement, under certain
limited circumstances, Subordinated Debentures may be issued in certificated
form in exchange for a Global Security. In the event Subordinated Debentures are
issued in certificated form, such Subordinated Debentures will be in
denominations as specified in the applicable Prospectus Supplement and integral
multiples thereof and may be transferred or exchanged at the offices described
therein. Payments on Subordinated Debentures issued as a Global Security will be
made to the Depositary for the Subordinated Debentures. In the event
Subordinated Debentures are issued in certificated form, principal and interest
will be payable, the transfer of the Subordinated Debentures will be registrable
and Subordinated Debentures will be exchangeable for Subordinated Debentures of
other denominations of a like aggregate principal amount at the corporate trust
office of the Debt Trustee in New York, New York; provided, that payment of
interest may be made at the option of TDS by check mailed to the address of the
persons entitled thereto.
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction involving TDS.
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SUBORDINATION
The Indenture provides that the Subordinated Debentures are subordinated and
junior in right of payment to all Senior Indebtedness of TDS, whether now
existing or hereafter incurred. Senior Indebtedness may include indebtedness of
TDS which is subordinated to other indebtedness of TDS but nevertheless senior
to the Subordinated Debentures. No payment of principal of (including redemption
and sinking fund payments, if any), premium, if any, or interest on, the
Subordinated Debentures may be made if (a) there is any default in the payment
of principal, premium, interest or any other payment due on any Senior
Indebtedness, or (b) the maturity of any Senior Indebtedness has been
accelerated because of a default. Upon any distribution of assets of TDS to
creditors upon any dissolution, winding-up, liquidation or reorganization of
TDS, whether voluntary or involuntary or in bankruptcy, insolvency, receivership
or other proceedings, all amounts due on all Senior Indebtedness must be paid in
full before the holders of the Subordinated Debentures are entitled to receive
or retain any payment. Upon payment in full of all amounts due on the Senior
Indebtedness then outstanding, the rights of the holders of the Subordinated
Debentures will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions applicable to such Senior
Indebtedness until all amounts owing on the Subordinated Debentures are paid in
full.
The term "Senior Indebtedness" means: (i) any payment in respect of (a)
indebtedness of TDS for money borrowed and (b) indebtedness evidenced by
securities, debentures, bonds, notes or other similar instruments issued by TDS;
(ii) all capital lease obligations of TDS; (iii) all obligations of TDS issued
or assumed as the deferred purchase price of property, all conditional sale
obligations of TDS and all of its obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business); (iv) all obligations of TDS for reimbursement on any letter of
credit, banker's acceptance, security purchase facility or similar credit
transaction; (v) all obligations of the type referred to in clauses (i) through
(iv) above of other Persons for the payment of which TDS is responsible or
liable as obligor, guarantor or otherwise; and (vi) all obligations of the type
referred to in clauses (i) through (v) above of other Persons secured by any
lien on any property or asset of TDS (whether or not such obligation is assumed
by TDS), except for (1) the Subordinated Debentures and any other indebtedness
that is by its terms subordinated to or PARI PASSU with the Subordinated
Debentures, as the case may be, including all other debt securities and
guarantees in respect of those debt securities, issued to any other trusts,
partnerships or any other entity affiliated with TDS which is a financing
vehicle of TDS in connection with the issuance of preferred securities by such
entity or other securities which rank PARI PASSU with, or junior to, the
Preferred Securities, and (2) any indebtedness between or among TDS and its
affiliates. Such Senior Indebtedness will continue to be Senior Indebtedness and
be entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued by TDS. In addition, since TDS is a holding company, the
right of TDS, and hence the right of the creditors of TDS (including any holder
of Subordinated Debentures), to participate in any distribution of the assets of
any subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of such subsidiary, except
to the extent that claims of TDS as a creditor of such subsidiary may be
recognized. There is no restriction in the Indenture against subsidiaries of TDS
incurring secured or unsecured indebtedness or issuing secured or unsecured
securities. The ability of TDS to make payments of principal and interest on the
Subordinated Debentures will be dependent upon the payment to it by its
subsidiaries of dividends, loans or advances. As more fully set forth in the
notes to the Company's financial statements, such payments by TDS's regulated
telephone company subsidiaries are subject to legal and contractual
restrictions, primarily contained in the mortgages granted by certain such
subsidiaries to the Rural Utilities Service.
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CERTAIN COVENANTS
If (i) there has occurred any event that would constitute an Indenture Event
of Default or (ii) TDS is in default with respect to its payment of any
obligations under any Preferred Securities Guarantee, then (a) TDS may not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of shares of TDS common
stock in connection with the satisfaction by TDS of its obligations under any
employee benefit plans or any other contractual obligation of TDS (other than a
contractual obligation ranking PARI PASSU with or junior to the Subordinated
Debentures), (ii) as a result of a reclassification of TDS capital stock or the
exchange or conversion of one class or series of TDS capital stock for another
class or series of TDS capital stock, or (iii) the purchase of fractional
interests in shares of TDS capital stock pursuant to the conversion or exchange
provisions of such TDS capital stock or the security being converted or
exchanged), (b) TDS may not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by TDS which rank PARI PASSU with or junior to the
Subordinated Debentures, and (c) TDS may not make any guarantee payments with
respect to the foregoing (other than pursuant to the Preferred Securities
Guarantees).
For so long as the Trust Securities under a Trust remain outstanding, TDS
will covenant (i) to maintain 100% direct or indirect ownership of the Common
Securities of such Trust; provided, however, that any permitted successor of TDS
under the Indenture may succeed to TDS's ownership of such Common Securities,
(ii) not to cause, as sponsor of such Trust, or to permit, as holder of such
Common Securities, the dissolution, winding-up, or termination of such Trust,
except in connection with a distribution of the Subordinated Debentures held by
such Trust as provided in the Declaration for such Trust and in connection with
certain mergers, consolidations or amalgamations, and (iii) to use its
reasonable efforts to cause such Trust (a) to remain a statutory business trust,
except in connection with the distribution of Subordinated Debentures to the
holders of Trust Securities of such Trust in liquidation of such Trust, the
redemption of all such Trust Securities, or certain mergers, consolidations or
amalgamations, each as permitted by such Declaration, and (b) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes.
OPTIONAL REDEMPTION
TDS will have the right to redeem the Subordinated Debentures of each
series, in whole or in part, from time to time, on or after the date set forth
in the applicable Prospectus Supplement or in whole but not in part at any time
in certain circumstances upon the occurrence of a Tax Event as described under
"Description of the Preferred Securities-Tax Event Redemption" in the applicable
Prospectus Supplement, upon not less than 30 nor more than 60 days' notice, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest, including Additional Interest (as defined herein),
if any, to the redemption date. If a partial redemption of the Preferred
Securities of a Trust resulting from a partial redemption of the Subordinated
Debentures held by such Trust would result in the delisting of such Preferred
Securities, TDS may only redeem such Subordinated Debentures in whole.
INTEREST
Each Subordinated Debenture will bear interest at the rate set forth in the
applicable Prospectus Supplement from the original date of issuance, payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year (each, an "Interest Payment Date"), to the person in whose name such
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment Date.
In the event the Subordinated Debentures do not continue to remain in book-entry
only form, TDS will have the right to select record dates which may be not less
than fifteen days prior to each Interest Payment Date.
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The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period will be computed on the basis of
the actual number of days elapsed in such 90-day quarter. In the event that any
date on which interest is payable on the Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Except to the extent set forth in the applicable Prospectus Supplement, TDS
will have the right at any time, and from time to time, during the term of any
series of Subordinated Debentures, to defer payments of interest by extending
the interest payment period for a period not exceeding 20 consecutive quarters,
at the end of which Extension Period, TDS will pay all interest then accrued and
unpaid (including any Additional Interest, together with interest thereon at the
rate specified for such Subordinated Debentures to the extent permitted by
applicable law); provided, that, during any such Extension Period, (a) TDS may
not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock (other than (i) purchases or acquisitions of shares of TDS
common stock in connection with the satisfaction by TDS of its obligations under
any employee benefit plans or any other contractual obligation of TDS (other
than a contractual obligation ranking PARI PASSU with or junior to the
Subordinated Debentures), (ii) as a result of a reclassification of TDS capital
stock or the exchange or conversion of one class or series of TDS capital stock
for another class or series of TDS capital stock, or (iii) the purchase of
fractional interests in shares of TDS capital stock pursuant to the conversion
or exchange provisions of such TDS capital stock or the security being converted
or exchanged), (b) TDS may not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by TDS which rank PARI PASSU with or junior to the
Subordinated Debentures to which such Extension Period applies and (c) TDS will
not make any guarantee payments with respect to the foregoing (other than
pursuant to the Preferred Securities Guarantees). This covenant effectively
requires that any Extension Period with respect to payment of interest on a
series of Subordinated Debentures will also apply to each other series of
Subordinated Debentures issued under the Indenture to other trusts similar to
the Trust. Prior to the termination of any such Extension Period for a series of
Subordinated Debentures, TDS may further defer payments of interest on such
Subordinated Debentures, by extending the interest payment period, provided that
such Extension Period together with all such previous and further extensions
thereof for such series of Subordinated Debentures may not exceed 20 consecutive
quarters or extend beyond the maturity of such series of Subordinated
Debentures.
Upon the termination of any Extension Period for a series of Subordinated
Debentures, and the payment of all accrued and unpaid interest on the
Subordinated Debentures then due, TDS may select a new Extension Period for such
series of Subordinated Debentures, as if no Extension Period had previously been
declared, subject to the above requirements. No interest on a series of
Subordinated Debentures during an Extension Period, except at the end thereof,
will be due and payable on such series of Subordinated Debentures.
TDS has no present intention of exercising its rights to defer payments of
interest by extending the interest payment period on any Subordinated
Debentures.
If the Property Trustee is the sole holder of a series of Subordinated
Debentures, TDS will give the Regular Trustees and the Property Trustee notice
of its selection of such Extension Period for such series of Subordinated
Debentures one Business Day prior to the earlier of (i) the next succeeding date
on which distributions on the related Preferred Securities are payable or (ii)
the date the applicable Trust is required to give notice to the AMEX or other
applicable self-regulatory organization or to holders of such
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<PAGE>
Preferred Securities on the record date or the date such distribution is
payable, but in any event not less than one Business Day prior to such record
date. The Regular Trustees shall give notice of TDS's selection of such
Extension Period to the holders of such Preferred Securities. If the Property
Trustee is not the sole holder of a series of Subordinated Debentures, TDS will
give the holders of such Subordinated Debentures notice of its selection of such
Extension Period ten Business Days prior to the earlier of (i) the Interest
Payment Date or (ii) the date TDS is required to give notice to the AMEX or
other applicable self-regulatory organization or to holders of such Subordinated
Debentures, but in any event at least two Business Days before such record date.
ADDITIONAL INTEREST
If at any time a Trust is required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States, or any other taxing authority, then, in any such case, TDS
will pay as additional interest ("Additional Interest") such additional amounts
as shall be required so that the net amounts received and retained by such Trust
after paying any such taxes, duties, assessments or other governmental charges
will be equal to the amounts such Trust would have received had no such taxes,
duties, assessments or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to any series of the Subordinated Debentures:
(a) failure for 30 days to pay interest on the Subordinated Debentures
of such series, including any Additional Interest in respect thereof, when
due; provided, however, that a valid extension of the interest payment
period by TDS will not constitute a default in the payment of interest for
this purpose; or
(b) failure to pay principal of or premium, if any, on the Subordinated
Debentures of such series when due whether at maturity, upon redemption, by
declaration, or otherwise; or
(c) failure to observe or perform any other covenant or agreement (other
than those specifically relating solely to one or more other series of
Subordinated Debentures) contained in the Indenture for 90 days after
written notice to TDS from the Debt Trustee or the holders of at least 25%
in principal amount of the outstanding Subordinated Debentures; or
(d) certain events of bankruptcy, insolvency or reorganization of TDS;
or
(e) the voluntary or involuntary dissolution, winding-up or termination
of the applicable Trust, except in connection with the distribution of
Subordinated Debentures to the holders of Trust Securities of such Trust in
liquidation of such Trust, the redemption of all outstanding Trust
Securities of such Trust and certain mergers, consolidations or
amalgamations permitted by the Declaration.
Upon the occurrence of an Event of Default set forth in (a),(b), or (c)
above, the Debt Trustee, or the holders of at least 25% in principal amount of
the outstanding Subordinated Debentures will have the right under the Indenture
to declare the principal of, and interest (including Additional Interest, if
any) on, the Subordinated Debentures to be immediately due and payable. The
principal amount of the Subordinated Debentures will become immediately due and
payable, without any declaration or other action by the Debt Trustee or any
other person, upon the occurrence of an Event of Default set forth in (d) or (e)
above.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures of such series have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Debt
Trustee. Either the Debt Trustee or the holders of at least 25% in aggregate
outstanding principal amount of the Subordinated Debentures of such series may
declare the principal of
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<PAGE>
such series due and payable immediately on default, but the holders of a
majority in aggregate outstanding principal amount of such series may annul such
declaration and waive such default if such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration and any applicable premium has been deposited
with the Debt Trustee.
The holders of a majority in aggregate outstanding principal amount of a
series of Subordinated Debentures affected thereby may, on behalf of the holders
of all such Subordinated Debentures, waive any past default, except (i) a
default in the payment of principal, premium, if any, or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration and any applicable
premium has been deposited with the Debt Trustee) or (ii) a default in the
covenant of TDS not to declare or pay dividends on, or make distributions with
respect to, or redeem, purchase or acquire any of its capital stock during an
Extension Period. An Indenture Event of Default also constitutes a Declaration
Event of Default. The holders of Preferred Securities in certain circumstances
described in the applicable Prospectus Supplement may have the right to direct
the Property Trustee to exercise its rights as the holder of the Subordinated
Debentures.
PAYMENT AND PAYING AGENTS
Payment of principal of and premium (if any) on Subordinated Debentures will
be made only against surrender to the Paying Agent of the Subordinated
Debentures. Principal of and any premium and interest, if any, on Subordinated
Debentures will be payable, subject to any applicable laws and regulations, at
the office of such Paying Agent or Paying Agents as TDS may designate from time
to time pursuant to the Indenture. Payment of interest on the Subordinated
Debentures on any Interest Payment Date will be made to the person in whose name
the Subordinated Debenture (or predecessor security) is registered at the close
of business on the Regular Record Date for such interest payment.
The Debt Trustee will act as Paying Agent with respect to the Subordinated
Debentures. TDS may at any time designate additional Paying Agents or rescind
the designation of any Paying Agent or approve a change in the office through
which any Paying Agent acts, except that TDS will be required to maintain a
Paying Agent at the place of payment.
All moneys paid by TDS to a Paying Agent for the payment of the principal of
or premium or interest, if any, on any Subordinated Debentures which remain
unclaimed at the end of two years after such principal, premium, if any, or
interest shall have become due and payable will be repaid to TDS and the holder
of such Subordinated Debentures will thereafter look only to TDS for payment
thereof.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting TDS and the Debt Trustee, with
the consent of the holders of not less than a majority in principal amount of
the Subordinated Debentures, to modify the Indenture or the rights of the
holders of the Subordinated Debentures, and the holders of not less than a
majority in principal amount of the Subordinated Debentures of a particular
series to modify the supplemental indenture affecting that series; provided that
no such modification may, without the consent of the holder of each outstanding
Subordinated Debenture affected thereby, (i) except as provided with respect to
any particular series, extend the fixed maturity of such Subordinated
Debentures, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, or reduce any premium payable upon the
redemption thereof, without the consent of the holder of the Subordinated
Debentures so affected or (ii) reduce the percentage of Subordinated Debentures,
the holders of which are required for such consent, without the consent of the
holder of each Subordinated Debenture then outstanding and affected thereby.
In addition, TDS and the Debt Trustee may execute, without the consent of
holders of the Subordinated Debentures, any supplemental indenture for certain
other usual purposes including the creation of any new series of Subordinated
Debentures.
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CONSOLIDATION, MERGER AND SALE
TDS may consolidate with or merge into any other Person in a transaction in
which TDS is not the surviving entity, or sell, convey, transfer or otherwise
dispose of its properties as an entirety, or substantially as an entirety to,
any Person if (i) the Person formed in such consolidation or into which TDS is
merged or to which TDS has sold, conveyed, transferred or otherwise disposed of
its properties as an entirety, or substantially as an entirety, is an entity
validly existing under the laws of the jurisdiction of its organization and such
Person assumes TDS's obligations under the Preferred Securities Guarantees and
the Indenture, (ii) immediately after giving effect to the transaction no Event
of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing, and (iii) any
such Person not organized and validly existing under the laws of the United
States, any state thereof or the District of Columbia, shall expressly agree in
a supplemental indenture (a) to pay to the holders of Trust Securities any
additional amounts as may be necessary in order that every net payment or other
amount due on the Trust Securities, after withholding for or on account of any
present or future tax, assessment or governmental charge imposed upon such
holder of Trust Securities (except for a tax, assessment or charge imposed
solely as a result of a connection between the recipient and the jurisdiction
imposing such tax, assessment or charge) by reason of or as a result of such
payment or other amount being paid by an entity which is not an entity existing
under the laws of the United States or any state thereof or the District of
Columbia, will not be less than the amount provided for in the Trust Securities,
the Indenture or the Preferred Securities Guarantees, as the case may be, to be
then due and payable and (b) to the selection and jurisdiction of courts of the
State of Illinois or the U.S. District Court for the Northern District of
Illinois for any litigation arising out of, under or in connection with the
Indenture or the Preferred Securities Guarantees. The phrase "substantially as
an entirety" is not defined in the Indenture or the Preferred Securities
Guarantees, and TDS is unaware of an established meaning or qualification of the
phrase under New York law, which is the law governing construction of the
Indenture and the Preferred Securities Guarantees. A holder of Preferred
Securities may bear the burden of establishing the meaning of the phrase
"substantially as an entirety".
Under the terms of the Indenture, TDS will be discharged from any and all
obligations in respect of any series of Subordinated Debentures (except in each
case for certain obligations with respect to denominations and provisions for
payment of such Subordinated Debentures and obligations to register the transfer
or exchange of such Subordinated Debentures, replace stolen, lost or mutilated
Subordinated Debentures, maintain paying agencies and hold moneys for payment in
trust) if TDS (i) deposits with the Debt Trustee, in trust, moneys or
Governmental Obligations, in an amount sufficient to pay all the principal of,
and interest on, such Subordinated Debentures on the dates such payments are due
in accordance with the terms of such Subordinated Debentures and (ii) delivers
to the Debt Trustee an opinion of counsel to the effect that, based upon TDS's
receipt from, or the publication by, the Internal Revenue Service of a ruling,
or a change in law, the holders of the Subordinated Debentures of such series
will not recognize income, gain or loss for United States federal income tax
purposes as a result of the deposit, defeasance and discharge and will be
subject to United States federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit,
defeasance or discharge had not occurred.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee, prior to default and after the curing of all defaults, if
any, undertakes to perform only such duties as are specifically set forth in the
Indenture and, after a default (that has not been cured or waived), will
exercise the same degree of care as a prudent individual would exercise in the
conduct of
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<PAGE>
his or her own affairs. Subject to such provision, the Debt Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby; but the foregoing will not relieve the Debt Trustee, upon
the occurrence of an Indenture Event of Default, from exercising the rights and
powers vested in it by the Indenture. The Debt Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debt Trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
TDS will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned subsidiary
of TDS; provided that, in the event of any such assignment, TDS will remain
liable for all of such obligations. Subject to the foregoing, the Indenture will
be binding upon and inure to the benefit of the parties thereto and their
respective successors and assigns. The Indenture provides that it may not
otherwise be assigned by the parties thereto.
The Indenture will provide that TDS will pay all fees and expenses related
to (i) the offering and sale of the Trust Securities and the Subordinated
Debentures, (ii) the organization, maintenance and dissolution of each Trust,
(iii) the retention of the Trustees and (iv) the enforcement by the Property
Trustee of the rights of holders of Preferred Securities.
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBENTURES
AND THE PREFERRED SECURITIES GUARANTEES
As set forth in the Declaration for each Trust, the sole purposes of each
Trust are to (i) issue Trust Securities, (ii) invest the proceeds thereof in the
Subordinated Debentures and (iii) engage in only those other activities
necessary or incidental thereto.
As long as payments of interest and other payments are made when due on a
series of Subordinated Debentures, such payments will be sufficient to cover
distributions and payments due on the related Trust Securities primarily because
(i) the aggregate principal amount of such Subordinated Debentures will be equal
to the sum of the aggregate stated liquidation amount of such Trust Securities;
(ii) the interest rate and interest and other payment dates on such Subordinated
Debentures will match the distribution rate and distribution and other payment
dates for the Trust Securities; (iii) TDS will pay for all costs and expenses of
each Trust; and (iv) the Declaration provides that the Trustees may not cause or
permit a Trust to, among other things, engage in any activity that is not
consistent with the purposes of such Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by TDS as and to the extent set forth under
"Description of the Preferred Securities Guarantees". If TDS does not make
interest payments on the Subordinated Debentures purchased by a Trust, it is
expected that such Trust will not have sufficient funds to pay distributions on
its Preferred Securities. The Preferred Securities Guarantee for a Trust is a
full and unconditional guarantee from the time of its issuance, but does not
apply to any payment of distributions unless and until such Trust has sufficient
funds for the payment of such distributions.
If TDS fails to make interest or other payments on the Subordinated
Debentures held by a Trust when due (taking into account any Extension Period),
the Declaration for such Trust provides a mechanism whereby the holders of the
Preferred Securities of such Trust, using the procedures described in
"Description of the Preferred Securities -- Voting Rights" in the applicable
Prospectus Supplement may direct the Property Trustee to enforce its rights
under such Subordinated Debentures, including proceeding directly against TDS to
enforce the Subordinated Debentures. If the Property Trustee fails to enforce
its rights under such Subordinated Debentures, a holder of such Preferred
Securities may, after a period of 30 days
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<PAGE>
has elapsed from such holder's written request to the Property Trustee to
enforce such rights, institute a legal proceeding directly against TDS to
enforce the Property Trustee's rights under such Subordinated Debentures without
first instituting any legal proceeding against the Property Trustee or any other
person or entity, including such Trust.
If TDS fails to make payments under a Preferred Securities Guarantee for a
Trust, such Preferred Securities Guarantee provides a mechanism whereby the
holders of the Preferred Securities of such Trust may direct the Guarantee
Trustee to enforce its rights thereunder. If the Guarantee Trustee fails to
enforce such Preferred Securities Guarantee, any holder of such Preferred
Securities may institute a legal proceeding directly against TDS to enforce the
Guarantee Trustee's rights under such Preferred Securities Guarantee, without
first instituting a legal proceeding against such Trust, the Guarantee Trustee
or any other person or entity.
The above mechanisms and obligations, taken together, are equivalent to a
full and unconditional guarantee by TDS of payments due on the Preferred
Securities. See "Description of the Preferred Securities Guarantees -- General."
PLAN OF DISTRIBUTION
TDS and the Trusts may offer and sell the Preferred Securities in any of
three ways: (i) through agents; (ii) through underwriters or dealers; or (iii)
directly to one or more purchasers. The Prospectus Supplement with respect to
any of the Preferred Securities will set forth the terms of the offering of such
Preferred Securities, including the name or names of any underwriters or agents,
the purchase price of such Preferred Securities, the proceeds to the applicable
Trust from such sale, any underwriting discounts or agency fees and other items
constituting underwriters' or agents' compensation, the initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers, and
any securities exchanges on which such Preferred Securities may be listed.
The distribution of the Preferred Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, at a market price prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
Underwriters, dealers and agents may be entitled, under agreements entered
into with TDS to indemnification by TDS against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the underwriters, dealers or agents may be required to make in
respect thereof. Such underwriters, dealers and agents, and affiliates thereof,
may be customers of, engage in transactions with, or perform services for TDS
and its affiliates in the ordinary course of business.
All Preferred Securities will be new issues of securities with no
established trading market. Any underwriters to whom Preferred Securities are
sold by a Trust for public offering and sale may make a market in such Preferred
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given concerning the liquidity of the trading market for any Preferred
Securities.
EXPERTS
The audited consolidated financial statements and schedules of TDS
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
incorporated by reference herein. The financial statements and schedules
referred to above have been incorporated by reference in reliance upon the
authority of such firm as an expert in accounting and auditing in giving said
reports.
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LEGAL MATTERS
Certain matters of Delaware law relating to the legality of the Preferred
Securities, the validity of the Declaration, the formation of the Trusts and
the legality under state law of the Preferred Securities will be passed upon
by Richards, Layton & Finger, special Delaware counsel to the Trusts and the
Company. The legality under state law of the Preferred Securities Guarantees
and the Subordinated Debentures will be passed upon on behalf of the Trust
and the Company by Sidley and Austin, Chicago. Certain United States federal
income taxation matters will be passed upon by Sidley & Austin, Chicago.
Walter C.D. Carlson, a director of TDS and a beneficiary and trustee of the
voting trust which controls TDS, is a partner of Sidley & Austin. Michael G.
Hron and William S. DeCarlo, the Secretary and Assistant Secretary of TDS and
certain TDS subsidiaries, respectively, and Stephen P. Fitzell and Sherry S.
Treston, the Secretary and Assistant Secretary of certain TDS subsidiaries,
respectively, are partners of Sidley & Austin.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSE OF ISSUANCE AND DISTRIBUTION
Previously included in original Registration Statement
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 145 ("Section 145") of General Corporation
Law of the State of Delaware (the "Delaware GCL") which provides for
indemnification of directors and officers in certain circumstances.
In accordance with Section 102(b)(7) of the Delaware GCL, TDS's Restated
Certificate of Incorporation provides that directors shall not be personally
liable for monetary damages for breaches of their fiduciary duty as directors
except for (i) breaches of their duty of loyalty to the Registrant or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, (iii) certain
transactions under Section 174 of the Delaware GCL (unlawful payment of
dividends) or (iv) transactions from which a director derives an improper
personal benefit.
The Restated Certificate of Incorporation of TDS provides for
indemnification of directors and officers to the full extent provided by the
Delaware GCL, as amended from time to time. It states that the
indemnification provided therein shall not be deemed exclusive. TDS may
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of TDS, or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether or
not TDS would have the power to indemnify such person against such expense,
liability or loss, under the provisions of the Delaware GCL.
Pursuant to Section 145 and the Restated Certificate of Incorporation,
TDS maintains directors' and officers' liability insurance coverage.
Each Declaration of Trust provides that no Trustee, affiliate of any
Trustee, or any officers, directors, shareholders, members, partners, employees,
representatives or agents of any Trustee, or any employee or agent of the Trust
or its affiliates (each an "Indemnified Person") shall be liable, responsible or
accountable in damages or otherwise to the Trust or any employee or agent of the
Trust or its affiliates for any loss, damage or claim incurred by reason of any
act or omission performed or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified Person reasonably believed
to be within the scope of the authority conferred on such Indemnified Person by
the Declaration or by law, except that an Indemnified Person shall be liable for
any such loss, damage or claim incurred by reason of such Indemnified Person's
gross negligence (or, in the case of the Property Trustee, negligence) or
willful misconduct with respect to such acts or omissions. Each Declaration of
Trust also provides that, to the fullest extent permitted by applicable law, TDS
shall Indemnify and hold harmless each Indemnified Person from and against any
loss, damage or claim incurred by such Indemnified Person by reason of any act
or omission performed or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified Person reasonably believed
to be within the scope of authority conferred on such Indemnified Person by such
Declaration, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Indemnified
Person by reason of gross negligence except, in the case of the Property
Trustee, as otherwise mandated by the Trust Indenture Act, or willful misconduct
with respect to such acts or omissions. The Declaration of Trust further
provides that, to the fullest extent permitted by applicable law, expenses
(including legal fees)
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incurred by an Indemnified Person in defending any claim, demand, action, suit
or proceeding shall, from time to time, be advanced by TDS prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
TDS of any undertaking by or on behalf of the Indemnified Person to repay such
amount if it shall be determined that the Indemnified Person is not entitled to
be indemnified for the underlying cause of action as authorized by such
Declaration.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ --------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting agreement for offerings of Preferred Securities
3.1 Restated Certificate of Incorporation of the Registrant, is hereby
incorporated by reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form 8-A/A-3 dated May 22, 1998)
3.2 Restated Bylaws of the Registrant, are hereby incorporated by reference to
Exhibit 3.2 to the Registrant's Registration Statement on Form 8-A/A-3
dated May 22, 1998)
*4.1 Form of Certificate of Trust
*4.2 Form of Declaration of Trust
*4.3 Form of Amended and Restated Declaration of Trust
*4.4 Form of Preferred Securities Guarantee Agreement by TDS and The First
National Bank of Chicago as Guaranty Trustee for the benefit of the
holders of Trust Preferred Securities of Trusts
*4.5 Form of Subordinated Indenture between TDS and The First National Bank of
Chicago (including form of Subordinated Debenture)
*4.6 Form of Supplemental Indenture to Subordinated Indenture to be used in
connection with the issuance of each series of Subordinated Debentures
4.7 Form of First Supplemental Indenture to Amended and Restated Declaration of
Trust relating to assumption by TDS Delaware
4.8 Form of First Supplemental Indenture to Preferred Securities Guarantee
Agreement relating to assumption by TDS Delaware
4.9 Form of Third Supplemental Indenture to Subordinated Indenture relating to
assumption by TDS Delaware
5.1 Opinion of Sidley & Austin as to the validity of the Subordinated
Debentures and Preferred Securities Guarantees
*5.2 Opinions of Richards, Layton and Finger as to the validity of Preferred
Securities
*8.1 Opinion of Sidley & Austin as to certain federal income tax matters
12.1 Computations of Ratios of Earnings to Fixed Charges and Ratios of Earnings
to Fixed Charges and Preferred Stock Dividends, are hereby incorporated
by reference to Exhibit 12 to the Company's Annual Reports on Form 10-K
for the years ended December 31, 1993, 1994, 1995, 1996 and 1997
12.2 Computations of Ratios of Earnings to Fixed Charges and Ratios of Earnings
to Fixed Charges and Preferred Stock Dividends are hereby incorporated
by reference to Exhibit 12 to the Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1997 and March 31, 1998.
23.1 Consent of Arthur Andersen LLP
24.1 Power of Attorney, filed as part of Part II to this Registration Statement
*25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
The First National Bank of Chicago, as trustee under the Indenture
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ --------------------------------------------------------------------------
<C> <S>
*25.2 Forms T-1 Statements of Eligibility under the Trust Indenture Act of 1939
of The First National Bank of Chicago as Property Trustee under
Declaration of Trust pertaining to each of TDS Capital I, TDS Capital
II, and TDS Capital III
*25.3 Forms T-1 Statements of Eligibility under the Trust Indenture Act of 1939
of The First National Bank of Chicago, as Preferred Guarantee Trustee
under the Preferred Securities Guarantee pertaining to each of TDS
Capital I, TDS Capital II, and TDS Capital III
</TABLE>
- -------------------
* Previously filed
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
a. To include any prospectus required by Section 10(a)(3) of the
Securities Act;
b. To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement, and
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.
2. That, for purposes of determining any liability under the Securities
Act, each filing of TDS's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Provided, however, that (1)(a) and (1)(b) do not apply if the information
required to be included in a post-effective amendment by those items is
contained in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference to this
registration statement.
4. That, for purposes of determining any liability under the Securities
Act, each filing of the Company's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions described and the documents referenced
under Item 15 above, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by any Registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, each Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
5. For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
6. For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement or Amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago, State of Illinois on this 19th day of
June, 1998.
TELEPHONE AND DATA SYSTEMS, INC.
BY /s/ LEROY T. CARLSON, JR.
------------------------------------------
Leroy T. Carlson, Jr., President
POWER OF ATTORNEY
Each person whose signature below constitutes and appoints Leroy T.
Carlson, Jr. and Murray L. Swanson, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and to take such actions in, and file
with the appropriate applications, statements, consents and other documents
as may be necessary or expedient to register securities of the Company for
sale, granting unto said attorneys-in-fact and agents full power and
authority to do so and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all the said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on
June 19, 1998 in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
/s/ LEROY T. CARLSON*
- ------------------------------ Chairman and Director
Leroy T. Carlson
/s/ LEROY T. CARLSON, JR. President and Chief
- ------------------------------ Executive Officer and
Leroy T. Carlson, Jr. Director
Executive VP -- Finance and
/s/ MURRAY L. SWANSON* Chief Financial Officer
- ------------------------------ (principal financial
Murray L. Swanson officer) and Director
/s/ JAMES BARR III*
- ------------------------------ Director
James Barr III
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
/s/ RUDOLPH E. HORNACEK*
- ------------------------------ Director
Rudolph E. Hornacek
/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/ LETITIA G.C. CARLSON*
- ------------------------------ Director
Letitia G.C. Carlson
- ------------------------------ Director
Donald R. Brown
/s/ GEORGE W. OFF*
- ------------------------------ Director
George W. Off
- ------------------------------ Director
Martin L. Solomon
/s/ GREGORY J. WILKINSON* Vice President and
- ------------------------------ Controller (principal
Gregory J. Wilkinson accounting officer)
</TABLE>
II-6
* By: /s/ LeRoy T. Carlson, Jr.
-----------------------------------------
LeRoy T. Carlson, Jr., Attorney-In-Fact
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
the undersigned Trusts certify that they have reasonable grounds to believe
that they meet all of the requirements for filing on Form S-3 and have duly
caused this Registration Statement or Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois on this day of June 19, 1998.
TDS CAPITAL I
(Registrant)
By: /s/ LeRoy T. Carlson, Jr.
------------------------------------------
Regular Trustee
TDS CAPITAL II
(Registrant)
By: /s/ LeRoy T. Carlson, Jr.
------------------------------------------
Regular Trustee
TDS CAPITAL III
(Registrant)
By: /s/ LeRoy T. Carlson, Jr.
------------------------------------------
Regular Trustee
II-7
<PAGE>
EXHIBIT 4.7
FORM OF SUPPLEMENTAL INDENTURE
TO AMENDED AND RESTATED DECLARATION OF TRUST
This FIRST SUPPLEMENTAL INDENTURE TO THE AMENDED AND RESTATED
DECLARATION OF TRUST, dated as of May 22, 1998 (the "First Supplemental
Indenture to the Declaration of Trust"), is entered into by and among Telephone
and Data Systems, Inc., an Iowa corporation ("TDS Iowa"), Telephone and Data
Systems, Inc., a Delaware corporation ("TDS Delaware"), and the Trustees.
W I T N E S S E T H:
WHEREAS, TDS Iowa and the Trustees are parties to an Amended and
Restated Declaration of Trust, dated as of November 18, 1997 (the
"Declaration of Trust"), relating to TDS Capital [I] [II], a trust (the
"Trust") established for the sole purpose of issuing and selling certain
securities representing undivided beneficial interests in the assets of the
Trust and investing the proceeds thereof in certain Subordinated Debentures
of TDS Iowa;
WHEREAS, capitalized terms herein, not otherwise defined, shall have
the same meanings given them in the Declaration of Trust;
WHEREAS, TDS Iowa has requested the Trustee to join with it in the
execution and delivery of this First Supplemental Indenture to the Declaration
of Trust in order to supplement and amend the Declaration of Trust to recognize
the merger (the "Merger") of TDS Iowa with and into its wholly-owned
subsidiary, TDS Delaware;
WHEREAS, the Merger will be consummated for the sole purpose of
reincorporating TDS Iowa from Iowa to Delaware, and will not result in any
change in its name, business, management, assets or liabilities;
WHEREAS, Section 14.1 of the Declaration of Trust provides that a
supplemental indenture may be entered into by TDS Iowa and the Trustees to
evidence the succession of another corporation to the Sponsor and the
assumption by the successor corporation of the covenants, agreements and
obligations of TDS Iowa;
WHEREAS, all things necessary to make this First Supplemental
Indenture to the Declaration of Trust a valid agreement of TDS Iowa, TDS
Delaware and the Trustee and a valid amendment of and supplement to the
Declaration of Trust have been done.
<PAGE>
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE TO THE
DECLARATION OF TRUST WITNESSETH:
For and in consideration of the premises, it is mutually covenanted
and agreed, for equal and proportionate benefit of all Holders of Securities,
as follows:
Section 1. SUCCESSION OF TDS IOWA BY TDS DELAWARE.
(a) Subject to the effectiveness of the Merger, TDS Delaware, as
successor to TDS Iowa, hereby expressly assumes the guarantee of the due and
punctual payment, performance and observance of all the covenants, conditions
and other obligations of the Declaration of Trust to be performed or observed
by TDS Iowa.
(b) TDS Delaware shall succeed to, and be substituted for, and may
exercise every right and power of, TDS Iowa under the Declaration of Trust with
the same effect as if TDS Delaware had been named as TDS Iowa therein.
Section 2. REFERENCE TO AND EFFECT ON THE DECLARATION OF TRUST.
(a) On and after the date of this First Supplemental Indenture to
the Declaration of Trust, each reference in the Declaration of Trust to "this
Agreement," "hereunder," "hereof," or "herein" shall mean and be a reference
to the Declaration of Trust as supplemented by this First Supplemental
Indenture to the Declaration of Trust.
(b) Except as specifically amended above, the Declaration of Trust
shall remain in full force and effect and is hereby ratified and confirmed.
(c) All capitalized terms used but not otherwise defined herein
shall have the respective meanings set forth in the Declaration of Trust.
(d) This First Supplemental Indenture to the Declaration of Trust
shall be effective at the time the Merger is effective.
Section 3. GOVERNING LAW
This First Supplemental Indenture to the Declaration of Trust shall
be governed by, and construed and enforced in accordance with, the laws of the
jurisdiction which govern the Declaration of Trust and its construction.
-2-
<PAGE>
Section 4. COUNTERPARTS AND METHOD OF EXECUTION
This First Supplemental Indenture to the Declaration of Trust may be
executed in several counterparts, all of which together shall constitute one
agreement binding on all parties hereto, notwithstanding that all parties have
not signed the same counterpart.
Section 5. SECTION TITLES
Section titles are for descriptive purposes only and shall not
control or alter the meaning of this First Supplemental Indenture to the
Declaration of Trust as set forth in the text.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to the Declaration of Trust to be duly executed and
their respective seals to be affixed hereunto and duly attested all as of the
day and year first above written.
----------------------------------------
as Trustee
----------------------------------------
as Trustee
----------------------------------------
as Trustee
-3-
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
Not in its individual capacity but
solely as Property Trustee
By:______________________________________
Name:
Title:
FIRST CHICAGO DELAWARE INC.
Not in its individual capacity but
solely as Delaware Trustee
By:______________________________________
Name:
Title:
TELEPHONE AND DATA SYSTEMS, INC.,
an Iowa Corporation, as Sponsor
By:______________________________________
LeRoy T. Carlson, Jr.
President
TELEPHONE AND DATA SYSTEMS, INC.,
a Delaware Corporation, as Sponsor
By:______________________________________
LeRoy T. Carlson, Jr.
President
-4-
<PAGE>
EXHIBIT 4.8
FIRST SUPPLEMENTAL INDENTURE
TO THE PREFERRED SECURITIES GUARANTEE AGREEMENT
This FIRST SUPPLEMENTAL INDENTURE TO THE PREFERRED SECURITIES
GUARANTEE AGREEMENT, dated as of May 22, 1998 (the "First Supplemental Indenture
to the Guarantee Agreement"), is entered into by and among Telephone and Data
Systems, Inc., an Iowa corporation ("TDS Iowa"), Telephone and Data Systems,
Inc., a Delaware corporation ("TDS Delaware"), and The First National Bank of
Chicago, a national banking association, as guarantee trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, TDS Iowa and the Trustee are parties to a Preferred
Securities Guarantee Agreement, dated as of November 18, 1997 (the "Guarantee
Agreement"), relating to the payment of Guarantee Payments by TDS Iowa for the
benefit of the Holders of Securities issued by TDS Capital [I] [II], a Delaware
statutory trust;
WHEREAS, capitalized terms herein, not otherwise defined, shall have
the same meanings given them in the Guarantee Agreement;
WHEREAS, TDS Iowa has requested the Trustee to join with it in the
execution and delivery of this First Supplemental Indenture to the Guarantee
Agreement in order to supplement and amend the Guarantee Agreement to recognize
the merger (the "Merger") of TDS Iowa with and into its wholly-owned subsidiary,
TDS Delaware;
WHEREAS, the Merger will be consummated for the sole purpose of
reincorporating TDS Iowa from Iowa to Delaware, and will not result in any
change in its name, business, management, assets or liabilities;
WHEREAS, Section 9.1 of the Guarantee Agreement provides that a
supplemental indenture may be entered into by TDS Iowa and the Trustee to
evidence the succession of another corporation to the Issuer and the assumption
by the successor corporation of the covenants, agreements and obligations of TDS
Iowa;
WHEREAS, pursuant to Section 10.2 of the Guarantee Agreement, this
First Supplemental Indenture to the Guarantee Agreement does not require the
consent of any Holders of Securities; and
WHEREAS, all things necessary to make this First Supplemental
Indenture to the Guarantee Agreement a valid agreement of TDS Iowa, TDS Delaware
and the Trustee and a valid amendment of and supplement to the Guarantee
Agreement have been done.
<PAGE>
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE TO THE
GUARANTEE AGREEMENT WITNESSETH:
For and in consideration of the premises, it is mutually covenanted
and agreed, for equal and proportionate benefit of all Holders of Securities, as
follows:
Section 1. SUCCESSION OF TDS IOWA BY TDS DELAWARE.
(a) Subject to the effectiveness of the Merger, TDS Delaware, as
successor to TDS Iowa, hereby expressly assumes the guarantee of the due and
punctual payment, performance and observance of all the covenants, conditions
and other obligations of the Guarantee Agreement and the Securities to be
performed or observed by TDS Iowa.
(b) TDS Delaware shall succeed to, and be substituted for, and may
exercise every right and power of, TDS Iowa under the Guarantee Agreement with
the same effect as if TDS Delaware had been named as TDS Iowa therein.
Section 2. NOTATION ON SECURITIES IN RESPECT OF
FIRST SUPPLEMENTAL INDENTURE TO THE
GUARANTEE AGREEMENT.
Securities authenticated and delivered on and after the date hereof
may bear substantially the following notation which may be stamped or
typewritten thereon:
"On May 22, 1998, Telephone and Data Systems, Inc., an Iowa
corporation, was merged with and into Telephone and Data
Systems, Inc., a Delaware corporation, which has assumed the
guarantee of the due and punctual payment, performance and
observance of all of the covenants, conditions and other
obligations of the Guarantee Agreement and the Securities to
be performed or observed by Telephone and Data Systems,
Inc., an Iowa corporation."
If TDS Delaware shall so determine, new Securities so modified as to
conform to the Guarantee Agreement as hereby supplemented, in form satisfactory
to the Trustee, may at any time hereafter be prepared and executed by TDS
Delaware and authenticated and delivered by the Trustee in exchange for
Securities then Outstanding, and thereafter the notation herein provided shall
no longer be necessary or required. Anything herein or in the Guarantee
Agreement to the contrary notwithstanding, the failure to affix the notation
herein provided to any Security or to exchange any Security for a new Security
modified as herein
-2-
<PAGE>
provided shall not affect any of the rights of the Holder of such Security.
Section 3. REFERENCE TO AND EFFECT ON THE GUARANTEE AGREEMENT.
(a) On and after the date of this First Supplemental Indenture to the
Guarantee Agreement, each reference in the Preferred Securities Guarantee
Agreement to "this Agreement," "hereunder," "hereof," or "herein" shall mean
and be a reference to the Guarantee Agreement as supplemented by this First
Supplemental Indenture to the Guarantee Agreement.
(b) Except as specifically amended above, the Guarantee Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
(c) All capitalized terms used but not otherwise defined herein shall
have the respective meanings set forth in the Guarantee Agreement.
(d) This First Supplemental Indenture to the Guarantee Agreement
shall be effective at the time the Merger is effective.
Section 4. GOVERNING LAW
This First Supplemental Indenture to the Guarantee Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
jurisdiction which govern the Guarantee Agreement and its construction.
Section 5. COUNTERPARTS AND METHOD OF EXECUTION
This First Supplemental Indenture to the Guarantee Agreement may be
executed in several counterparts, all of which together shall constitute one
agreement binding on all parties hereto, notwithstanding that all parties have
not signed the same counterpart.
Section 6. SECTION TITLES
Section titles are for descriptive purposes only and shall not control
or alter the meaning of this First Supplemental Indenture to the Guarantee
Agreement as set forth in the text.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to the Guarantee Agreement to be duly executed and their
respective seals to be affixed hereunto and duly attested all as of the day and
year first above written.
TELEPHONE AND DATA SYSTEMS, INC.,
an Iowa Corporation
[Corporate Seal]
By:
----------------------------
LeRoy T. Carlson, Jr.
President
Attest:
- ----------------------
Michael G. Hron
Secretary
TELEPHONE AND DATA SYSTEMS, INC.,
a Delaware Corporation
[Corporate Seal]
By:
----------------------------
LeRoy T. Carlson, Jr.
President
Attest:
- ----------------------
Michael G. Hron
Secretary
THE FIRST NATIONAL BANK OF CHICAGO
Trustee, a National Banking
Association
[Corporate Seal]
By:
----------------------------
Its:
Attest:
- --------------------------
-4-
<PAGE>
EXHIBIT 4.9
THIRD SUPPLEMENTAL INDENTURE
This THIRD SUPPLEMENTAL INDENTURE, dated as of May 22, 1998 (the
"Third Supplemental Indenture"), is entered into by and among Telephone and Data
Systems, Inc., an Iowa corporation ("TDS Iowa"), Telephone and Data Systems,
Inc., a Delaware corporation ("TDS Delaware"), and The First National Bank of
Chicago, a national banking association, as trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, TDS Iowa and the Trustee are parties to an Indenture,
dated as of October 15, 1997 (the "Indenture"), as supplemented by the First
Supplemental Indenture dated as of November 18, 1997 (the "First Supplemental
Indenture"), and as supplemented by the Second Supplemental Indenture dated
as of February 10, 1998 (the "Second Supplemental Indenture"), relating to
the issuance from time to time by TDS Iowa of its unsecured subordinated debt
securities ("Debt Securities") on terms to be specified at the time of
issuance;
WHEREAS, capitalized terms herein, not otherwise defined, shall have
the same meanings given them in the Indenture, First Supplemental Indenture and
the Second Supplemental Indenture;
WHEREAS, TDS Iowa has requested the Trustee to join with it in the
execution and delivery of this Third Supplemental Indenture in order to
supplement and amend the Indenture to recognize the merger (the "Merger") of TDS
Iowa with and into its wholly-owned subsidiary, TDS Delaware;
WHEREAS, the Merger will be consummated for the sole purpose of
reincorporating TDS Iowa from Iowa to Delaware, and will not result in any
change in its name, business, management, assets or liabilities;
WHEREAS, Section 9.01 of the Indenture provides that a supplemental
indenture may be entered into by TDS Iowa and the Trustee, without the consent
of any Holders of Debt Securities, to evidence the succession of another
corporation to the Issuer and the assumption by the successor corporation of the
covenants, agreements and obligations of TDS Iowa;
WHEREAS, pursuant to Section 9.01(b) of the Indenture, this Third
Supplemental Indenture does not require the consent of any Holders of Debt
Securities; and
WHEREAS, all things necessary to make this Third Supplemental
Indenture a valid agreement of TDS Iowa, TDS Delaware and the Trustee and a
valid amendment of and supplement to the Indenture have been done.
<PAGE>
NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually covenanted
and agreed, for equal and proportionate benefit of all Holders of Debt
Securities, as follows:
Section 1. SUCCESSION OF TDS IOWA BY TDS DELAWARE.
(a) Subject to the effectiveness of the Merger, TDS Delaware, as
successor to TDS Iowa, hereby expressly assumes the due and punctual payment of
the principal of (premium, if any) and interest on all of the Debt Securities of
all series, in accordance with the terms of each series, according to their
tenor, and the due and punctual performance and observance of all of the
covenants, conditions and other obligations of the Indenture and the Debt
Securities to be performed or observed by TDS Iowa.
(b) TDS Delaware shall succeed to, and be substituted for, and may
exercise every right and power of, TDS Iowa under the Indenture with the same
effect as if TDS Delaware had been named as TDS Iowa therein.
Section 2. NOTATION ON SECURITIES IN RESPECT OF
THIRD SUPPLEMENTAL INDENTURE.
Debt Securities authenticated and delivered on and after the date
hereof may bear substantially the following notation which may be stamped or
typewritten thereon:
"On May 22, 1998, Telephone and Data Systems, Inc., an Iowa
corporation, was merged with and into Telephone and Data
Systems, Inc., a Delaware corporation, which has assumed the
due and punctual payment of the principal of (premium, if
any) and interest on all of the Debt Securities of all
series, in accordance with the terms of each series,
according to their tenor, and the due and punctual
performance and observance of all of the covenants,
conditions and other obligations of the Indenture and the
Securities to be performed or observed by Telephone and Data
Systems, Inc., an Iowa corporation."
If TDS Delaware shall so determine, new Debt Securities so modified as
to conform to the Indenture as hereby supplemented, in form satisfactory to the
Trustee, may at any time hereafter be prepared and executed by TDS Delaware and
authenticated and delivered by the Trustee in exchange for Debt Securities then
Outstanding, and thereafter the notation herein provided shall no longer be
necessary or required. Anything herein or in the
-2-
<PAGE>
Indenture to the contrary notwithstanding, the failure to affix the notation
herein provided to any Debt Security or to exchange any Debt Security for a
new Debt Security modified as herein provided shall not affect any of the
rights of the Holder of such Debt Security.
Section 3. REFERENCE TO AND EFFECT ON THE INDENTURE.
(a) On and after the date of this Third Supplemental Indenture,
each reference in the Indenture to "this Indenture," "hereunder," "hereof,"
or "herein" shall mean and be a reference to the Indenture, as supplemented
by the First Supplemental Indenture, the Second Supplemental Indenture, and
this Third Supplemental Indenture.
(b) Except as specifically amended above, the Indenture shall remain
in full force and effect and is hereby ratified and confirmed.
(c) All capitalized terms used but not otherwise defined herein shall
have the respective meanings set forth in the Indenture.
(d) This Third Supplemental Indenture shall be effective at the time
the Merger is effective.
Section 4. GOVERNING LAW
This Third Supplemental Indenture shall be governed by, and construed
and enforced in accordance with, the laws of the jurisdiction which govern the
Indenture and its construction.
Section 5. COUNTERPARTS AND METHOD OF EXECUTION
This Third Supplemental Indenture may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all parties have not signed the same
counterpart.
Section 6. SECTION TITLES
Section titles are for descriptive purposes only and shall not control
or alter the meaning of this Third Supplemental Indenture as set forth in the
text.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed and their respective seals to be
affixed hereunto and duly attested all as of the day and year first above
written.
TELEPHONE AND DATA SYSTEMS, INC.,
an Iowa Corporation
[Corporate Seal]
By:
----------------------------
LeRoy T. Carlson, Jr.
President
Attest:
- ----------------------
Michael G. Hron
Secretary
TELEPHONE AND DATA SYSTEMS, INC.,
a Delaware Corporation
[Corporate Seal]
By:
----------------------------
LeRoy T. Carlson, Jr.
President
Attest:
- ----------------------
Michael G. Hron
Secretary
The FIRST NATIONAL BANK OF CHICAGO,
Trustee, a National Banking
Association
[Corporate Seal]
By:
----------------------------
Its:
Attest:
- --------------------------
-4-
<PAGE>
[SIDLEY & AUSTIN LETTERHEAD]
June 19, 1998
Telephone and Data Systems, Inc.
30 North LaSalle Street
Chicago, Illinois 60602
TDS Capital I
TDS Capital II
TDS Capital III
c/o Telephone and Data Systems, Inc.
30 North LaSalle Street
Chicago, Illinois 60602
Re: $400,000,000 Principal Amount of Trust Originated Preferred
Securities (Including Guarantees and Junior Subordinated
Deferrable Interest Debentures Related Thereto)
-------------------------------------------------------------
Ladies and Gentlemen:
We refer to the Post-Effective Amendment No. 1 to Registration
Statement on Form S-3 (the "Registration Statement") being filed with the
Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act"), by Telephone and Data Systems, Inc.,
a Delaware corporation (the "Company"), in connection with the proposed
issuance and sale by the Company from time to time of up to $400,000,000
aggregate principal amount of the Company's Junior Subordinated Deferrable
Interest Debentures (the "Debentures"), of which $100,000,000 remain
available for issuance, to be issued in one or more series pursuant to an
indenture between the Company and The First National Bank of Chicago, as
trustee (the "Indenture"), and by TDS Capital I, TDS Capital II and TDS
Capital III, each a business trust created under the laws of the State of
Delaware (collectively, the "Issuer Trusts"), in connection with the proposed
public offering from time to time in one or more series, of an amount not to
exceed $400,000,000 of preferred securities, of which $100,000,000 remain
available for issuance, representing preferred undivided beneficial interests
in the assets of the Issuer Trusts (the "Preferred Securities"), to be sold
pursuant to one or more Underwriting Agreements filed as an exhibit to the
Registration Statement (the "Underwriting Agreement") or otherwise as
described in the Registration
<PAGE>
Telephone and Data Systems, Inc.
June 19, 1998
Page 2
Statement. Capitalized terms used herein and not otherwise defined have the
meanings ascribed to them in the Registration Statement.
As described in the Registration Statement, the Company will issue
the Debentures from time to time in one or more series to the Issuer Trusts
in connection with the issuance of Preferred Securities. Upon the issuance
of Preferred Securities by the Issuer Trusts, the proceeds therefrom,
together with the capital contribution of the Company, as owner of the common
securities of each Issuer Trust, will be used to purchase Debentures.
Pursuant to a Guarantee Agreement between the Company and The First National
Bank of Chicago, as trustee, the Company will guarantee the payment by each
Issuer Trust of distributions that are required to be made from time to time
with respect to the Preferred Securities and of amounts due upon liquidation
of each Issuer Trust or the redemption of the Preferred Securities (the
"Guarantee," or when referred to collectively, the "Guarantees"), all to the
extent such Issuer Trust has funds available therefor as set forth in the
Guarantees. The Preferred Securities are to be issued by each Issuer Trust
pursuant to an Amended and Restated Declaration of Trust, the form of which
is filed as an exhibit to the Registration Statement.
We are familiar with the proceedings to date with respect to the
proposed issuance and sale and have examined such records, documents and
questions of law, and satisfied ourselves as to such matters of fact, as we
have considered relevant and necessary as a basis for this opinion.
Based on the foregoing, we are of the opinion that:
Each series of Debentures issued by the Company to an Issuer Trust
in connection with the issuance of a series of Preferred Securities issued by
such Issuer Trust and the Guarantee relating to such series of Preferred
Securities will be legally issued and binding obligations of the Company
(except to the extent enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws affecting the enforcement of creditors' rights generally and by the
effect of general principles of equity, regardless of whether enforceability
is considered in a proceeding in equity or at law) when (i) the Registration
Statement, as finally amended (including any necessary post-effective
amendments), shall have become effective under the Securities Act and the
Indenture (including any necessary supplemental indenture) and the Guarantee
Agreement shall each have been qualified under the Trust Indenture Act of
1939, as amended, and duly executed and delivered by the Company and the
Trustee; (ii) a Prospectus Supplement with respect to such series of
Debentures and the Guarantee with respect to such series of Preferred
Securities shall have been filed (or mailed for filing) with the SEC pursuant
to Rule 424 under the Securities Act; (iii) the Company's Board of Directors
or a duly authorized committee thereof shall have duly adopted final
resolutions authorizing the issuance and sale of such series of Debentures
and the Guarantee with respect to such series of Preferred Securities shall
have been duly executed and authenticated as provided in the Indenture and
such resolutions and shall have been duly delivered to the purchasers thereof
<PAGE>
Telephone and Data Systems, Inc.
June 19, 1998
Page 3
against payment of the agreed consideration therefor; (iv) the Indenture
(including any supplemental indenture with respect to such series of
Debentures), shall each have been duly authorized, executed and delivered by
the Company and duly executed and delivered by The First National Bank of
Chicago, as Trustee; (v) the Guarantee Agreement relating to the Guarantee
with respect to a series of Preferred Securities shall have been duly
authorized, executed and delivered; (vi) the Amended and Restated
Declaration of Trust of the Issuer Trust issuing the Preferred Securities
shall have been duly authorized, executed and delivered, and (vii) when the
Debentures and Preferred Securities of such series shall have been duly
authorized, executed and, in the case of the Debentures, authenticated, and
issued in accordance with the terms of the Indenture and the applicable
supplemental indenture and delivered against payment therefor in accordance
with the terms of the Underwriting Agreement.
For the purposes of this opinion, we have assumed that there will
be no changes in the laws currently applicable to the Company and that such
laws will be the only laws applicable to the Company.
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 sales of the Debentures
or the Preferred Securities.
This opinion is limited to the General Corporation Law of the State
of Delaware and the Laws of the State of New York and the federal laws of the
United States of America.
We hereby consent to the filing of this opinion as an Exhibit to
the Registration Statement and to all references to our firm included in or
made a part of the Registration Statement.
Very truly yours,
/s/ Sidley & Austin
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3 Registration Statement of Telephone and Data
Systems, Inc. of our report dated January 28, 1998 (except with respect to
the matters discussed in Note 5, "American Paging Merger"; and in Note 16, as
to which the date is February 18, 1998) 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, 1997 and to the incorporation by reference in this Form
S-3 Registration Statement of our report dated January 28, 1998, (except with
respect to the matters discussed in Note 5, "American Paging Merger"; and in
Note 16, as to which the date is February 18, 1998) on the financial
statement schedules of Telephone and Data Systems, Inc., included in the
Telephone Data Systems, Inc. Form 10-K for the year ended December 31, 1997.
We also consent to the incorporation by reference of our reports dated
January 28, 1998 on the financial statements of the United States Cellular
Group, the TDS Telecommunications Group and the TDS Group for the year ended
December 31, 1997, our report dated January 28, 1998 (except with respect to
the matters discussed in Note 10, as to which the date is February 5, 1998)
on the financial statements of the Aerial Communications Group and our report
dated January 28, 1998 (except with respect to the matters discussed in Note
5, "American Paging Merger"; and in Note 16, as to which the date is February
18, 1998) on the consolidated financial statements of Telephone Data Systems,
Inc. and Subsidiaries for the year ended December 31, 1997, included in the
Telephone and Data Systems Inc. Proxy Statement/Prospectus on Form S-4, as
amended. We also consent to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 17, 1998
